[lit-ideas] World Resources and China's Growth
- From: Omar Kusturica <omarkusto@xxxxxxxxx>
- To: lit-ideas@xxxxxxxxxxxxx
- Date: Wed, 19 Apr 2006 00:02:53 -0700 (PDT)
http://www.washingtonpost.com/wp-dyn/content/article/2006/04/18/AR2006041801120.html
How to Weather The 'Red Storm'
By David Ignatius
Wednesday, April 19, 2006; Page A17
President Hu Jintao's visit to Washington this week
has members of Congress grumbling that the Chinese are
selling too much to the rest of the world. CNN
commentator Lou Dobbs calls it the "Red Storm." But
the bigger worry over the next 25 years is that a
rising China will consume too much of the world's
resources. If models for economic growth don't change,
that's a recipe for continual battles over oil and
other scarce commodities.
Lester Brown, president of the Earth Policy Institute,
presents some startling estimates of future Chinese
consumption in a new edition of his book "Plan B 2.0."
He begins by noting that China already has replaced
the United States as the world's leading buyer of
basic commodities, consuming more grain, meat, coal
and steel on an aggregate basis than America does.
Only in oil does America remain the top consumer,
using three times as much as China in 2004.
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For all of China's growth, in terms of per capita
consumption, it still lags well behind the United
States, which continues to gobble up vastly more than
its share of world resources. But as the Chinese
economy prospers and grows, it's inevitable that
living standards will push consumption toward American
per capita levels. That's where Brown's estimates
become mind-boggling.
Let's start with assumptions about income and
population. Brown thinks that if China's economy
continues to grow at the rate of 8 percent a year, by
2031 the per capita income of its 1.45 billion people
will equal that of the United States in 2004. If
consumption patterns approximate those of today's
Americans, what will that mean?
Brown reviews the list of basic commodities, starting
with grain: If Chinese grain consumption per person
equals the current annual U.S. rate, by 2031 it will
consume about two-thirds of the world's total current
grain harvest. If the Chinese use paper at the current
U.S. level, their 2031 consumption will be nearly
double the current world production of 161 million
tons. If the Chinese match America's rate of three
cars for every four people, they will have 1.1 billion
vehicles, nearly 40 percent more than the world's
current fleet. And if China consumes oil at the same
per capita rate as the United States, it will use 99
million barrels of oil a day by 2031, well over total
current world oil production. In other words, if the
Chinese consume at current U.S. rates, there won't be
enough of anything left for the rest of the world.
But the Chinese won't match America's per capita
consumption of these resources. And that's Brown's
real point: China's overwhelming demand for
commodities will break the current models for economic
growth. Prices for commodities will rise so sharply
that the world will be driven onto a different growth
path, where it takes a smaller input of energy to
produce a given increase in output. New technologies
and food sources will alter the supply-demand picture.
Either that or the world will face an era of wars over
resources. Some would argue that war in Iraq and
rumors of war with Iran are harbingers of the coming
battle for control of resources, but I'm skeptical. I
wish Iraq were as simple as a war for oil.
Brown's dire forecasts are easy to criticize. They are
static, straight-line projections premised on the
unrealistic assumption that economists veil with the
Latin term ceteris paribus , or "other things being
equal." But, of course, other things never stay the
same. The variables in a global economy are changing
constantly in response to price signals about supply
and demand. But that is Brown's message. As he puts
it, "The western economic model -- the
fossil-fuel-based, automobile-centered, throwaway
economy -- will not work for China's 1.45 billion
people in 2031."
The commodities markets already are signaling what
China's rise (and the uncertainties caused by
America's recent difficulties) will mean for the
global economy. Oil hit a record high of more than $70
a barrel this week. Gold, a measure of investor
anxiety about inflation and instability, has more than
doubled in price over the past four years. Silver has
jumped even faster, more than tripling in price since
2002. According to economist Philip K. Verleger Jr.,
commodities have become the hot new investment play as
investors look at the basic supply-demand squeeze and
conclude that these raw materials are a safer and more
lucrative bet than stocks or bonds.
President Hu's visit to Washington should focus our
attention on the central strategic issue of the next
25 years: how to bring a newly prosperous China into
the global economy. The existing economic structure
will either adapt or it will break.
davidignatius@xxxxxxxxxxxx
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