Economics focus: The celestial economy | The Economist IT IS perhaps a measure of Americaâ€™s resilience as an economic power that its demise is so often foretold. In 1956 the Russians politely informed Westerners that â€œhistory is on our side. We will bury you.â€ In the 1980s history seemed to side instead with Japan. Now it appears to be taking Chinaâ€™s part. These prophesies are â€œself-denyingâ€, according to Larry Summers, a former economic adviser to President Barack Obama. They fail to come to pass partly because America buys into them, then rouses itself to defy them. â€œAs long as weâ€™re worried about the future, the future will be better,â€ he said, shortly before leaving the White House. His speech is quoted in â€œEclipseâ€, a new book by Arvind Subramanian of the Peterson Institute for International Economics. Mr Subramanian argues that Chinaâ€™s economic might will overshadow Americaâ€™s sooner than people think. He denies that his prophecy is self-denying. Even if America heeds its warning, there is precious little it can do about it. Three forces will dictate Chinaâ€™s rise, Mr Subramanian argues: demography, convergence and â€œgravityâ€. Since China has over four times Americaâ€™s population, it only has to produce a quarter of Americaâ€™s output per head to exceed Americaâ€™s total output. Indeed, Mr Subramanian thinks China is already the worldâ€™s biggest economy, when due account is taken of the low prices charged for many local Chinese goods and services outside its cities. Big though it is, Chinaâ€™s economy is also somewhat â€œbackwardâ€. That gives it plenty of scope to enjoy catch-up growth, unlike Japanâ€™s economy, which was still far smaller than Americaâ€™s when it reached the technological frontier. Buoyed by these two forces, China will account for over 23% of world GDP by 2030, measured at PPP, Mr Subramanian calculates. America will account for less than 12%. China will be equally dominant in trade, accounting for twice Americaâ€™s share of imports and exports. That projection relies on the â€œgravityâ€ model of trade, which assumes that commerce between countries depends on their economic weight and the distance between them. Chinaâ€™s trade will outpace Americaâ€™s both because its own economy will expand faster and also because its neighbours will grow faster than those in Americaâ€™s backyard. Mr Subramanian combines each countryâ€™s share of world GDP, trade and foreign investment into an index of economic â€œdominanceâ€. By 2030 Chinaâ€™s share of global economic power will match Americaâ€™s in the 1970s and Britainâ€™s a century before (see chart). Those prudent American strategists preparing their countrymen for a â€œmultipolarâ€ world are wrong. The global economy will remain unipolar, dominated by a â€œG1â€, Mr Subramanian argues. Itâ€™s just that the one will be China not America. Mr Subramanianâ€™s conclusion is controversial. The assumptions, however, are conservative. He does not rule out a â€œmajor financial crisisâ€. He projects that Chinaâ€™s per-person income will grow by 5.5% a year over the next two decades, 3.3 percentage points slower than it grew over the past two decades or so. You might almost say that Mr Subramanian is a â€œChina bearâ€. He lists several countries (Japan, Hong Kong, Germany, Spain, Taiwan, Greece, South Korea) that reached a comparable stage of developmentâ€”a living standard equivalent to 25% of Americaâ€™s at the timeâ€”and then grew faster than 5.5% per head over the subsequent 20 years. He could find only one, Nicolae Ceausescuâ€™s Romania, which reached that threshold and then suffered a worse slowdown than the one he envisages for China. He is overly sanguine only on the problems posed by Chinaâ€™s ageing population. In the next few years, the ratio of Chinese workers to dependants will stop rising and start falling. He dismisses this demographic turnaround in a footnote, arguing that it will not weigh heavily on Chinaâ€™s growth until after 2030. Both China and America could surprise people, of course. If Chinaâ€™s political regime implodes, â€œall bets will be offâ€, Mr Subramanian admits. Indonesiaâ€™s economy, by way of comparison, took over four years to right itself after the financial crisis that ended President Suhartoâ€™s 32-year reign. But even that upheaval only interrupted Indonesiaâ€™s progress without halting it. America might also rediscover the vim of the 1990s boom, growing by 2.7% per head, rather than the 1.7% Mr Subramanian otherwise assumes. But even that stirring comeback would not stop it falling behind a Chinese economy growing at twice that pace. So Americans are wrong to think their â€œpre-eminence is Americaâ€™s to loseâ€. Bratty or benign? If China does usurp America, what kind of hegemon will it be? Some argue that it will be a â€œprematureâ€ superpower. Because it will be big before it is rich, it will dwell on its domestic needs to the neglect of its global duties. If so, the world may resemble the headless global economy of the inter-war years, when Britain was unable, and America unwilling, to lead. But Mr Subramanian prefers to describe China as a precocious superpower. It will not be among the richest economies, but it will not be poor either. Its standard of living will be about half Americaâ€™s in 2030, and a little higher than the European Unionâ€™s today. With luck China will combine its precocity in economic development with a plodding conservatism in economic diplomacy. It should remain committed to preserving an open world economy. Indeed, its commitment may run deeper than Americaâ€™s, because its ratio of trade to GDP is far higher. Chinaâ€™s dominance will also have limits, as Mr Subramanian points out. Unlike America in the 1940s, it will not inherit a blank institutional slate, wiped clean by war. The economic order will not yield easily to bold new designs, and China is unlikely to offer any. Why use its dominant position to undermine the very system that helped secure that position in the first place? In a white paper published this week, Chinaâ€™s State Council insisted that â€œChina does not seek regional hegemony or a sphere of influence.â€ Whether it is precocious or premature, China is still a tentative superpower. As long as it remains worried about the future, its rivals need not worry too much.