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David Rubenstein’s Weak Case for Fearing China

Summary:
Tyler Cowen recently interviewed wealthy philanthropist David Rubinstein and, as with most Cowen interviews, the conversation ranged over many topics. I found most of them interesting. What particularly caught my eye, given current issues, was Rubinstein’s fear of China. Here’s part of the conversation. COWEN: Within, say, a 25-year time horizon, what do you think is the greatest risk to American prosperity? RUBENSTEIN: Probably the rise of China. China is a bigger population than we have by three times. Given the fact that they have a different type of capitalist system than we do — but they have a capitalist system, I would say — given their population base and their technology strengths, I think that we will have to recognize at 25 years from now, it’s

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David Rubenstein’s Weak Case for Fearing China

Tyler Cowen recently interviewed wealthy philanthropist David Rubinstein and, as with most Cowen interviews, the conversation ranged over many topics. I found most of them interesting.

What particularly caught my eye, given current issues, was Rubinstein’s fear of China. Here’s part of the conversation.

COWEN: Within, say, a 25-year time horizon, what do you think is the greatest risk to American prosperity?

RUBENSTEIN: Probably the rise of China. China is a bigger population than we have by three times. Given the fact that they have a different type of capitalist system than we do — but they have a capitalist system, I would say — given their population base and their technology strengths, I think that we will have to recognize at 25 years from now, it’s unlikely we’ll be the biggest economy in the world. If we’re not the biggest economy in the world, it’s unlikely we can support the biggest military in the world and unlikely we’ll be the biggest geopolitical power in the world.

Tyler often wants to move quickly to the next issue that interests him but he, like me, didn’t find this persuasive. So he probed:

COWEN: But how would that harm our prosperity? I can see it might be bad for smaller Asian nations, bad for Taiwan, obviously, but many others. But why would we be worse off as economic entities?

RUBENSTEIN: Generally, the most prosperous countries tend to be ones that are leaders in, let’s say, their given area. If we’re not the leader in technology and we’re not the leader in financial services because those worlds have shifted to China, we probably won’t get the profits and the most talented people coming here, and a lot of other things that you need to be a prosperous country.

These are all things you need to be a prosperous country? Seriously? Would Rubinstein say that Canada, Japan, Germany, and Switzerland, to name four, are not prosperous countries?

Rubinstein continues:

We’ve been the biggest economy in the world since 1870, and probably, in about 10 years or so, as measured by GDP, we won’t be. By purchase [sic] price parity, we’re already not the biggest.

True, but prosperity and size are two different things.

Unfortunately Tyler didn’t probe further.

I wrote here about why I don’t see China as an economic threat to us. I do see it as a military threat to countries around it. But it’s not a threat to us militarily either. The Pacific Ocean is awfully handy.

David Henderson
David R. Henderson (born November 21, 1950) is a Canadian-born American economist and author who moved to the United States in 1972 and became a U.S. citizen in 1986, serving on President Ronald Reagan's Council of Economic Advisers from 1982 to 1984.[1] A research fellow at Stanford University's Hoover Institution[2] since 1990, he took a teaching position with the Naval Postgraduate School in Monterey, California in 1984, and is now a full professor of economics.[3]

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