The Historic Economy of China
Summary
TLDRThe video script provides an insightful overview of China's economic rise, tracing its journey from a predominantly agricultural society to the second-largest economy in the world. It highlights China's historical wealth, with periods of technological advancement and stability that contributed to its economic success. The script also discusses the concept of GDP, comparing nominal and purchasing power parity measures, and uses the production possibility frontier to illustrate the trade-offs nations make in resource allocation. It notes the impact of the industrial revolution on European economies and how China's large population and arable land allowed it to maintain economic strength despite technological disparities. The video promises to delve into the challenges China faced in the 1900s, its subsequent recovery, and its current status as an economic powerhouse in a subsequent episode.
Takeaways
- đ China is the second largest economy in the world and has the largest population, with a significant impact on global poverty reduction.
- đ China's economic rise is remarkable, moving from the seventh largest economy by GDP in 1990 to a leading economic powerhouse today.
- đĄ GDP is measured in two ways: nominal, which is straightforward, and purchasing power parity (PPP), which accounts for cost of living and business.
- đ Nominal GDP can be misleading when comparing wealthier and poorer nations, while PPP GDP provides a more accurate picture of economic output.
- đș Historically, China has been one of the wealthiest nations, with periods of technological and economic dominance predating European advancements.
- đ The late 1800s saw China's economy outperforming more technologically advanced nations due to its vast population and fertile land.
- đ The concept of a production possibility frontier illustrates the trade-offs nations make between different types of production based on available resources.
- đŸ China's agricultural focus and large workforce allowed it to maintain a strong economy despite less advanced technology compared to the West.
- âł The 1900s saw a shift in global economic dynamics, with the United States surpassing China due to industrialization and technological advancements.
- đ The Han Dynasty's longevity and the continuity of Chinese culture contrast with the fragmented history of European powers like the Roman Empire.
- đïž China's relative peace and stability, compared to Europe's frequent wars, provided a foundation for economic growth and development.
- âïž The invention of gunpowder highlights cultural differences in innovation use, with China initially using it for fireworks, while Europe weaponized it.
Q & A
What was China's position in terms of GDP by purchasing power parity 30 years ago?
-30 years ago, China was the seventh largest economy on the planet by GDP purchasing power parity.
How does nominal GDP differ from purchasing power parity GDP?
-Nominal GDP is calculated using consumer spending, government spending, investments, and exports, typically expressed in US dollars for global comparisons. Purchasing power parity GDP does the same calculations but also accounts for the cost of living and business in a country, providing a more accurate comparison between nations with different cost levels.
What is the significance of China's economic rise in the context of global poverty reduction?
-China's economic development has significantly contributed to the massive drop in absolute poverty observed worldwide, as it has transformed from a predominantly agricultural society to an economic powerhouse.
Why is it not entirely fair to compare wealthier nations with poorer ones based on nominal GDP?
-It is not fair because the direct calculation of nominal GDP tends to favor wealthy nations, potentially underestimating the true industrious potential of poorer nations due to differences in the cost of living and business costs.
What historical factors have contributed to China's economic strength?
-Historically, China has been one of the wealthiest nations due to its large population, arable farmland, and access to fishing oceans. Even with basic commodities and technology, its sheer manpower allowed it to outperform more advanced nations at the time.
How did technological advancements in Europe during the industrial revolution affect China's economic status?
-Despite the industrial revolution making European nations like England, France, and Germany very wealthy, China's large population and agricultural focus allowed it to maintain its economic lead for a time. However, the lack of industrialization and modern technology eventually led to China falling behind these nations.
What is a production possibility frontier and how does it relate to a nation's economic decisions?
-A production possibility frontier is a concept used to show the trade-offs, or opportunity costs, that individuals or nations make when deciding how to allocate limited resources between the production of different goods or services. It represents the maximum output a nation can achieve with its available resources, assuming full and efficient utilization.
How did China's large population contribute to its economic strength in the late 1800s?
-China's large population, which made up close to 40% of the world's total population at the time, combined with its arable farmland and fishing oceans, allowed it to produce a significant amount of basic commodities. Despite having less advanced technology, China's raw manpower enabled it to outperform more advanced nations.
What is one major difference between the Han Dynasty's longevity and the Roman Empire's eventual decline?
-The Han Dynasty effectively lived on throughout the centuries under various names, with its lessons and technologies being passed on. In contrast, the Roman Empire crumbled and splintered, leading to the loss of many technological advancements and intellectual progress.
How did China's relative peace and stability contribute to its economic development historically?
-China's stability allowed for the establishment of trade routes, the construction of large cities, and the development of a strong economy. The lack of widespread conflict compared to Europe provided a foundation for economic growth and the accumulation of wealth.
What factors led to China's decline in economic status in the early 1900s?
-The advent of the century of technology, during which the United States became highly industrialized, outpaced China's reliance on raw manpower. Additionally, China experienced political instability and a series of changes in governance, disrupting the stability that had previously supported its economy.
What can we expect to learn in the next video of the series about China?
-The next video will specifically examine China in the 1900s, exploring the causes of its economic decline and the factors that led to its resurgence as a modern economic marvel.
Outlines
đ China's Economic Rise and Historical Wealth
The video opens with an overview of China's economic status as the world's second-largest economy, highlighting its rapid growth from a primarily agrarian society to a global economic powerhouse. The script emphasizes the significant reduction in global poverty partly due to China's development. It introduces the concept of GDP and its measurement methods, nominal and purchasing power parity (PPP), to illustrate the economic comparison between nations. The historical context of China's economic dominance is also discussed, showing how it was once the wealthiest nation before the industrial revolution in Europe. The video sets the stage for a series exploring China's economy, focusing on its rise and the factors that contributed to its current status.
đ Production Possibility and China's Agricultural Advantage
This paragraph delves into the economic concept of the production possibility frontier, explaining the trade-offs nations make in resource allocation. It contrasts the technological advancements of late 19th-century Western nations with China's reliance on basic commodities and raw manpower. Despite having outdated technology like ox plows compared to steam trains and factories, China's vast population and fertile land allowed it to maintain a strong economic position. The video also touches on the historical technological advancements of the Han dynasty, highlighting China's peaceful evolution and the stability that contributed to its economic success. It concludes with the acknowledgment of the 20th century's global shift towards industrialization, which challenged China's traditional economic model.
đ Historical Parallels and China's Stability
The final paragraph discusses the historical parallels between China and other ancient civilizations, such as the Roman Empire, emphasizing China's continuous cultural and technological legacy. It points out that while the Roman Empire's advancements were lost over time, China's were preserved and built upon. The video also contrasts the frequent wars in Europe with the relative peace in China, which fostered a stable environment conducive to economic growth. The anecdote about gunpowder usage in China versus Europe illustrates the different cultural approaches to technology. The paragraph concludes with a teaser for the next video in the series, which will explore the challenges China faced in the 20th century and the subsequent resurgence that led to its current economic status.
Mindmap
Keywords
đĄEconomic Rise
đĄGDP (Gross Domestic Product)
đĄPurchasing Power Parity (PPP)
đĄIndustrialization
đĄProduction Possibility Frontier
đĄTechnological Advancement
đĄHan Dynasty
đĄStability
đĄAgricultural Nation
đĄOpportunity Cost
đĄResource Allocation
Highlights
China has become the second largest economy in the world with the largest population.
China's economic development has contributed to a significant drop in global absolute poverty.
China's economic rise is not a new phenomenon; it was the seventh largest economy by GDP PPP 30 years ago.
GDP is measured in two ways: nominal and purchasing power parity (PPP).
PPP GDP accounts for the cost of living and business in a country, providing a more accurate comparison between nations.
Historically, China has been one of the wealthiest nations in history, often leading the world economy.
Even in 1880, China and India held a slim economic size advantage over the United States.
China's economy was primarily agricultural during a time when European nations were industrializing.
The concept of the production possibility frontier illustrates the trade-offs between different types of production.
China's large population and arable land allowed it to maintain economic strength despite simpler technology.
The Han Dynasty had many technologies around the same time or before Europe, and its knowledge was preserved.
China has historically been more peaceful than Europe, allowing for stable economic growth.
Gunpowder, invented by the Chinese, was initially used for fireworks, contrasting with Europe's military application.
Stability has been a foundation for China's strong economy, enabling the establishment of trade routes and cities.
In the 1900s, the United States surpassed China in economic size due to advancements in industry and technology.
China's political changes in the 20th century disrupted its stability, impacting its economic standing.
The video series will explore what caused China's economic decline in the 1900s and its resurgence as a global economic power.
Transcripts
[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]
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