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Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

carnegieendowment.org

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Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#31

Post by galuggus »

Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

That all depends on how powerful the leader is. If you look into the quite recent past this comment would be absolutely untrue. There was massive gridlock between factions it was just so opaque that we could only guess what was going on.

Also, How do you get the bureaucracy to actually do what you want?(A major recurring problem in Chinese History).

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#32

Post by UncleEntity »

> Notice that all four paths either raise investment or reduce savings, thereby reducing the country’s excess of savings over investment.

Or...a fifth path would be to entice people to convert "unproductive" savings into investment. If only there were some mechanism where people could tell if this was a viable route like, say, a market based interest rate.

Quite surprisingly, it turns out that "saving" and "investing" are nearly synonymous.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#33

Post by doombolt »

andygoo wrote: post #8

Studying economics for some time, I think economists often ask wrong questions. So let's say trade war occurs, and china will lose some of its exports. The main question is not whether savings would decrease or investment rise, the main question is how all the spare capacity left will be utilised. Yeah, if it won't be utilised then there will be unemployment, well pointed by the author. If domestic consumer will cons…

> let me assure you that strong Chinese government will find a way to use all the freed up labour/capital resources,

You're telling us that they have found The Holy Grail. Let me stay confident that it isn't the case.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#34

Post by bobwaycott »

mooreds wrote: post #3
baybal2 wrote: post #2

Such a long article just to state something well known: income growth has stalled for sure, and industry been contracting. China is about to hit its Brezhnev era. That's my fear. But for as long as Yi Da Yi Lu and state contracts rain gold, I see no personal reasons to worry

I have been reading his blog for years (ever since Calculated Risk, another great economics blog, pointed to him). He has been beating the same drum the entire time. His point is that the mechanics of how an economy work at the macro level reduce to a simple set of equations between investment, savings and consumption. And that those equations force hard choices that have political implications. I have passed some ar…

> And that those equations force hard choices that have political implications.

All economic decisions have political implications because all economic decisions are inherently political. Recall that until recently, we called it political economy until the Neoclassical school decided they wanted to pretend to be—and be viewed as—a science.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#35

Post by Nokinside »

crwalker wrote: post #23
Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

"...they can take as big hammer as needed to fix it." If you believe complex economic systems follow simple, well-known control laws, then yes. But I haven't seen much evidence for this.

Just study the War Economy in different countries during the WWII. Government can simplify and direct the economy if it has total control over it.

For lighter control look at the post war economies in Europe, Japan and Korea. Tight control of the economy worked just fine to stabilize the system.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#36

Post by Nokinside »

ekianjo wrote: post #26
Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

> It's all about being practical. The soviets and Mao's regimes had ample powers to do what they wanted, yet it resulted in mass murder and complete catastrophe at unprecedented scale because they made very, very poor decisions. Having leverage does not mean it fits prosperity nor crisis. Look at how soviets encouraged the killing of Kulaks which led to the great starvation (dozens of millions of deaths) in Ukraine i…

Those are examples of ideological action.

Chinese have not been strongly ideological after Deng Xiaoping.

Communist party is more like ruling aristocracy with privileges. Communist party is using communism the same way as aristocracy used religion to justify their divine mandate.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#37

Post by nkurz »

cinquemb wrote: post #20
nkurz wrote: post #9

I've tried reading this piece a couple times, but despite the bullet points and numbered lists, I can't make any sense out of it. I presume this is because I lack essential background knowledge. Can someone please help explain the context? When he says "China's debt problems", what exactly is he referring to? When he says "there are also only four ways that Beijing can respond", what are they responding to and what i…

I'm assuming the debt problems are the corporate defaults on bond payments [0] for 2018 until July, were close to equal to the entire year of 2016. There's also consumer debt stuff that's blowing up as well (the whole p2p loan companies going bankrupt was linked on HN recently). As for the what are they responding to is the engine for economic growth is stalling out from knock on effects behind whats going on above,…

I appreciate the answer. But I still don't see the connection between the proposed responses (the first four bullet points) and the stalling of economic growth. For example, how is "Reduce savings by letting unemployment rise" a response to slower economic growth, and how does this maintain economic stability?

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#38

Post by evilturnip »

Nokinside wrote: post #36
ekianjo wrote: post #26

Earlier quoted context omitted.

> It's all about being practical. The soviets and Mao's regimes had ample powers to do what they wanted, yet it resulted in mass murder and complete catastrophe at unprecedented scale because they made very, very poor decisions. Having leverage does not mean it fits prosperity nor crisis. Look at how soviets encouraged the killing of Kulaks which led to the great starvation (dozens of millions of deaths) in Ukraine i…

Those are examples of ideological action. Chinese have not been strongly ideological after Deng Xiaoping. Communist party is more like ruling aristocracy with privileges. Communist party is using communism the same way as aristocracy used religion to justify their divine mandate.

Central decision makers generally cannot predict the outcomes of the decisions they make because the system is so complex. It's been proven time and time again that the distributed decisions of millions of individual actors ala a non-centralized economy results in a more efficient and non-catastrophic outcome.

Wherever recent history has gone awry is when a few powerful people think they know what's best for everyone else.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#39

Post by bitxbit »

Nokinside wrote: post #10

Unlike liberal democracies, Beijing has more room to act in crisis. China has extractive institutions that will ultimately be a growth limiting factor, but I don't see it limiting their crisis responses. * There will be no political gridlock between left and right that can be solved only with half measures. Decisions are done in small groups of 30 people at most, with several hundred people having some influence. * T…

This is wrong. China can’t defy gravity and the laws of economics especially in a global economy. It boils down to the fact that Chinese govt continues to abuse the labor without meaningfully increasing their standard of living. This can’t continue. What they’re doing is akin to engineering growth for the sake of showing growth.

Re: Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

#40

Post by jessaustin »

Nokinside wrote: post #36
ekianjo wrote: post #26

Earlier quoted context omitted.

> It's all about being practical. The soviets and Mao's regimes had ample powers to do what they wanted, yet it resulted in mass murder and complete catastrophe at unprecedented scale because they made very, very poor decisions. Having leverage does not mean it fits prosperity nor crisis. Look at how soviets encouraged the killing of Kulaks which led to the great starvation (dozens of millions of deaths) in Ukraine i…

Those are examples of ideological action. Chinese have not been strongly ideological after Deng Xiaoping. Communist party is more like ruling aristocracy with privileges. Communist party is using communism the same way as aristocracy used religion to justify their divine mandate.

It has worked that way for several decades, but as you say, an authoritarian state can change direction quickly. There are some indications that Xi's ideology is very similar to Mao's: total domination of everything by the guy at the top. Will it be a surprise when everyone starts carrying around a little red smartphone?
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