Sometimes it is worth remembering that what is taken as very ordinary is in fact very odd. Positive real interest rates are one of those things.

In a simple telling, an interest rate is how much one has to be paid to defer consuming goods and services available now until sometime in the future. When one frames the question this way, it seems natural that this should be a positive value: why should I wait to eat my ice cream, when it’s the same ice cream now or tomorrow? Deferred gratification seems less fun than instant gratification, so you should have to pay me if you want me to hold off. Right?

But even in this simple tale, it is obviously not necessarily right. If you have a whole tub of ice cream, and it’s just you, the “decreasing marginal utility” of gluttony now kicks in pretty quickly. After about the third scoop, it’s not so fun, and the utility of consumption by dumping in the garbage can is quite low. So in fact, most of us are willing to purchase, maintain, and fuel an expensive device to permit us to defer consumption to a utility-maximizing future moment: the refrigerator.

The fact that it is costly to store stuff, and that lots of stuff is perishable and does not store well, is a prima facie argument for negative real interest rates! At some level, it ought to cost you something to control the timing of your consumption, especially in an imperfect world with limited space and where things are constantly breaking.

In the real world, economies don’t work like this, precisely because savings does not map to the storage of stuff. Economies are amazing, dynamic beasts in which stuff that will not be consumed today is not much produced today, avoiding these costs and inefficiencies and gluts of things no one wants. “Saving” is about channeling our energies into preparing to produce tomorrow rather than storing what we have today. It is because we usually get better and better at producing stuff, if we prepare for the future rather than producing and consuming all we possibly could today, that interest rates are positive. Even if I prefer to eat ice cream tomorrow rather than today, tomorrow we’ll be better at making ice cream, especially if I’m willing to lend a hand to building a better frozen-cow milker instead of gulping down those ten scoops now. In exchange for my deferral in consumption, regardless of whether waiting was subjectively costly, I’m should be entitled to a share of tomorrow’s great bounty.

So note that the true reason interest rates are positive isn’t that you have to pay someone to defer consumption. It’s because deferring consumption helps to promote more future production, and in a fair system, the deferrers should get a piece of that.

Not all futures are more bountiful than today. It’s possible, due to poor investment (deferring consumption to do things that turn out not to be helpful, or even harmful, to future production) or economic “cycles”, for things to be worse tomorrow than today. This is the situation in which economists expect people to realize negative real interest rates.

But even in a growing economy, where the future is in fact more bountiful, people may willingly save and realize negative interest rates! Why? Because not all systems are fair (none are perfectly fair), and the rewards for deferring consumption may not be awarded to the saver. Does this mean that people won’t save in these economies? Of course not. In fact, it may very well mean that people will save much more than in economies where people expect to earn high positive interest rates.

As we saw in the parable of the ice cream, controlling the timing of consumption is itself a good, a good for which people would generally willing to pay. If there is no way safe way to realize a return on savings, people nervous about the future will accept costs and save anyway. If the cost of saving — the negative real interest rate — is likely to be high, people nervous about the future will save even more, to offset those costs. Insecurity can promote savings at least as well as optimism. Perhaps the way to increase savings is not by presenting savers with an expectation of stable high returns, but with the likelihood of low, even negative real returns (although always positive nominal returns). The latter approach has the advantage of encouraging savings while permitting bankers, governments, and others to profit on the spread between high positive economic returns on investment and negative real interest rates paid to savers.

Do you think this might have something to do with China? And with who is really paying for those imported goods that seem so cheap in terms of US dollars?

What is odd about all this is not that it implies a policy of theft and expropriation by the state on a massive scale. History is full of massive state theft and expropriation. What is odd is that in China’s case, it seems to be genuinely good policy, not just for bankers, and politicians, and nouveau riche exporters, but for the state as a whole. It’s pretty clear that China’s development has outpaced that of any country that’s ever tried the neoliberal Washington consensus.

Claims that China is still a communist country are often dismissed as nothing more than a historical conceit of capitalism’s new Wild East. But maybe China really does represent a new and interesting take on communism. Using the old words, one might describe China as allowing the development of a small bourgeoisie, with its constant revolutions in production, while harnessing the arcane machinery of bourgeois financial institutions to nationalize much of the wealth produced by the proletariat. Expropriation via high finance is superior to taxation or outright nationalization, because it masks itself as a fact of nature, as something implicit to markets and currencies and banks. It also has the advantage of turning the bourgeoisie into an ally rather than an adversary of the confiscatory state. Since the bourgeoisie are financially sophisticated, they can avoid expropriation of returns by working outside the state-regulated money and banking system. Plus, the state uses part of the excess returns extracted from the proletariat to buy the support of the bourgeoisie, while the rest can be used to pursue national goals. At the moment, China’s currency policy captures much of the action: By subsidizing exports, it buys off the capitalists; by preventing Renminbi appreciation or deflation, it robs real returns from ordinary savers; and by encouraging development and increasing China’s economic and industrial power, it serves state interests and arguably the public good.