CHINA You know, I tend to look at really boring things like demographics, educat

http://www.telegraph.co.uk/finance/comment/10044456/China-may-not-overtake-America-this-century-after-all.htmlON CHINA

You know, I tend to look at really boring things like demographics, education, cultural values (Trust, Truth, Corruption), and the complexity of the products produced rather than the high variability of financial activity. Most of this stuff falls into the long wave hypothesis, which in my opinion is a variation on the Generations hypothesis.

That’s why I was right about china’s growth path even though I was wrong about how long that they could hold it together. I said 2010, but clearly I didn’t understand their ability to keep pumping money into the economy well enough. Or maybe I misunderstood the value of china as a safer-haven during the crisis. I don’t know. The medium term isn’t my specialty – the long term is.

That said, there is no way china gets out of the middle income trap. Velocity is impressive, and I certainly understand what they’re trying to do. But no way. Too many other problems.

But maybe I should hedge that a bit. Sure, there is no way that they avoid having the middle income problem. That isn’t to say that unlike other smaller countries with less control, that they can’t work out of it with levers that most other countries couldn’t use.

Authoritarian governments can (a) force literacy (b) force spending into the economy and even (c) control birth rates. They can also (d) brutally crack down on corruption, (e) totally destroy the oligarchs without also tearing the country apart. What I don’t want to see them to is what most countries with less control might do (f) externalize the internal conflict through aggressive military expansion. Russia for example, cannot fix its military culture, or its alcohol culture, despite the fact that they’re closely related.

India can’t do it because india lacks the central power structure to overcome corruption – the red army is always there and happy to use its power. In india they dont’ have that power, and have to achieve it organically – and slowly, if at all. (I wish our army was as dedicated to the constitution as it is to the idea of civilian leadership. The army is more reliable than the courts.)

I’m just as impressed with recent data as everyone else is. But I don’t have a handle on the state of affairs well enough to look for contrarian positions. And I’m pretty skeptical that we have enough momentum to insulate ourselves from other possible shocks. (Although, those of us who have been studying international politics long enough probably realize that the speed of communication and information