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China Rises

I came across an item, written by Jared Diamond, on the New York Times website recently.  Although it was a few years old, it struck me that if it was correct then it is probably as relevant now as when it was written.  Just to satisfy my curiosity I looked further and sure enough dug up more items which fitted in with the first.  Of these the most notable is an article written by Michael Pettis on his blog, China Financial Markets, entitled The difficult arithmetic of Chinese consumption, published a little later in 2009. In essence most of these articles  talk about the rise in consumption of China, of the problems which may arise from this and how they should be dealt with, but looking at the figures used I couldn’t help wonder if they were not looking at the situation the wrong way round.

Let me explain what I mean.  In 2008 the gross domestic consumption of the PRC [Peoples Republic of China] was $1.2 trillion – that is, two digits followed by eleven zeroes. By comparison consumption in the UK [United Kingdom] in the same year was $1.4 trillion and in the US [United States of America] was $9.4 trillion.  All big numbers to get your head around.  So it seems that Britain consumed slightly more than China but quite a lot less than the US, but then that is a bigger and more wealthy country.  But are these reasonable comparisons?  If, instead of using total consumption, we compare consumption per person possibly we might have a more reasonable figure to look at, after all there are substantial differences in population; 1,300 million, 304 million and 60 million for the PRC, US and UK respectively.  After dividing the figures these are the rates per capita for the year 2008  –

PRC     $923

UK       $23,333

US       $30,921

Think about it for a moment.  On average a British citizen consumes 25 times as much and a US citizen 33 times as much as the average person in China.  This may not sound much of a difference when compared with, for instance, the income of the wealthiest family in Britain with the poorest family but these are averages, not extremes.

For a moment let’s turn the situation on its head.  If the rate of consumption in China were the same as that in the UK it could only support a population of 51,428,571 and if it were the same as in the US the population would be only 38,808,510.  How does that compare with the present PRC population of 1,300,000,000?

Turning the figures round yet again and dividing the total consumption of the UK and the US by the consumption rate of China will give us some idea of how many people can be [financially] supported in these two countries – in Britain 1,516,666,666 Chinese consumers and the US 10,183,332,484 Chinese consumers.  These figures are nonsense, of course, as they represent more people than live in the entire world and more than the whole world can probably support –  but what if certain countries decided they wanted to live as we do?

I think you get my point, that with such a huge disparity between countries we cannot expect to continue, unchallenged, living such an extravagant lifestyle as we do now.  Sooner or later our standard of living will change. Downwards.  As to what the answer is, invade their countries [again], nuke the buggers, or bring a bit of moderation and realism to the western world, who knows,  that’s a question for the political leaders and experts to decide.

Related posts – “Future Masters

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One Response

  1. I vote for “bring a bit of realism to the western world”, but then I’ve always supported radical ideas.

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