December 03, 2014
Eduardo Porter ends an interesting piece on declining income inequality in Latin America with a warning that the decline may not continue, insofar as exports of commodities was a major cause. The argument is that China’s growth is slowing, and since China was a major market for exports, this means that growth in demand in the future might be much slower than growth in demand in the last decade.
The problem with this view, which is frequently repeated in the media, is that it ignores the fact that China is much larger now than it was a decade ago. China’s economy has more than doubled in size over the last decade. This means from the standpoint of the world economy, 7.0 percent growth in China today has far more impact than 10.0 percent did a decade ago. It may well be the case that demand for commodities exported from Latin America is weakening, but if we are comparing the impact of growth in China on this demand, it is undoubtedly a larger factor in 2014 than it was in 2004.
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