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It used to be that if a country had a big population it was a threat because of the number of soldiers it could put into the field. This is not so true anymore. With modern weapons, countries with large armies can be defeated. But this doesn't mean that having a large population doesn't matter. Indeed it is just the opposite, having a large population means that you have a large domestic market for goods and a large labor force. If your labor force happens to have a low wage base and is well educated and skilled in manufacturing, you have the best of all worlds. The world is changing and China may very well become the dominant economy if things keep going the way that they are.

There are more people learning English in China right now, then there are people speaking it in the United States. China is educating about five time the amount of engineers as the U.S. The U.S. had 3 major car companies, now we really have two since Chrysler was purchased by Daimler Benz, a German company. China has over 100 car companies and they are going to sell cars in the U.S. in 2007. Since their labor works so cheap, they should be able to easily undersell every car sold in this country right now and maybe even in the world. One thing that I read really surprised me, that was the fact that there is so much new building going on in China that they use half of all the world's cement every year. They are even going into the commercial plane market and I am sure that they will take a big bite out of Boeing and Air Bus once they get rolling. But will China be able to sustain a position of manufacturing leadership in today's world? The problem is very understandable, as a nation becomes successful at manufacturing, the standard of living rises for the workers. Once it reaches a certain point then that nation is vulnerable to competition by other nations that have a lower standard of living. For example as China gets more successful, a country like India may be able to manufacture goods cheaper than it, until they reach the same wage level.

Eventually the entire world could reach a point where the wage would be about the same no matter where you went. The next problem would be that there won't be enough work for everyone. Since more and more automation is being used in plants and factories, less jobs are required. Another point is that automation, if used properly, might enable a country to stay competitive with a low wage country. That may be the answer that allows a country like the U.S. to maintain it's economy. What I don't understand is why American car companies say they can't build cars in this country because of high labor costs, yet the Japanese and other nations can do precisely that? I mentioned this to someone that knew and he told me that the U.S. companies were carrying too much baggage in the form of hospitalization and pensions. This makes you wonder because my understanding is that the Japanese auto companies take quite good care of their workers and some companies such as Honda won't hire more workers unless they are sure that they will have a job for them for their entire lives. Honda has said that they never had to let a worker go.

Some countries may begin to panic at the thought that their goods will no longer be competitive. Of course the European Union has just to keep foreign goods out, but then they could never get rid of their goods. Some countries may erect high tariffs or limit the import of cheap goods. Cheap goods have a good side also. They are good for the consumer. One of the reasons that inflation has stayed so low in the U.S. is the importation of cheap goods. Many items are much cheaper today than they were years ago. One has just to go to a Payless shoe store to see what I am talking about. The many dollar stores that are springing up everywhere wouldn't have been possible without these cheap goods. Another thing is that these cheap items are a much higher quality than the items you used to buy in a 5 and 10 cent store for about a dollar. I am thinking of things like tools for example. You used to be able to get a 99 cent hammer that was made of cast iron. It always broke after a couple of uses. Today you can get a hammer in the dollar store that will actually last under normal home use.

I am not too worried about more engineers and scientists because we should still have plenty in this country. Maybe it will prove to be too many in the long run. After all you need street sweepers too. Another thing might happen that I haven't discussed yet. We might see several national economic power houses becoming the dominant economies in the world. It might boil down to three or four. One might be the European Union, another China, another the U.S. and a fourth Japan. Countries may have to band together to cause this to happen. An example of this would be Japan and Korea becoming one economic unit. The U.S. might join forces with Canada and Mexico and even some South American countries. While this all looks unlikely now, who can really tell what the future holds. I could be entirely wrong and the two most powerful countries may become China and India, simply because they have such a big domestic market for goods and such a huge, low wage, work force.

The world is changing and I am sure that in a hundred years from now, the world powers will be different from who they were twenty years ago. One has only to look at the reserves possessed by countries to see the sad shape the U.S. is getting in. A family has to have a budget or limit to what they spend every month or year. If the family's income is $5,000 per month, they can't spend $8,000 per month. The U.S. has been doing this for years. Add to this the job losses and the losses of skilled workers and you have a recipe for disaster. Look around the world at the successful countries and you will notice one thing, they are not paying 140 billion a year for wars every year. Foreign nations now hold much of the debt of the U.S., this is not a very good position to be in. We are taking an economic beating and much of it is our own fault.