America’s Greatest Economic Rival Offers Lessons For US

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America’s greatest economic rival in the foreseeable future is the People’s Republic of China (PRC). Since entering the global economy in 1978, China’s economy has an annual growth rate of 10.4 percent while the U.S. economy averages 2.7 percent.

As a result of this growth, economists predict that the gross domestic product (GDP) of China will exceed America’s by 2017. This will crown China as the world’s largest economy before the end of the decade.

Of course, China’s ascension to the world’s top economy has not been without controversy. Even over the past few years, the PRC has been slammed with reports of trade violations to environmental justice complaints to even hacking Google. Yet, economic studies suggest these ‘cheats’ have been nominal factors in China’s growth.

According to a report from the International Monetary Fund (IMF), the major catalysts for China’s growth have been capital investment (both foreign and domestic), worker productivity, advancements in technology and infrastructure, and market-oriented reforms in national enterprise (e.g. property rights and worker autonomy).

Conversely, the U.S. still maintains significant advantages over its rising foe. Even though China will eventually overtake the U.S. in GDP, the per capita figures tell a different story.

The latest data from the World Bank indicate the U.S. leads China by 175% in GDP per capita. This was illustrated in a Forbes report, citing “the average annual household income in China [is] $10,220 compared with $84,300 in the United States.”

When measuring the fundamental tenets of economic growth, the U.S. bests China in almost every category: higher education, innovation, civil liberties, military power, income equality, and international relationships.

On the other hand, the U.S. should not discount effective initiatives in modern-day China. Instead, leaders in Washington should examine China’s successes in pursuit of finding advantageous policies that will keep America at the vanguard of prosperity.

With this in mind, here is a short list of economic lessons that America could learn from China.

Connecting Cities at 200 mph

China has the world’s longest high-speed railroad network, totaling 5,800 miles worth of tracks. It is also home to the world’s single longest high-speed rail, which stretches 1,428 miles and connects Beijing to Guangzhou. This rail employs trains that travel over 180 mph, reducing the travel time between these two cities from 21 hours to 8 hours.

Comparatively, the United States only has one high-speed railroad. Managed by Amtrak, the Acela Express runs from Boston to Washington, D.C. — stopping in Philadelphia, Baltimore, and New York City — totaling 456 miles in all. The average speed of the Acela Express train is 70 mph, with a top speed of 150 mph, making it a 7 hour trip from start to finish.

According to a study by the U.S. Conference of Mayors, high-speed rail networks can stimulate local economies by adding hundreds of thousands of jobs while creating billions in revenues from new opportunities in business, tourism, and technology.

The partner in this study, the Economic Development Research Group (EDR Group) claims these results would rival the economic success that European and Asian countries have had with their high-speed rail systems, which has also led to positive impacts on the environment and sustainable development.

The Booming African Trade Market

A report from Business Insider indicates that 10 of the 20 fastest growing economies in the world are in sub-Saharan Africa. This is driven by a surging African population – which surpassed one billion in 2010 – that is expanding the middle-class and developing more business-friendly infrastructure.

Since 2009, China has been Africa’s largest trading partner.

China now gets one-third of its oil from the region, and is spending tens of billions of dollars in refinery projects all across the continent. Furthermore, the PRC is importing more sub-Saharan minerals than any other nation in the world.

African economies are benefiting as well. Over the past decade, sub-Saharan countries have witnessed a 75% growth in their GDP.

In an exclusive interview with Daniel Tarling-Hunter, an economist at Euromonitor International, he expounded on the trade relationship between China and Africa, stating:

“During the 1980s and 90s, Western countries stopped investing in Africa’s languished infrastructure, particularly in countries like Nigeria and Mali, but infrastructure is what these countries needed most…these [infrastructure demands] became the conduit China needed to expand their trade [value] in the region.”

Because of Africa’s growth, “there is now a [surging] consumer marketplace, which is why China’s actions in the region are not benevolent…it has enabled them, with its huge disparity of capital [over western countries], to capture these new markets,” making private American enterprise compete with the behemoth central bank of China.

These claims are consistent with a recent report indicating that last year’s China-Africa trade value increased by 20 percent — approaching $200 billion — while the US-Africa trade value declined 30 percent, reaching $85 billion.

“Africa is no longer an object of our fears or hopes or pity,” said Todd Moss, a senior fellow at the Center for Global Development, in an August interview with The New York Times. “The United States is stuck in a bit of a time warp,” he added, referring to America not mounting the trade potential in Africa.

A Renewable Energy Future

For a country riddled with decades of reports outlining poor environmental policy, it might be strange to hear that the United Nations recently titled China as the world’s largest investor in renewable energy projects.

The UN report showed that in 2011, China spent $52 billion on renewable energy while the U.S. spent $51 billion. However, China intends to go much further with renewable expenditures whereas the U.S. is expected to remain stagnant.

According to the PRC’s five-year economic plan, the country will spend $473 billion on renewable energy investments by 2015. In addition, Chinese officials have set a goal to have renewables generate 20% of the country’s power by 2020.

However, the future of renewable energy in America is far-less predictable. This is bolstered by two on-going factors.

The first is because individual states are crafting their own unique policies. The federal stimulus in 2009 made significant investments toward clean-energy programs, but it has also turned the union “into a green-energy crazy quilt, a regional patchwork [that is] driven by [state] mandates”, as one writer noted.

The stimulus package boosted the competitiveness of the renewable energy market, but has not taken any major steps since. This has left these green-energy programs to the mercy of state legislatures: thus eliminating a unified, national vision for renewable energy’s future.

The second reason, however, may be more self-fulfilling than the first. With a gold mine of natural gas and shale oil beneath our feet, it appears that an era of hydraulic-fracturing, or fracking, has begun. This could lead to America becoming the world’s largest oil consumer and exporter.

To its defense, fracking may be the key to American energy independence. It has also garnered support from both liberal and conservative politicians, which is especially vivid when incorporating caveats (i.e. more regulation and safer protocols) to the mining process.

However, critics, such as Frankie Falsam, environmental activist and founder of NoFracking.com, offer a different narrative.

After reaching out to Falsam, asking him why the U.S. should not embrace fracking as the key to energy independence, he replied:

“The more fracking grows, the more prevalent these effects will be…with the greatest effects coming decades down the line…leading to regions where shale rock layers would have turned to rubble and fracking fluids would be permanently interconnected to underground water aquifers. Doing this to Americans is too great of a price to pay for a [temporary] bonanza of profits.”

“On a political and economic level, the U.S. has subsidized non-renewable industries much more than renewable sources…by [rewarding] the established, profitable sector of the energy industry with a finite lifespan, rather than an emerging, struggling sector of that same industry, shows little to no foresight. This explains our lag behind China, which is subsidizing renewables to such an extent, that the U.S. Department of Commerce states it violates trade agreements because Chinese producers are selling solar panels for less than the cost of production, [triggering] U.S tariffs on Chinese solar cells and panels. But, I’d much rather see a subsidized price war than a trade war…it would cost less for both countries overall.”

There is no doubt that energy independence is better than foreign dependence, and fracking is an imaginable solution to the latter. That being said, the country should also tread carefully.

People should recognize that whatever fossil fuel consumption exists today, will eventually affect the problems everyone will have tomorrow (e.g. climate change and sustainable development). There is, but one inevitable, and that is the unlimitedness of renewable energy. Why should America allow its competitors to have a head start?