Train C2019 covers the 120 kilometers between Beijing and Tianjin in 30 minutes, passing peasants in fields burning corn stalks and warrens of shacks occupied by people who aren't sharing in China's economic boom. The line is part of China's 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast. The time savings that the new system delivers may not justify the cost, creating a potential drag on long-term growth, said Michael Pettis, former head of emerging markets at Bear Stearns Cos. The losers are Chinese consumers, who will have to wait for new health-care and old-age benefits while the government focuses on public-works spending, he said. While the expanded service will be a "trophy" for China, the country "already has probably the best infrastructure in the world for its level of development," said Pettis, now a finance professor at Peking University.
The line is part of China's 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast.
The time savings that the new system delivers may not justify the cost, creating a potential drag on long-term growth, said Michael Pettis, former head of emerging markets at Bear Stearns Cos. The losers are Chinese consumers, who will have to wait for new health-care and old-age benefits while the government focuses on public-works spending, he said.
While the expanded service will be a "trophy" for China, the country "already has probably the best infrastructure in the world for its level of development," said Pettis, now a finance professor at Peking University.
Rail deflects from road/air, both of which are heavy liquid fuel users. Are Bear exposed to an underperforming oil market ? keep to the Fen Causeway
Bear Stearns doesn't exist any more and the guy is not working for Bear Stearns, he's formerly at Bear Stearns and currently a professor in China according to the article. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Got BS confused with GS.
Even so, I still think there's something in that analysis that, if not directly self-interested, derives from a starkly neoconservative view that infrastructure is for wimps. It's not hi-speed rail he hates, it's anything govt initiated and aponsored. keep to the Fen Causeway
Buying medical electronics from the USA would at least give them something of value for their US dollars. Or they could just wait and watch the dollars evaporate along with their export market. At least the Saudis understood the importance of recycling foreign currency. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
His response was that that the Chinese government was (1) not sure exactly how to make such social infrastructure investments and tied along with that, were doubtful of the effectiveness of those investments, especially in light of the still significant amount of corruption that exists in China; (2) doubtful even if such social infrastructure investments actually succeeded in their primary objectives (i.e. improved healthcare, social security for the elderly, better education, childcare to let more mothers work, etc.), whether if such successes would necessarily lead to more domestic consumption; and (3) if they did result in more domestic consumption, they might not be able to control the rate of that domestic consumption and thus the inflation that it would engender.
Despite these possible explanations, it remains unclear to me why there is such reluctance to invest in social infrastructure by the Chinese central government when (a) they have so much money, and (2) everyone else seems to agree that it would be good for domestic consumption, which in turn would be good for the Chinese economy in the long-term. La Chine dorme. Laisse la dormir. Quand la Chine s'éveillera, le monde tremblera.
I suspect this is elementary economics, but could you unpack that relationship for me? You're saying companies will have to pay higher wages if workers have state-supported health insurance/services and/or a social retirement program? La Chine dorme. Laisse la dormir. Quand la Chine s'éveillera, le monde tremblera.
Governments are not Santa and social benefits aren't made by elves. We need to understand that these things cost money and have to be sustained through taxes and/or user premiums. Chinese goods are so cheap partly because workers get no benefits--no retirement, no health care and often rather shoddy schools, as recent earthquakes show. Lots of what is spent is wasted on graft to local party elites. There is little reason to expect that a scaled up health care industry would be built more efficiently. One would hope that it might be run more efficiently, but possibly in vain.
But the ongoing costs of health care and retirement will eventually increase the cost of exports. The US and Europe have been uncompetitive wrt manufacture of consumer goods in no small part because of the total absence of any benefits to Chinese labor. China has a vast pool of potential industrial labor still in the countryside, so, in effect, Malthus rules and wages tend to subsistence. China has begun to see that the lack of any rules on environmental pollution has to be dealt with and are likely focused there and do not want to be distracted by other expensive programs.
From the point of view of the elites, workers are a disposable, renewable commodity, little different from pigs and chickens raised for market. They would object to the characterization, but the fact is western elites envy them their lack of restraints. The attitudes of some "overseas" Chinese of the business class that I knew or knew of in LA were completely compatible with that characterization. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Have the neolibs got to the chinese ? keep to the Fen Causeway
That is a very large part of the whole point of globalization. The fact of a low cost producer puts pressure on higher cost producers. The public and the vast majority of economists have been taught that this is just how economics work and that bringing politics into the equation is WRONG. Of course this is absurd and the existing arrangements are the RESULT of politics that favor elites and that then disguise the fact that politics are even a part of the equation.
It is a measure of the task ahead that enough of the public must be re-educated to support sensible, available solutions, such as Hudson, Stiglitz and others have suggested, or see themselves in the same condition as the Chinese worker today faces. The next generations really can all live in shipping crates sitting in open sewers unless we awaken. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
What happens if the Chinese suddenly all start consuming a lot more? Seems to me they'll buy themselves some cars and airplane tickets. More infrastructure spending would be necessitated. You don't hear anyone (anyone that matters, like, economists) nag about the airports and highways China is building. No doubt that slice of infrastructure spending amounts to something when you sum it up.
So, that's why I thought the piece was a rather amazing display of economic stupidity.
It is going to be sufficiently challenging to simply provide the basics that a modernizing peasantry in India and China will want without compounding the problem by allowing deliberately shoddy merchandise that is junk in half or less of its reasonable lifetime. But that implies that criteria other than next month's and years corporate statements are to be seriously considered. Flopenhagen showed how far we have to go yet. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
I understand the worries about corruption regarding public subsidies (unemployment, pensions) but free provision of basic services like health care and education doesn't lend itself to so much corruption.
The control-freakery of the Chinese government does shine through. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
