China's rise: The wealth of a nation (not ours)

When the economic histories of our time are written, 30 or 50 or 100 years from now, I strongly suspect that the main topic of discussion will not be U.S. budget deficits and taxes, nor health insurance, nor the struggles of the European Union with the euro, and perhaps not even "globalization" writ broadly.

Instead, history will see our era defined by the extraordinary economic rise of China.

Although this rise has been happening right in front of our eyes for almost 40 years, it has changed the lives of more than a billion people in ways that are not fully appreciated. Here are a few measures of how life in China changed between about 1980 and the present, according to World Bank data:

• The share of China's population below the poverty line, modestly defined as having a consumption level of $3.10 per capita per day, has fallen from 99 percent of the population to 11 percent.

• Per capita GDP has risen from $200 per person to $8,200 per person.

• Life expectancy has risen from 66 years to 76 years.

• Infant mortality per 1,000 live births has fallen from 48 to 9.

• The literacy rate for those 15 and older has risen from 66 percent to 96 percent.

• The share of China's total population over age 25 who have completed a secondary-level (high school) education has risen from 6 percent to 22 percent.

Such a list could be extended, of course. But the bottom line is that more than a billion people in China have risen out of a combination of grinding poverty, poor health and low levels of education to what the World Bank classifies as "upper middle income." A Chinese person who was a young adult back in 1980 has observed the entire process in his or her own lifetime — and hasn't yet reached retirement age.

So, do you rejoice for China? Adam Smith, who launched the systematic study of economics in 1776 with "The Wealth of Nations," published an earlier tome in 1759 called "The Theory of Moral Sentiments," which includes a meditation on how most people in the West think about the welfare of people in faraway China. Smith wrote:

"Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity.

"He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general.

"And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befal himself would occasion a more real disturbance.

"If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own."

In Smith's spirit, one might ask: Do you rejoice that China's economic growth has lifted hundreds of millions of people out of the most dire and terrible poverty? Or do you wish the process had been considerably more restrained, and slower? Or deep down, does a part of you sort of wish that it had not happened at all?

After all, the earthquake of China's shift to a moderate prosperity has caused tremors throughout the world economic and political systems. A shortlist of the aftershocks would include economic dislocations experienced in communities throughout the world to wages, interest rates and communities; theft of intellectual property and technology; environmental costs, like severe air pollution experienced mostly in China as well as the global effects of China's role as by far the leading emitter of carbon and other gases related to climate change; and political disruptions and muscle-flexing, especially with other Asian nations.

Of course, the rest of the world has also experienced positive effects from China's economic transformation. Consumers of products with Chinese inputs have benefited from lower prices, and now are starting to benefit more from Chinese-developed technology. Investment funds from China have helped to finance U.S. government borrowing and have encouraged economic development in certain parts of Africa and Latin America.

But when thinking about China, it seems to me remarkably easy to focus on negative effects, and more generally on how China's economic growth has affected the U.S. or other nations outside China. And in doing so, it seems remarkably easy to undervalue the transformative and improved lives of more than a billion of our fellow humans.

Back in 1759, Adam Smith argued that when thinking about the welfare of faraway people, it wasn't going to be enough to rely on "love of neighbor" or "love of mankind." He wrote that "it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love."

Instead, Smith argued that people should listen to a much tougher judge than feelings of love or benevolence — namely their own conscience. He wrote:

"It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration."

Dramatic and substantial real-world change is messy. In some ways, it was easier to be sympathetic with China back in the 1970s and early 1980s, when it was a poor country. It was picturesque, sentimental and sometimes just a little patronizing to watch some cultural dances and Chinese pingpong players, and sometimes at the end to make a moderate donation to help feed children or support schools.

But those times are done. Even with all the concerns about past side effects of China's economic growth or future policy decisions that will need to be made, I rejoice for China.

Timothy Taylor is managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul. He blogs at conversableeconomist.blogspot.com.