Category: Politics, Power, and Governance

PROSPECTS FOR CHINA STILL LOOK GOOD

Michael Churchill:

I am unconvinced either way on China. It is very hard to analyze because the data are so murky. From a Mosca-ian perspective, the issue is whether the decision-making process in a uni-party state gets enough new ideas, fresh blood and diverse opinions to keep itself tethered to reality. So far that’s been sort of true of China. But it’s also the case they have maxed out the credit cards of the SOEs — exactly what happened to Japan before its 25-year dormancy period.

Curt Doolittle:

Just to amplify your statement a little bit: authoritarianism is exceptional at “catching up from behind”; and state-capitalism is exceptional at (if not necessary for) startup-funding of capital-demanding industries (which is why americans have high risk light capital industries and more statist countries have low risk heavy capital industries). But states are notoriously horrible at returns on capital (operating, profiting, innovating) for the same reasons they are good at heavy capital organizing (military, industry, bureaucracy state finance). So the question about china is whether she can defeat the red queen of middle class development before her authoritarian credit card runs out, and whether that middle class can convert to operating profits independent of state credit cards (directly and indirectly). It’s one thing to BUY your way into a middle class, and another for that middle class to grab the baton and run the race with it. Seems like they are doing a pretty good job so far. much better than I thought. And of course, we have (sh-t) data from over there so its like reading tea leaves. What I didn’t estimate whatsoever was the quality and size of the labor pool that can be educated to perform chemical, industrial, engineering, and construction work. There is much less ‘drag’ from the lower classes over there. We’ve imported ‘drag’ we can’t compensate for.