The Chinese influence.  This is a concept that so many people in the United States regard as a powerful growing force that will eventually take over the world.  The influence that I am talking about is China’s growth rate.  For the past forty years, China’s real GDP has grown at astonishing rates of 10% or more per year.  The issue for many people is that they fear that the Chinese Economy will grow so much, that it will usurp the United States as an Economic powerhouse; coupled with an over 1 billion person populace, and impose its will on the World.  However, what many people, and professionals overlook, is the source of China’s power.  The reason China‘s growth rates are so sporadic and high is because the source of their economic power lies within Capital Accumulation.  Capital Accumulation is what a person or nation does by investing heavily in capital-intensive resources such as stocks, derivatives, commodities, etc.

The problem with Capital assumption is its volatility.  If you look at the embedded graph, you will see that China’s real GDP fell sharply in the 1970’s and in the 1980’s because of recessions caused by the OPEC oil crisis.  In contrast, if you look toward at the United States, you will see that the U.S. has maintained a relatively stable growth rate of approximately 3% for almost half of a century, and yet our economy is still stronger than that of China’s.  The economy of the United States is more consumption based, and therefore its GDP builds off everything every single American consumes.  Even in times of recession, people still consume, and therefore our nation is able to continue to grow.

For those naysayers out there, China’s sporadic growth may help them day-to-day; but for the long run economy, the U.S.’s consumption model wins.