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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

#41

Post by Nokinside »

evilturnip wrote: post #38
Nokinside wrote: post #36

Earlier quoted context omitted.

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…

You have completely wrong image in your mind. We are not talking about fully centralized command economy.

Just like I said in other comment, Look at the post war economies in Europe, Japan, Korea etc. Wage controls, price controls, rationing etc. still a market economy and not a command economy.

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

#42

Post by cinquemb »

nkurz wrote: post #37
cinquemb wrote: post #20

Earlier quoted context omitted.

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?

For that particular example I think economists usually see savings as bad because it means that there is unproductive capital (and eventually leads to deflation?) and therefore reduced savings means that capital that would typically be in savings would now be productive (an asset on someones balance sheet that can now be tallied for GDP instead of liability on a banks).

Well I put "stability" in quotes because in reality, every economic actor will have their own perspective of what the goal is and how effective any solution will be in achieving such goal. Some people thought zero lower bound and real negative interest rates solved things, and others thought it was just kicking the can down the road…

My issue with the first four bullet points is that the government now can point to instances where they say that they have been doing all of those things (because all these bullet points address things at such a high level), and all this is telling them to do is just do more of the same and expect different results.

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

#43

Post by tonyedgecombe »

eksemplar wrote: post #4

I don’t get this article. China exceeded their economic growth target for 2018 in April when their economy hit 6.8% growth. Their wages are steadily increasing. Their internal market is the healthiest of any g20 economy. Investments both internally and internationally are up and their population has little dept. On top of that they haven’t touched retirement age, so they have a lot of leverage there.

I don't think anybody believes their growth figures any more.

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

#44

Post by paulsutter »

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…

Where can I find more detail on this?

> Decisions are done in small groups of 30 people at most, with several hundred people having some influence.

To all the ideological responses to nokinside: don’t underestimate China. China isn’t perfect but is an incredible story.

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

#45

Post by pk3469 »

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…

[flagged]

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

#46

Post by bitxbit »

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…

You can go through a simple two-stage exercise. But it comes down to how China can churn out tech and this is exactly why they are not allowing the Big Silicon Valley to do business there (and understandably so). To be honest, the tech baton will stay in the US until someone can put up a comparable education and research ecosystem. I don’t see that happening for at least another 50 years. China is at a crucial point in their economy and my bet is they will do whatever they can to generate growth in the WRONG (and easy) areas.

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

#47

Post by mooreds »

paulsutter wrote: post #44
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…

Where can I find more detail on this? > Decisions are done in small groups of 30 people at most, with several hundred people having some influence. To all the ideological responses to nokinside: don’t underestimate China. China isn’t perfect but is an incredible story.

Totally an incredible story. Like Japan, South Korea or Taiwan, but 10-100x the size. It's amazing.

That said, the challenges they face are enormous. I hope they can navigate through them.

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

#48

Post by seibelj »

pk3469 wrote: post #45
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…

[flagged]

You are seriously arguing that consuming sugar is equivalent to mass murder ordered by the government, and that a totalitarian regime might be better than democracy? I think you have some errors in your logic.

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

#49

Post by slv77 »

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…

>When he says "China's debt problems", what exactly is he referring to?

China’s response to the financial crisis was to loosen credit and “encourage” banks to lend. The result was that debt started rising faster than GPD and total debt now stands at 300% of GDP.

Since GDP is the income needed to pay off debt there is a point where it is no longer sustainable. If there were no limit it would be possible to eliminate poverty by simply giving poor people loans.

> When he says "there are also only four ways that Beijing can respond", what are they responding to and what is the goal of their response?

With a looming trade war it is unlikely that China will be able to sustain the trade deficits with the US like it has in the past. It is also unlikely that China can find any other viable markets that could absorb exports that are currently destined for the US. China will want to mitigate the domestic impact of the outcome in a way that preserves domestic stability.

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

#50

Post by pk3469 »

seibelj wrote: post #48
pk3469 wrote: post #45

Earlier quoted context omitted.

[flagged]

You are seriously arguing that consuming sugar is equivalent to mass murder ordered by the government, and that a totalitarian regime might be better than democracy? I think you have some errors in your logic.

If a totalitarian regime is not better than a democracy, then why is China outpacing the western world by every meaningful metric? Why are more and more governments increasingly shifting to the totalitarian side of the spectrum?

I think it's pretty obvious by now that individuals' feelings of being 'free' are not relevant to the big picture of what nation states seek to achieve. If you tasked an AI with controlling a country to achieve arbitrary goals, you can be damn sure it would be totalitarian for maximum efficiency.

I don't support or condone totalitarian governments and I value my freedoms, however illusionary they may be. But I have no delusions about what the optimal governance structure is.

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