2011-10-18

Det sägenomspunna Kina



Myths about China
economicoutlook.net

Today we learned that – China posts slowest GDP growth in two years – yes, the annual rate of growth has dropped to 9.1 per cent which was 0.4 per cent lower than the second-quarter and 0.2 per cent lower than the estimate provided by the Bloomberg News survey of 22 economists. …The anticipation of a slowdown over the last week has fuelled a host of doomsday projections about how the Chinese investment boom will crash and how it will cripple the rest of the world. My view is different. I consider the Chinese government to be totally on top of managing their economy, which sets them apart from the leaders in the advanced world. They will not let a major economic crisis occurring within their own borders.

For the rest of us, China provides an economic example – when all other sources of expenditure fail, turn on public spending and do it quickly and don’t err on the conservative side.

There is a lot of misinformation about China that spreads across the world media each day. A few months ago there was the obsessive worries about the Chinese dumping their strategy of buying US government bonds with their trade surpluses and sending the latter broke.

There is also the constant chatter about it artificially deprecating its own exchange rate because it wants to maintain its export-led growth. That presumes, of-course that exports drive its growth.

All these misinformed commentaries reflect a failure to give much credit to the Chinese for understanding the characteristics of their fiat monetary system and the opportunities that being the monopoly-issuer of currency within that system presents the Chinese government.

There is no doubt in my mind that the Chinese are much smarter than the Western politicians. I agree that some of this “smartness” might just be the fact that they are subject to less political constraints – the type of which are paralysing the governments in the advanced world.

But the very fact that these constraints are operating in this way in the advanced world is testimony of how stupid our politicians are – on all sides of politics.

It seems that the commentators apply the flawed “Western” (that is, neo-liberal infested) logic to all governments. But the Chinese government has shown that it is less willing to abide by the neo-liberal narrative and its performance during the crisis is clearly testimony to that.

They sailed through the global crisis even though exports fell dramatically. In this blog – Where the crisis means death! – I discussed the response of the Chinese government to the onset of the crisis and the sharp decline in their export revenue as spending in the advanced nations collapsed.

Most people think of China’s growth coming from its burgeoning export sector. But it has a very strong domestic economy and a large public spending program.

Nations need to be continually built and the comparison between China’s performance with Japan (with virtually no public sector) and the performance of Australia and New Zealand, which have only miniscule growth originated from public spending, is compelling.

So the graph highlighted in the early stages of the crisis the importance of very large fiscal interventions. My Chinese contacts informed me that at the time there was no discussion over there about the country drowning in debt or that the government was going to “run out of money”. These ideas that crippled the recovery in the West were not allowed to germinate in China.

Presumably, as more US-trained PhD students go back to China with there nonsensical economic theories things will change. But at this time, the Chinese government behaved impeccably.

They demonstrated a confidence in their knowledge that they are sovereign in their own currency and can deficit spend to further their sense of public purpose. We might deviate (dispute) what they define as purposeful behaviour and I certainly don’t suggest that all the policies of the Chinese government are sound. They are clearly not!

But they do have a much more sophisticated understanding of the opportunities that they have as a monopoly supplier of their currency than our Government has. And they are taking those opportunities more than other nations around them that are caught in and are being choked by the neo-liberal web imposed on them by the advanced nations.

A budget surplus does not lead to increased national saving – it actually squeezes the wealth of the non-government sector and so reduces national saving. The concept of saving in one’s own currency is nonsensical. Saving is the act by which a user of the currency postpones consumption now to provide for greater consumption later. This “sacrifice” is required because the non-government sector has to finance all of its spending in one way or another.

The sovereign currency-issuing government never needs to store up currency in order to spend. It can spend its own currency whenever it wants irrespective of what it did last period as long as there are goods and services available for purchase in that currency.



Conclusion

Whenever I read a story about China I realise that the West is so infested with neo-liberalism that it has forgotten how a fiat monetary system actually operates and the opportunities such a system affords a government which issues the currency.

China faces different political constraints to the West and that might explain why they seem capable of exploiting those opportunities while the leaders in West spend all their time denying they have them.

I also like to think that the Chinese are smart. I don’t know that definitely. What I do know is that the leaders of the West are stupid.



Kinesisk elmoppe



5 comments:

Björn Nilsson sa...

Skulle kinesiska doktorer i nationalekonomi återvända till Kina och försöka sig på några konstigheter kan väl regeringen dra slutsatsen att de behöver lite fortbildning, och skicka dem för omskolning hos arbetare och bönder i någon avlägsen provins några år?

Ja, nu har Kina en fördel i och med att man har en ledning som har förmåga att ta beslut, även om själva processen knappas följer demokratiska grundprinciper. I västländerna klarar man inte av att ta beslut även om grundprinciperna åtminstone officiellt följs. Men om västländerna vaknade till realiteterna från den neoliberala förlamningen, och fortsatte att följa grundprinciperna även i verkligheten, skulle de kanske hamna på toppen och gå om Kina vad det gäller förmåga att hantera kriser?

Teckentydaren sa...

Det är förmodligen möjligt. Det är ju inte demokratin som förlamar våra politiker praktiskt och intellektuellt utan snarare så att den rådande nyliberala ideologin och ekonomiska ”vetenskapen” som förlamar demokratin.

Hannu Komulainen sa...

Skillnaden mellan Väst och Kina kan ju bero på att de befinner sig i olika utvecklingsstadier. Och inte på skillnader i intelligens.

När lönsamheten i produktionen minskar, så kommer det kinesiska kapitalet också att hamna i en finansiell, "mogen" och ruttnande fas om det ska fortsätta att tjäna pengar. Kan man gissa...

Jan Wiklund sa...

Det är definitivt inte demokratin som hindrar vettiga beslut. Läser just nu Stiglitz' Freefall, som beskriver hur USAs regering, oavsett om dess chef hetat Bush eller Obama, har förlitat sig på gamla banksters för att sköta den ekonomiska politiken. Ingen demokrati där inte, inte ens nån offentlighet åt manipulationerna! Ingen vet hur mycket staten har slängt åt bankrutta banker för att direktörerna ska kunna fortsätta att stoppa bonusar i fickan, enligt Stiglitz.

Jan Wiklund sa...

PS till Hannu: Frågan är om Kina följer de vanliga kapitalistiska principerna, som ju har sin drivkraft i att företag konkurrerar och att den som misslyckas i konkurrensen slås ut.

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