Historical Origins of China Economic Advantage
Historical Origins of China’s Economic Advantage
Abstract
China was the premier civilization for millennia. Upon interacting with the
West, China declined from the drug trade, military defeat and decentralization
of the nation into “spheres of influence,” a resulting fall of the Empire and foreign invasion by Japan, with several peasant rebellions, two world wars, and a long
and hard civil war ending in the victory by the Chinese Communist Party in 1949.
The Communists then drove what little was left of the economy into the ground.
By 1978, China was in terrible shape. Under Deng Xiao Ping, China reorganized
the economy into large free-standing state enterprises operating in a market
environment. China opened up the country to trade and foreign investment,
which flowed in chasing after very cheap labor. The resulting economic boom
is unstoppable because the Chinese people have suffered terrible economic
conditions for over 300 years and are now grateful for peace and trivial wages.
Thomas J. Stevens
ECON 4, Micro
MW 4 pm
Feb. 24, 2012
Historical Origins of China’s Economic Advantage
I. Introduction
China is commonly thought to be an economic miracle that has an unlimited future.1 The success of China’s recent economic growth rate is unimpressive. China pursued the worst possible economic policies for thirty years following their Communist Revolution.2 The preceding three hundred year decline was due to the impact of the West: drug addiction, destruction of central authority, foreign invasion, world war and civil war.3 Consequently, their economy was driven to unimaginable lows.4 The recovery is simply a rebounding from depths they never should have been driven to. However, the depths of these lows now insures that it will be the dominant economic power for the next century because of the simple truth that capital seeks out cheap labor.5 China’s history insures that this competitive advantage will not soon be lost.
II. The Pattern of Classical China
China is one of the great classical civilizations. (See Table 1, Classical Civilizations.) A review of its succession of dynasties demonstrates one great truism: nothing lasts forever. (See Table 2, Chinese Dynasties.) China has had only 40 dynasties in 4,000 years.6 Sometimes change comes from within.7 Sometimes, change comes from without.8
There is a general pattern to Chinese history.9 A lean, mean and hungry challenger overthrows a corrupt and weak government which is unpopular and a menace to the people.10 The challenger takes over.11 The bureaucracy readily changes allegiance to the new masters and survives the transition.12 The new government quickly becomes as refined, decadent, and
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reduced by 80% from the exchange rate.112 The answer to the question is, the Americans aren’t going to compete with the Chinese.
The Chinese are going to wipe out all American manufacturing, and all of the maquiladoras in Mexico, too.113 The Chinese will build television sets, washing machines, and automobiles. Very soon, nothing will be manufactured in North America, Europe, Korea, Taiwan or Japan. And when nothing is manufactured in any of those places, the prices will go up. But never enough for long enough to revive domestic manufacturing.
IX. Conclusion
The Chinese have been the dominant civilization on this planet for 95% of the last 4,000 years.114 They stumbled recently, but they are back, and they are back on top. They have 1 billion people.115 Their currency-adjusted economy is over $20 trillion.116 They have a nuclear arsenal with over 400 bombs and have indicted no hesitancy in using those weapons against us.117 The Chinese have a space program.118 The armed forces of China exceed 2.3 million soldiers.119 They are number one and getting more powerful every day. The U.S. in number three and getting weaker every day. In twenty years, if the Russians and the Indians do their job, the United States will be number five, the present international equivalent of France. All empires decline. The United States has plummeted.
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Table 1
Classical Civilizations
OriginCivilization
2900 B.C.Egypt
2600 B.C.Mesopotamia (Iraq)
2600 B.C.Maya (Mexico, Guatemala, Belize, Honduras, El Salvador)
2500 B.C.India
2370 B.C.Sumeria (Iraq)
2200 B.C. China
1900 B.C.Greece
1750 B.C.Babylon (Iraq)
1500 B.C.Persia (Iran)
1250 B.C.Israel
1100 B.C.Inca (Peru, Chile, Bolivia, Ecuador)
735 B.C.Rome
500 B.C.Celts (Western Europe, Eastern Europe, British Isles, etc.)
300 B.C.Japan
700 A.D.Norse (Scandanavia)
850 A.D.Ottoman (Turkey)
862 A.D.Russia
1300 A.D.Aztec (Mexico)
Sources: Arthur Cottrell and David Morgan, China’s Civilization (New York, Praeger Publishers: 1975).
China Online: A Brief Chinese Chronology. http://chineseculture.about.com/library/
weekly/aa100501a.htm
Mayan History, http://www.crystalinks.com/mayanhistory.html.
Aztec History, http://www.crystalinks.com/aztechistory.html.
Andean History, http://www.crystalinks.com/aztechistory.html.
Celtic Europe, http://www.watson.org/~leigh/celts.html.
History of Japan, http://www.japan-guide.com/e/e641.html.
The Forgotten History of Norse Trade, http://arno.daastol.com/history/norsetrade.html.
The Ottoman Empire, http://www.turizm.net/turkey/history/ottoman.html.
Origins of the Persian Empire, http://www.infoplease.com/ce6/history/A0860309.html.
Timeline: Ancient Rome, http://www.exovedate.com/ancient_timeline_one.html.
Edward Hanigan, Successors of Rome: Russia, 862 – Present. (New York, Prentice Hall: 2001).
Sumerian History, http://www.crystalinks.com/sumerhistory.html.
Brief History of Mesopotamia, http://it.stlawu.edu/~dmelvill/mesomath/history.html.
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Table 2
U.S. Mexico Trade: 1980-2004
(US$ millions)
Year Imports Exports Balance
1980 19.5 15.4 -4.1
1981 24.1 19.3 -4.8
1982 14.5 21.5 7.0
1983 21.5 19.4 -2.1
1984 11.2 24.3 13.1
1985 19.1 13.6 -5.5
1986 17.3 12.4 -4.9
1987 20.3 14.6 -5.7
1988 23.3 20.6 -2.6
1989 27.2 25.0 -2.2
1990 30.2 28.3 -1.9
1990 31.1 33.3 2.1
1992 35.2 40.6 5.4
1993 39.9 41.6 1.7
1994 49.5 50.4 1.3
1995 62.1 46.3 -15.8
1996 74.3 56.8 -17.5
1997 85.9 71.4 -14.5
1998 94.6 78.8 -15.9
1999109.7 86.9 -22.8
2000135.9 111.3 -24.6
2001131.3 101.3 -30.0
2002134.6 97.4 -37.1
2003138.1 97.4 -40.6
2004155.9 110.8 -45.1
Source: U.S. Census Bureau. “Foreign Trade Statistics,” (2006), http://www.census.gov/foreign-trade/balance/ and World Almanac, 1980-1986.
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Table 3
U.S. Federal Government Spending: 1916-2005
($billions)
YearAmtYear AmtYear Amt
1916 0.71946 55.21976 371.8
1917 2.01947 34.51977 409.8
191812.71948 29.81978 458.7
191918.71949 38.81979 504.7
1920 6.41950 42.61980 590.4
1921 5.11951 45.51981 678.2
1922 3.31952 67.71982 745.7
1923 3.11953 76.11983 808.4
1924 2.91954 70.91984 851.9
1925 2.91955 68.41985 946.4
1926 2.91956 70.61986 990.4
1927 2.91957 76.619871,004.1
1928 3.01958 82.419881,064.5
1929 3.11959 92.119891,143.5
1930 3.31960 92.219901,253.1
1931 3.61961 97.719911,324.3
1932 4.71962106.819921,381.6
1933 4.61963111.319931,409.5
1934 6.61964118.519941,461.9
1935 6.51965118.219951,515.8
1936 8.41966134.519961,560.5
1937 7.81967157.519971,601.2
1938 8.81968178.119981,652.6
1939 9.11969183.619991,701.9
1940 9.51970195.620001,789.1
194113.71971210.220011,863.0
194235.11972230.720022,011.0
194378.61973245.720032,159.9
194491.31974269.420042,292.2
194592.71975332.320052,479.4
Sources: Historical Statistics of the United States: Colonial Times to 1970 (GPO, Wash., DC: 1975), and Economic Report of the President. Table B–78.—Federal Receipts, Outlays, Surplus or Deficit, and Debt, Fiscal Years, 1939–2006.
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Table 4
U.S. Economic Statistics: 1985-2009
Year GDP Unemp Infl
1985 5.8 10.6 5.5
1986 5.9 9.4 5.9
1987 6.3 9.6 6.2
1988 6.3 8.6 6.6
1989 6.7 8.0 7.2
1990 7.2 7.3 7.9
1990 7.8 7.3 7.1
1992 8.2 7.6 7.4
1993 8.9 6.6 5.7
1994 9.1 5.4 4.3
1995 9.5 4.8 3.8
1996 10.3 4.3 3.5
1997 10.9 4.1 3.5
1998 11.8 3.9 3.3
1999 12.2 3.9 3.8
2000 12.9 3.6 3.6
2001 13.3 5.3 5.0
2002 13.6 6.8 5.5
2003 13.1 7.4 5.9
2004 13.9 8.3 6.2
2005 13.5 8.4 7.1
2006 14.1 9.3 6.8
2007 14.8 9.5 7.0
2008 15.2 9.8 7.1
2009 15.2 10.3 6.1
Key: GDP = Gross Domestic Product ($trillions)
Unempl = Unemployment Rate, non-farm (%)
Infl = Inflation, based on CPI (%)
Source: U.S. Census Bureau. “Domestic Economic Statistics,” (2011), http://www.census.gov/ domestic-economic/statistics/ and World Almanac, 1985-2010.
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Notes
1) See Arthur Cotterell & David Morgan, China’s Civilization, p. 31.
2) See Arthur Cotterell & David Morgan, China’s Civilization , pp. 36-40; and Jonathan D. Spence, The Search for Modern China, pp. 227-29.
3) See Jonathan D. Spence, The Search for Modern China, pp. 143-148.
4) See, e.g., The Dragon King, http://www.eng.taoism.org.hk/daoist-beliefs/immortals&immortalism/pg2-4-4-5.asp.
5) A teacher’s college was established in 145 B.C. The Imperial University was founded in 124 B.C. The subjects were often confined to literature and philosophy. See Arthur Cotterell & David Morgan, China’s Civilization, pp. 56-57 and 76-77.
6) See Arthur Cotterell & David Morgan, China’s Civilization, p. 214.
7) See Jonathan D. Spence, The Search for Modern China, p. 129.
8) See Emergence of Modern China, http://www-chaos.umd.edu/history/modern.html.
Ellen N. La Motte, The Opium Monopoly, “XV History of the Opium Trade in China,” http://www.druglibrary.org/schaffer/History/om/om15.htm.
9) See A Short History of the Opium Wars, http://www.druglibrary.org/schaffer/heroin/
opiwar1.htm. Jonathan D. Spence, The Search for Modern China, Ch. 7, The First Clash with the West.
10) See Edward Thompson, “The Dragon Rises Again,” Los Angeles Times, April 12, 2004, p. A-7.
11) See Michael Barnes, “Economic Patterns in Industrializing Nations,” Journal of Economic Perspectives, vol. 74, iss. 2, (Winter 2005) pp. 125-162.
12) See Diana Preton, The Boxer Rebellion, chpt. 4.
13) See “The Last Emperor of China,” http://www.royalty.nu/Asia/China/PuYi.html.
Arthur Cotterell & David Morgan, China’s Civilization, p. 242. Jonathan D. Spence, The Search for Modern China, pp. 262-268.
14) See Arthur Cotterell & David Morgan, China’s Civilization, p. 266, and Jonathan D. Spence, Sun Yat-Sen, http://www.time.com/time/asia/asia/magazine/1999/990823/sun_yat_sen1.html.
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