08.21.12 1:10 PM ET
In Defense of Niall Ferguson
Niall Ferguson has ignited a controversy with his Newsweek cover urging rejection of President Obama. One point in the story that has roused special fury is this chart, projecting China's economy will overtake Americas by 2017.
Many commentators have shrugged off this projection. China has four times more people than the U.S., so even if they only attain one-fourth the per-capita output of Americans, it is inevitable China must overtake the U.S. Nothing to be done about it, therefore nothing to worry about, therefore shocking bad form for Ferguson to raise the point at all.
If living standards mattered most, then Denmark would be a superpower. A China that becomes richer in aggregate than the U.S. will exert new global sway—and make this planet a less congenial place for those who cherish liberal democratic values.
Fortunately, things are not yet quite so dire as Ferguson fears. His chart does not specify, but he's comparing Chinese to U.S. GDP not at market prices but using instead with currencies adjusted for purchasing power parity. The purchasing power parity measure has its valid uses, but for comparing two countries' international throw weight, you want to know what they can buy on global markets. By that measure, China cannot overtake the U.S. until at least pretty deep in the 2020s.
Still, Ferguson's polemical point is the true one. The prospect of the U.S. as number 2 is a threat and challenge. So long as China remains a repressive authoritarian oligarchy, the prospect of a world reordered to meet Chinese imperatives is an ugly one. If the outcome cannot wholly be averted, postponing it for another generation ought to be a supreme task for national policy making. And shrugging off Ferguson's grim warning with self assurances about higher U.S. consumer welfare utterly misses the mark: those who have power can take wealth from those who possess wealth, but lose power.