China’s Likely Trajectory in Xi Jinping’s Third Term, &
BRIEFLY NOTED: For 2022-06-03 Fr
FIRST: China’s Likely Trajectory in Xi Jinping’s Third Term
The Economist joins those who think that Xi Jinping's policies are not sidestepping but instead falling deeper into the middle-income trap:
The Economist: How Xi Jinping Is Damaging China’s Economy: ‘Inflexible policies are trumping pragmatism…. Ideological zeal is behind… economic initiatives that form what Mr Xi calls his “new development concept”, which is meant to address “great changes unseen in a century”… to tackle inequality, monopolies and debt, and to ensure that China dominates new technologies and is fortified against Western sanctions.
Yet in all cases Mr Xi believes the party must take the lead, and implementation has been punitive and erratic. A blizzard of fines, new regulations and purges…. A savage but incomplete crackdown on the property sector, responsible for over a fifth of gdp, has led to a funding crunch—one reason why housing sales fell by 47% in April compared with a year earlier…. Xi’s economic model… involves expanding the scope of the least productive part of the economy: the government-run one.
China’s industrial policy has had formidable successes, for example building a dominant global position in advanced batteries. Mr Xi hopes that technology and a new cohort of state investment funds will make decision-making more agile. But don’t forget all the dismal failures, from rust-belt industries to microchips…. To the extent it can be discerned from the black box of elite politics, there is no rival to Mr Xi, who is 68. Yet in the run-up to a party congress that may see him secure power until at least 2027, the shortcomings of one-man rule in the world’s second-largest economy are glaring…
It is the fact that I have been wrongly pessimistic about China's growth in the past—and wrongly optimistic about its politics—that gives me pause here. Right now I am very pessimistic about China's politics and pessimistic about China's economics. I think there is a very good chance that it is caught in a middle income trap. But the track record tells me that I really should not believe myself. Who should I believe instead?
As I see it, there are ten important aspects of the situation right now:
China’s growth has created three Chinas—the Spain-level 60-million megacity growth poles, which also possess the world’s second-leading high-tech economy; the Poland-level 300-million coastal economy, which is the world’s largest export manufacturing mechine ever (and which is mostly integrated with the rest of the world much more than with China’s interior), and the Peru-level one-billion interior economy, whose performance has been very good by global-south standards but sub-par by Pacific Rim standards.
All-in-all, China—coastal China—has managed to grow about as fast as one would expect given (i) when it started its reform process, and (ii) that it is located on the Pacific Rim.
China managed to grow at a near-Pacific Rim pace by stepping away from really-existing socialism-style planning and implementing a market economy.
A near-Pacific Rim pace: while coastal China has matched, the 1B people of poor China—although they have done very well—have not.
Thus the Chinese government will be focusing on trying to make poor China rich—and on playing the nationalism card—for the next generation.
China accomplished this in seven stages: (i) rural de-communization, (ii) growth of TVEs, (iii) urban retail decontrol, (iv) successfully dismantling the SOEs, (v) the great rural interior-urban coast migration, (vi) housing privatization, and (vii) the WTO-undervalued RMB-export manufacturing push.
This was not at all easy. Other countries that attempted to transition to a market economy—to “step away from the plan”—suffered a decade-long depression, underwent enormous political turmoil, and ended with a system that was substantially dysfunctional both in its political and its economic aspects. China managed it.
Starting in 2010, China moves its management of the coast away from mere decontrol and toward focusing investment and growth on “strategic” priorities
It tries “leapfrog”: trying to get in on the ground floor with the development of a new “General Purpose Technology” cluster: networks and data and AI—Innovation-Driven Development Strategy
It faces “weaponized interdependence” and a perceived declaration of technological war against China, to which China is now responding.
What does the Chinese government think that it is doing?
It is still pursuing what it calls “socialism with Chinese characteristics”, but which those of us interested in calling things by their right names call: authoritarian state surveillance capitalism with egalitarian aspirations. The Chinese government thinks: we have nothing to learn from the United States—GFC, Great Recession, anemic recovery, Trump, disinformation epidemic, coronavirus: it is a society in decline, living off of accumulated capital. Therefore we need to break away from it. The purpose of the export machine is not to slot ourselves into the export-machine slot in the global division of labor. The purpose of our export machine is to attain technological parity. And after that, our societal superiority will lead to technological supremacy. And after that, the CCP will lead humanity forward into the sunlit uplands of utopia.
What form will “utopia” take in the eyes of Xi Jinping and his successors? Well, they are certain that the CCP can only be the vanguard of humanity if the CCP is more than a bunch of corrupt bureaucrats uneasily sitting atop the pyramid of society. So:
Use propaganda to create centralized campaigns of inspiration.
Recall the CCP to its egalitarian, utopian origins.
Repress those who seek to remove the CCP from its vanguard role—that way lies decadence and incompetence, like the United States today.
The problem is that the CCP is, increasingly, a bunch of corrupt bureaucrats uneasily sitting atop the pyramid of society. So I really cannot see how it could end well.
Omar Moav: How Farming Shaped the World <https://www.youtube.com/watch?v=3DVCsbDHdus>:
One Image: Failure to Recognize the Magnitude of the Inflation Problem in the 1970s
Very Briefly Noted:
David Rovella: Too Many US Jobs, Not Enough US Workers: ‘CSX… said it’s been turning away freight due to a lack of workers… <https://www.bloomberg.com/news/newsletters/2022-06-02/bloomberg-evening-briefing-too-many-us-jobs-not-enough-us-workers?cmpid=BBD060222_BIZ>
Tim Brookes: Should You Buy a VR Headset? <https://www.howtogeek.com/794893/should-you-buy-a-vr-headset>
Duncan Black: Every Old Elite Political Media Guy Reveals His Fondness of Stupid EvoPsych & Caliper Set Eventually<https://www.eschatonblog.com/2022/06/every-old-elite-political-media-guy.html>
John Timmer: Manipulating Photons for Microseconds Tops 9,000 Years on a Supercomputer: ‘An optical quantum computer does things we can’t computationally model…. The news here is more about the potential of Xanadu’s hardware to scale… <https://arstechnica.com/science/2022/06/manipulating-photons-for-microseconds-tops-9000-years-on-a-supercomputer/>
Lionel Laurent: When Crypto’s Tulipmania Meets The Real Economy: ‘Regulators begin to consider how to keep DeFi from becoming the next subprime… <https://www.bloomberg.com/opinion/articles/2022-05-30/when-crypto-s-tulipmania-meets-the-real-economy>
Matt Levine: Don’t Insider Trade NFTs: ‘The New York Field Office of the Federal Bureau of Investigation… an Indictment charging NATHANIEL CHASTAIN, a former product manager at Ozone Networks, Inc. d/b/a OpenSea… with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens… <https://www.bloomberg.com/opinion/articles/2022-06-02/don-t-insider-trade-nfts#xj4y7vzkg>
John Stuart Mill: “Hitherto It Is Questionable If All the Mechanical Inventions Yet Made Have Lightened the Day’s Toil of Any Human Being” <https://delong.typepad.com/sdj/2008/05/hitherto-it-is.html>
Robin Wigglesworth: Investomania: ‘Regulating financial markets is hard. Half the country hates you for destroying freedom; the other half for allowing rapacious capitalism to run amok. And Elon Musk will haunt your dreams… <https://www.ft.com/content/82818a7f-1642-43dc-b77f-94168b29a7d1>
Ran Abramitzky & Leah Boustan: Why the Children of Immigrants Get Ahead <https://time.com/6182715/immigrants-children-us-mobility/>
George Magnus & al.: Is China’s Economic Miracle Over? <https://www.project-syndicate.org/bigpicture/is-china-s-economic-miracle-over>
Robert Dalsjö & al.: A Brutal Examination: Russian Military Capability in Light of the Ukraine War <https://www.tandfonline.com/doi/epub/10.1080/00396338.2022.2078044?needAccess=true&>
Adam Gurri: Rationalism, Pluralism, & Fear in the Speech Debate <https://www.liberalcurrents.com/rationalism-pluralism-and-fear-in-the-speech-debate/>
Chris Anstey: China’s Second-in-Command Makes a Worrying Plea: ‘Wen Jiabao…
Twitter & ‘Stack:
Anand Giridharadas: Like Capitalism Itself, Business Journalism Is Broken. Can It Be Fixed?: ‘Talking to New York Times reporter David Gelles about the implosion of capitalism, the failure of the business press to tell that story, and how it can do better now…
Joshua Hausman: Perhaps worth noting that professionals also thought inflation in the 1970s would be lower than it was… <https://t.co/HwzF6YsMrX> <
Zvi Mowshowitz: Covid 6/2/2022: Declining to Respond: ‘Paxlvoid and Fluvoxamine remain hard to get. Time is not a flat circle, that’s a dumb expression, but history rhymes. Covid–19 is a good excuse to work on curing aging, let’s do that…
Yakov Feygin: If we are really going to talk Marshall Plan, then we have to consider that it did a lot of political work to ensure debt forgiveness, which Ritschl would say isn’t a fiscal transfer, but sure gives you room to do more…
Diana Butler Bass: From Watershed Moment to Apocalypse Now: ‘The Southern Baptist Convention.. has a theological problem that generated a sexual abuse problem…
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