Arnold Kling  

Futurology

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Anglosphere Challenge... Social Security Indexing Debat...

While I'm in the middle of reading about "network commonwealths" in James C. Bennett's The Anglosphere Challenge, the National Intelligence Council, a CIA affiliate, has just released Mapping the Global Future.


Most forecasts indicate that by 2020 China’s gross national product (GNP) will exceed that of individual Western economic powers except for the United States. India’s GNP will have overtaken or be on the threshold of overtaking European economies.

...Traditional geographic groupings will increasingly lose salience in international relations.


Bennett is adamant on the latter point. A main theme of his book is that in an information economy physical proximity matters less than cultural proximity. Hence his promotion of the "Anglosphere."

For Discussion. What factors might constrain growth in India or China in the next 15 years?


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COMMENTS (14 to date)
snacknuts writes:

protectionism.

dsquared writes:

Does he really mean GNP as opposed to GDP? If China and India are going to get GDP up to this sort of level, they will end up doing it with the use of considerable amounts of foreign capital. This will tend to drive up net factor income to overseas, which puts a wedge between GDP and GNP.

Mr. Econotarian writes:

China faces significant problems with state-owned-enterprises and its banking situation. Not to mention that it is hard to achieve a more developed status as a dictatorship. That move will bring tremendous political risks, but China will need to embrace democracy to keep economic growth going, I suspect sometime between 2020 and 2040 judging from the politico/economic history of South Korea.

While the aggregate economies of India and China will be huge in 2020, we need to keep in mind that it might not be until much later this century that the average person in either country is near to today's US GDP per capita, much less where that will be down the road.

The saddest thing is that India blew ~40 years of democracy having low growth before the 1980's.

Walker writes:

Both -- resource constraints (though probably more of a concern beyond the 15 year window)
India -- lack of infrastructure, poorly positioned in manufacturing, ineffective/corrupt government.

Lawrance George Lux writes:

The major constaint is technological innovation. The World cannot afford one United States now, let alone more intense Consumption nations. The real problem is not in base materials, but in Heat and Pollutants. Economies will not cease to expand, but an alternate Product-mix will have to be devised. lgl

Dezakin writes:

You're all wrong.

Mr. Econotarian:

While China in the very short term faces problems in its banking industry, the problem China faces has nothing to do with the political authoritarianism, but rather lack of transparency. China can be a one party dictatorship and still have high growth if investors are confident of the predictability of the government. This is better for capital, especially foreign capital, than a vibrant democracy contested by populist demogogues, where whole sections of the economy might be nationalized in vote buying/idelogical mechanizations. The history of India is illustrative in this example.

Indeed India's problem over the next quarter century actually is democracy. Too much reform too fast, and you have Laloo Prasad Yadav and less visable populists resisting any privatization, indeed productivity improving moves. (The popular railway minister has a resistance to computers because the deprive people of jobs, see) While it was possible under dictatorship in China to reform very fast, it was very painful in such a manner that was impossible to undertake in India.

Another problem both countries face in growth over the next quarter century is endemic corruption, especially in India. Every civil servant in India looks for 'tips' to grease the wheels, and its impossible to actually do work there without bribing the cops, the land commisioner, the local water board, Laloo, Ibrahim Dawood's underboss in Mumbai, etc.

I'm not sure what Lawrance George Lux was talking about, but lack of innovation is not the barrier to India and China's growth... infrastructure is much more important. In the US, we have all the infrastructure needed to set up competitive industries really, and so you need to innovate to advance the economy. In the BRIC nations all you need is better roads, electric power thats on more often, new phone lines, some big diesel trucks and port facilities to move goods around, tractors and other farm equipment, and so on... and boom, your economy expands. All the innovation that India and China need to develop economically was done a century ago.

The notion that the world can't support more US sized consuming nations is misguided at best. On raw food output, the world can support well over 70 billion people on the US diet with 1950's farming techniques. Pollutants dont enter the picture at all, given they almost never actually impair economic growth.

Mark Bahner writes:

Barriers to growth for India and China:

India: Incredibly bad trade policy, in terms of protectionism. High government burden (government spending a high percentage of the economy). Terrible banking sector (with most banks government owned, and foreign banks forced to loan to "priority sectors" of the economy).

Economic freedom in India

China: Poor trade policy (though not as bad as India), poor property rights (worse than India). Basically, China is equally poor in all aspects related to economic freedom, where India is better than China in some aspects, but worse in others.

Economic freedom in China

Mark Bahner writes:

Geez, what's wrong here? Here are the links:

http://www.heritage.org/research/features/index/country.cfm?id=India

http://www.heritage.org/research/features/index/country.cfm?id=China

***
[I think I fixed it for you. It looks like the urls just weren't pasted into the "a hrefs".--Econlib Ed. (LFL)]

Walker writes:

Nothing to disagree with in Dezakin's post until the last paragraph...

The notion that the world can't support more US sized consuming nations is misguided at best. On raw food output, the world can support well over 70 billion people on the US diet with 1950's farming techniques. Pollutants dont enter the picture at all, given they almost never actually impair economic growth.

One, that is an ambitious set of numbers. What is your source?

Two, food is not the the only resource of interest. In particular, water and petroleum availability are concerns.

Dezakin writes:

BURINGH, P., VAN HEEMST H.D.J. and STARING G.J. - Computation of the absolute maximum food production of the world. A report by the Department of Tropical Soil Science, Agricultural University, Wageningen, 1975.

Estimates approximately 30 times the output of 1970, based entirely on water, soil, and climate conditions.

As for water and petroleum, these are functions of energy, as all petroleum products, from fuel to waxes and plastics, can be synthesized from any carbon source given a source of energy: First petroleum, then coal, then methane hydrates, finally limestone. Given the rather low operating cost of nuclear power and the abundance of uranium and thorium nuclear fuels (several hundred million years worth at todays electric prices) energy scarcity is not a gating factor.

I expect before the thorium runs out, we'll eventually get either cost effective solar energy and controlled nuclear fusion.

Walker writes:

To Dezakin,
I can't find the article you referenced online, but I'll take your word for it. I'll only say that estimates vary widely and that this is just one. Joel Cohen wrote the definitive work on the subject a few years back, and this web page contains a list of "carrying capacity" estimates over the year due to various limiting factors....

http://www.bemidjistate.edu/peoplenv/carrycap.html

The overall conclusion I derive is that no one number has a strong enough argument behind it for any kind of consensus.

Concerning energy in particular, I find it interesting when one simply postulates infrastructure adjustments or technological fixes on the one hand, while at the same time saying that social/political issues like "corruption" are barriers to growth. On the flip side, scientists and engineers are often guilty of the same type of thinking in reverse when they assume that social instititutions will be able to utilize new technologies in the most effective way possible.

Another point...the estimate given for Uranium reserves (several hundred million years) is several orders of magnitude greater than the typical estimates that are in the hundreds of years.

Dezakin writes:

I'm familiar with Cohens compilation, but clearly any number lower than 6 billion is obviously false, and I'm more inclined to believe soil and agricultural researchers than environmentalists with an axe to grind. The actual number is likely much higher, and given demographic trends are likely to view human population growth not exceeding 10 billion in the next century, I think the point is moot.

As for energy, certainly the estimate for Uranium reserves are listed often as low as fifty years: at present prices for uranium from known high grade ore-bodies in a once through light-water reactor fuel regime.

http://www.world-nuclear.org/info/inf75.htm

Now, given that actual uranium reserves from even granite are economically recoverable for energy production, and nuclear power's price is gated not on fuel as is coal, but on infrastructure, you run the numbers and you're going into the hundreds of thousands of years...

But before recovering uranium from granite becomes economically viable, recovering uranium and plutonium from spent fuel will... a close fuel cycle is 100 times more fuel efficient... now you're into the millions of years.

Oh, and you can use thorium as a nuclear fuel also, which is about three times more plentiful than uranium.

jaimito writes:

What factors might constrain growth in India or China in the next 15 years?

WAR

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