America will soon cease to be the world’s largest economy. You can argue about why, when and how bad, but the end is indeed nigh. According to the Penn World Tables — the best data to compare gross domestic product across countries — China’s GDP was worth $10.4 trillion in 2011, compared with a U.S. GDP of $13.3 trillion. But with China’s economy growing 7 to 10 percent a year, compared with the recent U.S. track record of less than 3 percent, China should take the lead by 2017 at the latest.
Already, China is the world’s top trading nation, edging the United States in total imports and exports in 2012. And Arvind Subramanian, an economist formerly with the International Monetary Fund, predicts that by 2030 the world will have four major economic players: China will be the heavyweight, followed by the United States and European Union, with economies about half as large, and then India close behind.
Regardless of its current perch atop the global economy, the United States is only the 19th least corrupt nation, according to Transparency International. It rates 67th in equality of pay between men and women according to the 2013 Gender Gap Report from the World Economic Forum. And among 31 high-income countries belonging to the Organization for Economic Co-operation and Development, the United States ranked third in GDP per capita as of 2011 — but 27th in life expectancy, 29th in infant mortality, 23rd in unemployment, 27th in math test scores (as of 2012) and 30th in income equality.
In fact, the link between the absolute size of your economy and pretty much any measure that truly matters is incredibly weak. Whenever China takes over the top spot, it will still lag far behind the world’s leading countries on indicators reflecting quality of life. For starters, there are a lot more people sharing China’s GDP; even the rosiest forecasts for the country’s economic growth suggest that per capita income will be lower than in the United States for decades to come. The average American lives five years longer than the average person in China, and civil and political rights in the world’s soon-to-be-biggest economy are routinely abused. Living in an America that ranks second in GDP to China will still be far, far better than living in China.
There are some real economic costs related to losing the top spot in the GDP rankings, but they are small and manageable. The dollar might lose its dominance as the currency of choice for central bank reserves and trading, and some predict that will increase the cost of U.S. borrowing and exporting. In fact, the dollar share of global reserves has already fallen from about 80 percent in the 1970s to about 40 percent today, with the euro and the renminbi gaining ground, but there isn’t much sign that that has spooked global markets. Meanwhile, businesses in the rest of the world still manage to export, even though they must go through the trouble of exchanging currencies.
And if you want further reassurance that you don’t need to be large to be rich, remember that in tiny Luxembourg, average incomes are almost twice those in the United States.
Of more concern to Washington might be that having the world’s largest economy helps the United States maintain the planet’s largest defense budget. At the moment, America accounts for about four out of every 10 dollars in global defense spending; China, in second place, accounts for less than one out of 10. But one way to think about this is to ask how much the three-quarters increase in defense spending between 2000 and 2011 enhanced America’s well-being. It is distinctly unclear that having one of the world’s largest defense budgets, rather than the largest, poses an existential threat to U.S. citizens’ quality of life.
Although the downsides are limited, the upside to the United States of losing the top GDP spot is immense. The country’s declining economic primacy is mainly a result of the developing economies becoming larger, healthier, more educated, more free and less violent. And there is little doubt the United States benefits from that. Just over the past few years, for example, U.S. export markets in Asia, Africa and Latin America have grown rapidly. Three-fifths of America’s exports go to the developing world, and that suggests that about 6 million Americans are employed providing goods and services to emerging markets. As the developing world gets richer, it will import more — and create more jobs here.
And growth in the developing world, even if it means that some populous economies may eventually grow larger than the United States, also means that there are more places for Americans to travel in security and comfort, and more places to learn, work or while away our retirement years.
America’s tenure on top is ending because much of the world is becoming more like America in many ways: richer, more democratic, more secure. The world increasingly shares aspirations, priorities and attitudes similar to ours.
This is a success story for U.S. stewardship of the global economy.
So celebrate with me: We’re No. 2!
Charles Kenny is a senior fellow at the Center for Global Development. This essay is adapted from his new book, “The Upside of Down: Why the Rise of the Rest Is Good for the West.”