America's misplaced inferiority complex
When it comes to China it seems Americans are suffering from a severe inferiority complex.
According to a Gallup poll published last week, 40 per cent of Americans think China is the leading economic power in the world today, while only 33 per cent believe the United States is top economic dog.
This is a remarkable result - and not just because an astonishing 93 per cent of those polled failed correctly to identify the European Union as the world's biggest economy (see the chart below).
More extraordinary is that 40 per cent think China, with a gross domestic product of a little over US$3 trillion last year, punches with more economic might than the US, which with a GDP of US$14 trillion has more than three times the output.
The sense of relative US decline is startling. In May 2000, 65 per cent of Americans correctly identified their homeland as the world's leading economic power. Now few think the decline is reversible: 44 per cent think China will be the world's leading economy in 2020, while only 31 per cent think it will be the US.
This economic pessimism is completely misguided. If China continues to grow at an average 10 per cent a year and the US at close to 3 per cent, it will be 2030 before China catches up. Yuan appreciation would bring that date closer, but in reality Chinese growth will slow over time as productivity gains become harder to come by and demographics begin to work against rapid development.
Most economists think it will be around 2050 before China can overtake the US, assuming China's growth trajectory is not interrupted by financial crashes, political upheavals or environmental disaster.
As a result, the poll's findings have caused a fair amount of supercilious snickering around the world, with commentators making fun of Americans' economic ignorance in much the same way that they laugh at surveys showing that 50 per cent of US students cannot find New York on a map of their own country.
The misperception of China's economic weight has several causes. Saturation media coverage of China's rapid development, endless stories about stolen US jobs and the ubiquity of Chinese-made goods in the shops at a time when the US dollar is sinking and the property crunch is starting to bite probably have a lot to do with it.
But although the mistake is understandable, it is still dangerous. The belief that China is a bigger economic power than the US will wrongly encourage Americans to think China poses a threat to their way of life. It will provide a platform for populist politicians to advance themselves by promoting a protectionist agenda with China as the perceived enemy.
That would hurt. Americans' paranoia that Japan was about to take over the world in the 1980s fuelled US demands for Tokyo to allow the yen to rise rapidly in value. That appreciation caught Japan in the deflationary liquidity trap that led to the 'lost decade' of stalled economic growth during the 1990s.
If China is to avoid the same fate, it will have to work a lot harder to help Americans overcome their inferiority complex.