On China’s Economic Potential

The best functional equivalent of today’s China isn’t India or the E.U. or the United States. It’s the Roman Empire, were it still around today. Both have ancient origins. Both are fairly diverse both climatically and demographically, but not as diverse as the post-1492 European empires. The Roman Empire region’s population today is half that of China (at the Roman Empire’s height, its population was basically equal to that of China). Like China today, the Roman Empire was a nominal Republic that was in practice a despotism. Both empires were similarly technologically advanced when the Roman Empire was at its height.

This comparison is extremely useful today in understanding where China will end up over the next few decades, first economically and secondly in terms of national power. China’s current per capita GDP is similar to Mexico’s. The best predictor of per capita GDP in a country is its human capital. Both China and the Roman Empire region contain areas of very high and very unimpressive human capital. As a result, we should expect China’s GDP per capita to end up around where Roman Empire’s would be were it a modern-day Mediterranean state.

All evidence shows math is a special strength of the Chinese (especially Southeastern Chinese, e.g., Hakka and Fujianese), but math scores as not a useful predictor of economic development once one already has Verbal/Science scores. Korea and Japan are basically as rich as Britain and France, even though their math scores are obviously superior. Beijing-Shanghai-Jiangsu-Guangdong’s 2015 smart fraction for PISA Science was right between Britain and Belgium (verbal scores were relatively worse). The population of B-S-J-G is around 240 million. Half of this would be 120 million -precisely as one would expect if China were comparable to the Roman Empire region and England, France, and the Netherlands were comparable to B-S-J-G. The 2018 numbers released last year were clearly gamed (as the Chinese leadership is wont to do) and are, thus, worthless for analysis. Fujian and Zhejiang are, I presume, comparable in non-math human capital to Switzerland, Northern Italy, and the formerly Roman-occupied parts of Germany.

So where is China’s equivalent of the Muslim Mediterranean? One would expect it to exist. China is, after all, the fairly recent origin of the Filipinos/Maori/Polynesians, as well as of the Thais and Laotians. None of these groups have large smart fractions. And, indeed, though evidence is far from conclusive, there are strong indications that China’s equivalent of the Muslim Mediterranean does exist in the regions of Guangxi, Guizhou, Yunnan, Jiangxi, Anhui, Hebei, and Sichuan. Though the test used in the paper linked to isn’t particularly predictive of national outcomes, and the idea intellectual will and ability in these provinces are actually the lowest in the world seems extremely doubtful, the assumption that the state of human capital in Guizhou and Jiangxi is not much different from that in -and these regions are not richer than- Indonesia and Egypt seems a fairly safe one to make.

Since China for obvious reasons cannot hope to economically surpass the most successful post-Communist countries -Slovenia and Czechia- and since it is already almost at Bulgaria’s (≈Mexico’s) level of GDP per capita, a reasonable observer should conclude China will probably stop its above-trend growth with its current institutions at a level of GDP per capita somewhere in between these -say at around that of Croatia, Latvia, or even Hungary. Given China’s not as impressive as advertised human capital state, this indicates a rather positive assessment of current Chinese Communist economic institutions- that they are at least as good as those that can be expected from the post-Communist European Union. Further institutional reform (since all agree China’s economic institutions are far from ideal -an identical Chinese worker will never earn as much in real terms in a comparable part of China as in Taiwan, and especially not under current Chinese Communist economic institutions) would thus surely guarantee China’s economy being at least as large as the U.S. by exchange rates, and more than twice the size of the U.S. by PPP.

Author: pithom

An atheist with an interest in the history of the ancient Near East. Author of the Against Jebel al-Lawz Wordpress blog.

One thought on “On China’s Economic Potential”

  1. he world changed when China secured the Tarim territories and established contacts with India through Bactria.

    The Romans knew about India, but were unaware of the Far East until the first century BC when silk began to reach the Mediterranean through the Parthian Empire which ruled in ancient Iran.The Parthians sent their first envoys to the Han Empire in 100 BC and it was from these early contacts that they learned of the profits to be made by controlling the overland trade in Chinese goods, including silk and steel.

    Parthian subjects blocked Roman access to the caravan courses that crossed Iran and for security and profit they restricted the flow of information that reached the Mediterranean concerning the distant Han Empire.5 A second advance in the ancient world economy occurred in 31 BC, when the Roman general Octavian defeated the Ptolemaic Queen Cleopatra VIII and her consort Mark Antony. This conflict was the final civil war of the Roman Republic and after his victory Octavian took control over the eastern legions and annexed Egypt. The economic prospects of the Roman regime were transformed when Octavian seized the accumulated wealth of the Ptolemaic Kingdom and distributed the funds amongst the citizen population of Rome.6 The resultant commercial boom occurred at the same time as the Empire gained direct control over the Red Sea shipping lanes that led into the Indian Ocean. Within five years, there were over a hundred Roman ships sailing to India, and Mediterranean markets were inundated with eastern products.7 By the first century AD Indian imports into Egypt were worth over a billion sesterces per annum and the Roman Empire was receiving more than 250 million sesterces from the quarter-rate custom tax it imposed on its Red Sea frontiers.8 The Empire received further high-level income from taxing eastern goods entering Roman Syria by way of the Persian Gulf and the Parthian caravan routes that crossed Iran. An inscription from the frontier city of Palmyra confirms that Rome must have received revenues of a least 90 million sesterces from this caravan traffic.9 To place this figure in context, Caesar imposed tribute worth 40 million sesterces on his Gallic conquests and by the first century AD the Rhineland frontier was defended by eight legions (80,000 soldiers) at a cost of 88 million sesterces.10 This meant that the taxes that Rome collected from international trade surpassed the revenues of entire subject countries and were sufficient to pay the costs of large permanent armies. Every year Rome required up to a billion sesterces to finance its Empire and the ancient evidence suggests that a third of this amount came from taxing eastern commerce conducted through the Indian Ocean and Iran.11 In 27 BC, Octavian took the name Augustus and received formal recognition as the first Emperor of Rome. The new revenues derived from international commerce enabled Augustus to reform the Roman military, transforming an ad hoc system of short-term citizen service into the first full-time professional army devised by any ancient regime. Augustus calculated that almost thirty legions including 300,000 career soldiers were needed to protect the Roman Empire from external threat and maintain control over its subject nations (the Pax Romana). This military force was maintained at a cost of over 330 million sesterces per annum, the single largest expense in Roman government spending.12 The revenues raised by eastern commerce helped the Roman regime meet its military costs, but this prosperity was generated by the export of gold and silver to pay for exotic commodities in foreign markets. Pliny the Elder, an advisor to the Emperor Vespasian, estimated that more than 100 million sesterces of bullion left the Empire every year as a consequence of international commerce.13 This bullion was exported to acquire expensive stocks of Arabian incense, Indian spices and Chinese silks. The problem for Rome was that its gold and silver reserves were finite; while the products that the Romans sought in eastern markets were renewable resources for the regimes that controlled production. Consequently, the Roman Empire’s long-term prospects were determined by its economic position in the ancient world economy and the interests of China and other powerful regimes in Central Asia affected the fortunes of western civilization.

    McLaughlin, Raoul. The Roman Empire and the Silk Routes (pp. xix-xx). Pen and Sword.

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