China is to overtake the US as the world’s largest economy -- as, of course, it should. That last part is the news that isn’t accompanying the reports that it will.
Because, everything else being equal, a larger group of people should produce a larger economy than a smaller group of people.
Thus, China -- or, perhaps, India -- as the largest groups of people within the borders of the one country should be the largest economies in the world.
And, looking over history, this is what was true for most of it.
The anomaly, the oddity that is being remarked upon, is not that China will grow to that position again, it’s that it is not true here and right now.
This is not, of course, how we normally think of things precisely because it has not been the recent experience. But it is how we should think of things.
Consider a world in which all people were equal. We each produced the same amount and could thus consume the same amount.
In such a case then, a group of 1 million of us would have a smaller economy than 10 million of us. This is clear and obvious.
To use the economic jargon a bit, the GDP per capita would be equal but some countries, just by having a larger population, would have a higher GDP.
For most of history, this is roughly how it did work too. The living standards of the average person around the world was about the same.
In modern money, somewhere between $600 and $1,000 a year, as measured by that GDP per capita. This is just what history was. It did not get much lower because if it did then not enough children would survive to maintain the population.
If it got much higher, then population growth would rise, and in the next generation, there would be more people, but at that same old standard of living. This is now called “Malthusian” growth.
About 300 or 400 years ago, this first changed. Quite why is still argued about, although we do know what happened -- the Industrial Revolution.
Technological advancement sped up for some unknown reason, and this led to living standards rising faster than populations could alter to bring them back down again.
As we know, this started in England and spread through Europe and offshoots. It has taken all this time to spread to near everywhere in the world, but this is what is happening now.
Except for those few places entirely cut off from the global economy everywhere is now having an industrial revolution.
It is exactly what has been causing Bangladesh’s 5 to 8 per cent GDP growth per year in recent decades. And it is the same for India and China and so on.
To illustrate the difference here between growth in the economy and living standards. It is often said that India -- the wider India, including all of Bengal and Pakistan -- was poorer when the British left than when they arrived.
This is not in fact true. The GDP per capita was about the same after those 300-odd years, that is true.
But there were hundreds of millions more people doing the living. The GDP rose but the GDP per capita did not, as the population expanded along with the overall size of the economy -- that is that Malthusian growth.
Much of the same happened in China over the same period and this is not something exclusive to colonialism.
In fact, much the same happened everywhere throughout history except for those strange and odd places that had those industrial revolutions.
What is happening now is that the world is going back to all reacting to growth in the same way.
Everywhere, there is an increase in living standards from growth and not simply an increase in population at the same old levels. We have beaten Malthusian growth, given that everywhere is having that revolution.
We still have some way to go to get to everyone living at the same standard of course, given that historical divergence.
But it is one of the general assumptions within economics that it will happen. In the absence of bad policy from local governments, that is.
We can also observe it happening: the currently poorer countries are growing faster -- in both GDP and GDP per capita -- than the currently richer ones. Thus, the gap is closing.
We are, thus, getting back to where we ought to be. Which is that larger groups of people -- like China -- should be richer in aggregate, should have larger economies, than smaller groups of people.
China is closing in upon, within a decade perhaps, being the largest economy in the world again. It will still be poorer per person than most European countries but that is just something that will take more time to rectify.
Do though note the interesting corollary here. Bangladesh has a larger population that Britain and at some point, in this process it will therefore have a larger economy than Britain.
It will be interesting to see what people say when that happens -- won't it?
Tim Worstall is a senior fellow at the Adam Smith Institute in London