Assessing Economic Performance

Country Comparision

Assessing Economic Performance

The United States vs. China: An economic comparison

Increasingly, the threat of world dominance by China is used as a 'scare tactic' to raise alarm about the faltering place of the U.S. In the world economy. However, while the U.S. faces major challenges, China also faces considerable obstacles in its upward economic trajectory, particularly given its low levels of personal spending, dependence upon exports and with political concerns about its human rights record and government corruption.

The United States remains one of the most powerful nations in the developed world. Its per capita GDP is $49,800. However, this figure alone does not explain the entire 'picture' of the U.S. economy (USA, 2013, CIA Fact Book). There is a growing divide between the very poor and the very rich which could lead to problems such as political unrest, resentment, and insufficient demand for goods and services. "Since 1975, practically all the gains in household income have gone to the top 20% of households. Since 1996, dividends and capital gains have grown faster than wages or any other category of after-tax income" (USA, 2013, CIA Fact Book). The CIA Fact Book blames the increased technological complexity for this discrepancy, which creates a divide between 'haves' and 'have-nots' in terms of education and skills.

Although the power of the U.S. economy is undeniable, many recent economic problems have had a significant, negative impact upon it, indicating it is far from impervious to harm. "Long-term problems include stagnation of wages for lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, energy shortages, and sizable current account and budget deficits - including significant budget shortages for state governments" (USA, 2013, CIA Fact Book). But despite the political divisions riddled through its government, the U.S. commands a great deal of influence thanks to its history, its stability, its strong democratic tradition, and its current military and geopolitical influence. The E.U., once thought to rival the U.S. As a trading block, is facing credit-related problems of its own.

In contrast, while the economy of the U.S. can best be characterized as a powerhouse under threat, the economy of China can best be characterized as an emerging economy. Since its transition from a command-based communist economy, China's growth has been stratospheric. In 2012, China was the world's second-largest economy, right behind the U.S. However, Chinese growth has been more sluggish in recent years: China is highly dependent upon the U.S. And European markets as sources of exports, and these economies have been suffering. "The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the workforce; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation" (China, 2013, CIA Fact Book). China also remains a communist state with antidemocratic values that set it profoundly apart from the rest of the developed world, as recent controversies regarding free speech with Google have revealed, along with a number of embarrassing incidents highlighting its suppression of dissidents. Despite its economic power, there are also tremendous divides in lifestyles between rural and city residents, both in term of technology and access to resources.