The China superbubble.....
This interesting Christian Science Monitor article hypothesizes that China's amazing economic performance will face an inevitable slowdown. Government directed resource allocation inevitably causes an economy to perform worse than it would have without the government mandates....
Government is horrible at allocating large amounts of capital, especially at the speed it is done in China. Political decisions (driven by the goal of full employment) are often uneconomical, and corruption and cronyism result in projects that destroy value.This is not only true for China its true for ALL governments.
posted by glenzo @ 3/18/2010 07:51:00 AM
2 Comments:
China has expended, and continues to expend an enormous amount of new wealth to build an infrastructure to rival anything in the world. It has re-allocated the incoming money, mostly traded in US dollars, to do this.
Without a secondary drive to use this infrastructure, it will go the way of Chavez.
Having said that, China also still encourages SME's to flourish, something the US refuses to support.
America was built on, and is foundationally built on individualism, which China has actually embraced and encourages.
China is also still mostly agrarian, and this is an advantage in that they can still feed themselves if they have to if in fact the monetary system as we know it falters and collapses.
They can internalise consumption, much like Indonesia, not a small country or population, but a small economy, or like Asean, that can also trade outside of the norm and now has money to create new and productive ways to do this.
It is indeed a new world
Every dog has its day. A nation must reinvent itself and revitalize itself every 2 generations. The USA is not doing it. It is feeding off itself through progressive Marxist lurches.
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