Maybe China won't be our economic master after all

New research suggests One Child Policy may negatively impact growth, innovation

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Numerous studies and forecasts over the past few years have concluded that China will usurp the United States as the top economic power in the world.

The latest study, released one month ago by the National Intelligence Council, concludes that China "will probably have the largest economy, surpassing that of the United States a few years before 2030."

The International Monetary Fund thinks China will have the world's largest economy much sooner, by 2016.

Given China's huge and increasingly educated workforce, and the growth in tech jobs and industries, it does seem inevitable that its economy will dislodge ours from the top position, with when this will happen being the only subject of debate.

But new research suggests a dramatic social policy introduced 34 years ago to control population growth might inadvertently undermine China's economic progress.

China introduced its One-Child Policy in 1979 in order to curb its population. (Still, with 1.3 billion people, China is the world's most populous country, with more than four times as many people as the U.S.)

The new study by a team of researchers at several universities in Australia analyzed the behavioral attributes of Chinese children born just before and after the OCP was implemented in 1979 by having more than 400 test subjects play economic games. Here's the abstract of the research, published in the online journal Science:

We document that China's One-Child Policy, one of the most radical approaches to limiting population growth, has produced significantly less trusting, less trustworthy, more risk-averse, less competitive, more pessimistic, and less conscientious individuals.

Interesting, though, that this nation of purported misanthropic, fatalistic and selfish slackers still is expected to surpass the entrepreneurial, hyper-competitive U.S. as the world's top economic power any year now. What's up with that?

Remember, the researchers aren't arguing that all Chinese people born under OCP have become dull, churlish and timid automatons. For example, Monash Professor Lisa Cameron says, "Our data show that people born under the One Child Policy were less likely to be in more risky occupations like self-employment."

That's less likely. I'm reasonably certain there still are millions of young Chinese entrepreneurs, just as there's plenty of innovation going on in China that is driving economic growth. From Forbes:

Many analysts believe that Chinese are good at copying but not at innovating. That's just not true anymore.

The country has become the main recipient of venture capital money in clean technology. The government is trying to address soaring health care costs by reducing pollution and is actively encouraging foreign investment to do so.

So while the Australian study raises some interesting points about the social and psychological impact of China's OCP policy, I suspect it's overstating the negative impact on China's economic growth.

Personally, I'm rooting for a vibrant and healthy global economy. It doesn't have to be a zero-sum game. I'd like to see the U.S., China and other nations both compete and grow economically. I'm sure that makes me a socialist.

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