The Historic Economy of China

[Music] this is china the second largest economy in the world home to the largest population in the world and the most aggressive economic expansion in modern history most people watching this video now would have seen china go from a collection of mostly peasant farmers into the economic powerhouse it is today within their lifetimes the economic development of china has amongst other things also contributed heavily to the massive drop in absolute poverty we have seen around the world today modern china is so massive and influential that a rundown of its economy would not fit into a single video so just like previous videos on the united states we will be breaking it down into a video series with a particular focus per video now with that out of the way what i really want to focus on is china's economic rise because in a sense that is probably not a fair label to put on it 30 years ago china was the seventh largest economy on the planet by gdp purchasing power parity now this is still impressive but it puts it well behind usa and the soviet union which were at the time number one and two respectively in terms of gdp by purchasing power parity a quick side note is that gdp or gross domestic product is generally measured in two ways nominal and purchasing power parity nominal gdp is the simplest to understand it is just this formula using the calculations from consumer spending plus government spending plus investments plus and exports normally expressed in us dollars for global comparisons now purchasing power parity gdp does the exact same calculations but it also balances this with the cost of living and business in a country for example if you have ten thousand us dollars in the united states you would be able to buy a decent secondhand car and have enough left over for a few weeks worth of groceries if you had ten thousand us dollars in nigeria well you would be able to buy a house and have a year's worth of groceries of some of the nation's finest food cooked for you personally because of this it is not necessarily fair to compare wealthier nations with poorer nations based on nominal gdp because this direct calculation tends to unfairly favor wealthy nations and means that their true industrious potential is not equally compared for example this is the nominal gdp of america and china as of 2018. this is the purchasing power parity gdp of america and china at the same time in china things are cheaper meaning that the same nominal figures actually mean a greater output overall anyway with that out of the way we still find that in 1990 china was the seventh largest economy in the world even using a calculation that favored them over wealthier nations at the time the big takeaway here is that this wasn't necessarily the status quo china is not some random nation that just decided to have lots and lots of babies then became really wealthy out of the blue when it went through post-communist industrialization it is actually kind of the opposite historically china has been one of if not the wealthiest nation in history today it's kind of just reclaiming its throne china has at many points throughout the ages being the wealthiest nation in the world in fact even as recently as 1880 china and even india held a slim economic size advantage over the united states since then the united states has pulled out a comfortable and significant lead for all the reasons we have explored in the video series on the united states but before then china was the leader but how would this make sense around this time the industrial revolution was in full swing in europe manufacturing and empire had made the economies of england france germany and the like incredibly wealthy but still china which was at this point almost exclusively an agricultural nation was out ahead of them what is going on here to really explain this we need a quick economics lesson this is a production possibility frontier these are normally used to show the trade-offs individuals or institutions make when deciding on one thing or another which is collectively known as opportunity cost if you buy an xbox you won't be able to afford a playstation if you buy a playstation you won't be able to buy an xbox and if you buy either you are a filthy casual anyway these trade-offs exist for countries as well it is assumed that countries have a limited amount of resources like land materials labor and technology these all combine to give them a maximum output for some combination of stuff for simplicity economists primarily look at the trade-off between two items at a time for a nation state let's say the trade-off is the production of rice or the production of ships the more land and workers they dedicate to rice paddies and farmers means less resources is put towards things like timber forests and dock workers to make ships in reality a trade-off is made and a nation will make some rice and some ships and most people are happy with this trade-off now this line here actually represents full utilization of available resources in the most efficient possible way with absolutely nothing left over when you have produced any combination of these two products in reality every single nation on earth exists somewhere below their respective line now if you want to move this line you have to do one of a few things find more resources find more labor or employ better technology in the late 1800s england the united states france and the like had significantly better technology england had steam trains china had ox plows the united states had factories and china had fields normally this would mean the production possibility frontier of these modern nations would be greater than china's and if everything else were kept the same this certainly would be the case but everything wasn't even china at the end of the 19th century had a population of 450 million making up close to 40 of earth's total population and it also had and still has incredibly arable farmland and fishing oceans meaning that even though china was producing and trading in the most basic commodities it was still able to outperform more advanced nations at the time based pretty much entirely off raw manpower alone [Music] most people in the western world today know very little of chinese history outside of maybe mulan and there isn't necessarily anything wrong with that in the same vein a lot of chinese students wouldn't even know who napoleon was what is often lost in all of this though is that china had a lot of technologies around the same time or even before europe had them the han dynasty was formed and existed around the same time period as the peak of the roman empire now the roman empire was the birthplace of many technological marvels but a lot of that progress was lost in history as the empire later crumbled and splintered and intellectual islam started to become a no-no things like cement mathematics metallurgy and even relatively advanced medical procedures all existed in both the han dynasty and the roman empire the only difference is that the han dynasty effectively lived on throughout the centuries under various names and the lessons and the technologies of the empire were passed on as opposed to being lost in history this can easily be seen today it is unlikely that anybody in the world today calls themselves roman well apart from maybe the three million people that live in rome maybe but like do people actually do that i'm honestly asking i don't call myself a sydney and but this is like is this a thing if anybody knows please please please comment it but with that aside there are plenty of people that call themselves han chinese it is actually by far the largest demographic of people living in china at the moment which goes to show that the han dynasty evolved and morphed over time as opposed to crumbling and being lost in history oh and also even at this time china was a much much much more powerful economy than the roman empire so i guess there is also that too china also benefited from being a remarkably peaceful place compared to europe this is a list of wars that took place in europe in the last two millennia and here is a list of battles that took place in china the list is about the same length but it must be remembered that wars are a collection of battles and it is very very easy to discern that europe was a much more hostile place which makes sense china was a vast landmass with all the resources you would really ever need internally europe was a collection of much smaller more cramped nations vying for dominance of a less abundant land now this is not to say china was free from conflict and that the han dynasty sailed through the last two millennia unscathed when china went to war they went hard but it was overall a more peaceful region an economic history professor of mine once shared the anecdote that gunpowder was invented by the chinese the first thing they decided to do with it was to create fireworks to entertain people when gunpowder made its way to europe the first thing they thought was how good would this be for killing the french now i have said that over and over and over again on this channel stability is the foundation of any good economy and china had this stability the stability to set up trade routes all over the nation the stability to build the largest city in the world at the time the stability to get down to work and build the wealthiest nation on earth but then in the 1900s the world caught up at the start of the 1900s china had lost its throne as the largest economy in the world the united states had become so competent at industry that even the raw manpower that china had been relying on for the past few centuries couldn't keep them at bay the century of technology had begun and ox carts weren't going to cut it anymore no matter how many of them you had the country also went from being china to china to china to china to china all in the space of 50 years so the great stability thing that it had going for it kind of got tossed out the window in the next video in this series on china we will look specifically at china in the 1900s and look at exactly what caused it to fall so far behind and then look at what brought it back to become the economic marvel it is today [Music] thanks for watching the latest video guys and a special thanks to all of our amazing patrons over on patreon you guys in particular continue to make this possible if you did enjoy the video please consider liking and subscribing otherwise as always a live stream q a session will be taking place on the economics explained discord server so feel free to head over there and hang out thanks guys bye

Channel: Economics Explained

Views: 416,564

Keywords: the economy of ancient china, the economics of ancient china, the economy of ancient china explained, the economics of ancient china explained, ancient china economics explained, economics explained ancient china, ancient china economy explained, ancient china economy, ancient china economy economics explained, economics, ancient china economics, how ancient china economy works, economics explained

Id: Vi-U9wfa3CE

Length: 10min 10sec (610 seconds)

Published: Sun Dec 22 2019

Reddit Comments

[u/[deleted]]

China's future prosperity absolutely depends on its relationships with Europe and North America. If it can't abide by international rules it'll be put aside. China has more to lose than the rest of the world.