China has much to teach us. John Roberts does not.
So, I don’t really write here any more. I write at drafts.interfluidity.com instead. Please follow that feed or subscribe by e-mail.
I do still offer periodic roundups here of what I’ve been up to! And it’s been a busy few months. Without further ado.
Unless it is remedied soon, the Supreme Court has rendered an end to liberal democracy in the United States nearly inevitable by their decision in Trump v. United States.
It’s not about Trump. Donald Trump, if he loses the election, very likely will face criminal liability for things he did while President. The Supreme Court’s decision is not a “get out of jail free” card.
What it is, however, is a road map. The decision lays down a clear path by which a President could shield almost any unlawful thing he proposed to do behind an impenetrable armor made of “official acts” and the “conclusive and preclusive” pardon power. Rule of law in the United States is now entirely at the option of the President. The vandalism to our Constitutional order that the Supreme Court did on July 1 is far greater, and far more difficult to reverse, than anything Donald Trump has (thus far) done. Benedict Arnold deserves to be numbered among American patriots, when set beside John Roberts. John Roberts is not an institutionalist or an honorable man, but a traitor and a villain. One does not speak John Roberts’ name. One spits it.
See…
But who is really the authoritarian? After all, I propose that we in the collective West should embrace and adapt China’s model. To be very clear, I favor embracing China’s economic model, and adapting it to our liberal-democratic political order. China has improvised the most successful economic model in world history, a set of practices distinct from that of predecessor Asian tigers like Japan and Korea, and from Alexander Hamilton’s United States.
I think Western economists are kind of in denial of China’s obvious success. We’ve predicted doom and crisis for decades, as we do even today. For Westerners, the international side effects of China’s model are, understandably, very salient, so we tend to mistake a zero-sum, “beggar-thy-neighbor” dynamic as the core of the model. But I think that’s wrong. In the past, China did require “advanced” export markets — not so much as a source of demand, but to discipline its own industries, to ensure that the quality and efficiency of its industries were world-class. That battles has been won. Now the role of exports in China’s economy is just to offset the fiscal cost of the subsidies that are the beating heart of China’s industrial development.
China, of course, really does want to export. The Chinese state prefers to sell more and subsidize less, and perceives a strategic interest in encouraging other countries’ dependency on its products. But even if (when, for strategic industries) borders close to its products, China’s model will remain worth the larger fiscal cost. China’s model is worth understanding and pursuing even though the United States and Europe will not have partners willing to accept the large trade surpluses China has enjoyed.
For my writing on this, see…
- Industrial policy and ecosystems (from May)
- China as a model
- Competition and the form of the subsidy
- Income driven repayment of fixed capital
That last piece sounds very boring, but I think it is my most important work in a while. The way China subsidizes and disciplines its industries — the “form of the subsidy” — is not well suited to more open and rule-bound liberal democracies. “Income driven repayment of fixed capital” is my attempt to find a form of industrial subsidy that would serve the same purpose as China’s subsidy without the book-cooking and discretionary, politically-imposed, discipline that China relies upon to endow its tremendously competitive industries.
Since the last roundup, I’ve also written two election pieces, and a tax policy suggestion that tries to make the best of a bad campaign pledge by both Presidential candidates (“no tax on tips”).
Also, if you consider yourself Hayekian (which I do! though also Keynesian!), you should obviously be skeptical of “innovation” in the direction of first-degree price discrimination. Hayek has a right-leaning valence, and right-leaning people are in the habit of deferring to business interests as though business interests and “the market” were not in tension (oh my god they are in tension!). But if you genuinely favor the price system as a massive, radically decentralized information system, innovating away from single-price markets is just destroying what you claim to love. “Murdering Hayek” is my piece.
Thank you always for reading a word of this. Please offer thoughts on any or all of these pieces in the comments here. This summary has grown long, so I’m not doing excerpts. Do you miss them? Let me know that in the comments too please!
Just a note to say that I’ve lurked on this thing for well over a decade, and it’s still some of my favourite reading on the internet.
September 9th, 2024 at 2:35 pm PDT
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China is not a economic success, by any measure. Perhaps the clearest reason is the preferred measure of economic success, GDP, doesn’t mean the same in China as everywhere else in the world. Since at least 2008 China has been inflating GDP by including “investment”, i.e. spending on property and infrastructure (roads, railways, airports etc.) in the total.
This let China maintain GDP growth. Even in the depths of the global recession, and in the many setbacks since, China could ensure GDP grew at its preferred measure by spending enough. This became a running joke, that while other countries looked forward to GDP growth announcements for signs of recovery/recession China always hit its targets (until very recently).
But to keep doing this it’s had to keep spending, pouring concrete into tower blocks, bridges, tunnels, runways. This maybe made sense 15 or more years ago, as China needed investment. But increasingly since 2008 investment has gone into unproductive things. Roads, railways and airports that (with few exceptions) hardly anyone uses. And tens of millions of surplus apartments.
Measured properly, stripping out all the “investment” which accounts for maybe half the published growth rate of the last 15 years, and the true GDP is far smaller, up to 50% smaller.
https://en.wikipedia.org/wiki/Chinese_property_sector_crisis_(2020–present)
The other clear indication of China’s economic problems is a consequence of the above. The massive ove-rinvestment in residential property drove a massive bubble. China tried to rein in the bubble, but in doing so forced firms to face up to their losses and drove some very large ones into distress. And now there’s a massive property bust. As almost all the investment was unproductive it didn’t pay for itself. Instead it was funded through borrowing, massive borrowing of up to 300% of GDP, which is now coming due.
It’s hard to think of an international comparison as nothing before (the US, EU or Japan) was on the same scale. One reason this problem is so much worse is the sheer scale over overbuilding. Tens of millions of properties which will have to be demolished as with a now shrinking population they’ll never be needed. It’s not just the property sector, it’s the main engine of the economy.
The shrinking population is another problem which is now only just becoming an economic problem, particularly as the workforce is shrinking, has been for a few years. This is of course the one child policy. For a couple of decades it boosted the economy, as fewer children meant less time lost by female workers, lower childcare costs, education costs. But the generation of single children is now entering the workforce, and there are far fewer of them than their parents and grandparents. And this is by far the hardest problem to solve. Even if they somehow persuade people to start having larger families (and they’ve had no success so far) any benefits to the economy are decades in the future.
September 9th, 2024 at 5:15 pm PDT
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