A series of documentaries on the fall of the Soviet Union by the Chinese Academy of Social Sciences offer insights into the minds of Party ideologues.
History is a battleground. "Historical nihilism" is the enemy. Xi and his Party, the protagonists.
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two good IMF related background work wrt China, for those interested:
imf.org/en/Publication
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imf.org/external/pubs/
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"Gaps in the social protection system have led households to self-insure through high precautionary savings, stymieing rebalancing toward a more sustainable growth model."
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"An expenditure policy that prioritizes public investment is less effective in stabilizing economic fluctuations than one that prioritizes targeted support to households..."
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IMF staff analysis:
"A structural tax revenue deficit has incentivized local government recourse to opaque, off-budget financing mechanisms to cover expenditures, leading to high government debt..."
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Data on local gov funding sources
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Augmented debt estimates.
For background, since 2014, the IMF calculates an augmented debt figure for China, including LGFV debt estimates (this is a point of contention with the PRC).
Original paper on calculating augmented here: imf.org/external/pubs/
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The IMF released its Article IV Consultation for China today.
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This book was instantly understood by foot people. Not so car people.
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Great ways to start a book, Exhibit A:
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Wade argues the Asian Financial Crisis not a vindication of Washington Consensus, but a lesson regarding open capital accounts perniciously undermined the "Asian alliance capitalism" model.
My sense is this argument is viewed favorably nowadays
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"There is virtually no good evidence that the creation of efficient, rent-free markets coupled with efficient, corruption-free public sectors is even close to being a necessary or sufficient condition for a dynamic capitalist economy." - Robert Wade, 'Governing the Market'
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Li Keqiang says: "Boosting consumption is a key step to expand domestic demand. We need to restore the structural role of consumption in the economy." After 15 years of the same promise, is this time different?
ft.com/content/851f52
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"why does China refuse to stimulate household consumption?"
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An NBER paper from 1991 argues that "policy decisions in Japan reflect the interests of insiders (usually only producers-consumers are excluded)."
It was this, not industrial policy per se, that led to international distortions via a "pour down" of "exports to foreign markets."
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"We have come to know man as he really is. After all, man is that being who invented the gas chambers of Auschwitz; however, he is also that being who entered those gas chambers upright, with the Lord's Prayer or the Shema Yisrael on his lips.”
Frankl, Man's Search for Meaning
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Today, on Holocaust Memorial Day, I'm thinking about this little boy, the same age as my kids, proudly showing a flower to another child, outside a gas chamber at Auschwitz, where they were all murdered moments later. It is so important for us all to remember what happened.
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General Secretary Valley Girl explains "historical nihilism"
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A series of documentaries on the fall of the Soviet Union by the Chinese Academy of Social Sciences offer insights into the minds of Party ideologues.
History is a battleground. "Historical nihilism" is the enemy. Xi and his Party, the protagonists. jonathonpsine.substack.com/p/the-cold-win
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Francis Fukuyama will have his revenge
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Overburdened and underfunded local governments de-facto operate kind of like McDonalds! Via an incentive scheme Yuen Yuen Ang calls "Bureau-franchising" where public agents are allowed revenue-making privileges as motivation to finance service provision. sites.lsa.umich.edu/yy-ang/wp-cont
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Local experimentation has been paralyzed by uncertainty and fear of capricious top-down punishment. That’s the consensus narrative I hear.
This deeply grounded perspective challenges “received wisdom” and is therefore all the more welcome & important to consider:
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1) Local policy experimentation isn't necessarily decreasing under Xi Jinping, 2) Local officials may not even want to experiment, but they may do so anyway because 3) These officials are under more pressure than ever to visibly experiment with "innovative" policy solutions.
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Jonathan Spence reviews a collection of Frederick Wakeman's essays shortly after the latter's passing. He highlights the relationship between Wakeman's intellectual and real life passion for adventure.
I wonder, can anyone ever have the one without the other?
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China is uniquely decentralized when it comes to its fiscal system, heavily burdening local governments..a fact that’s often repeated but not effectively conveyed.
This chart provided a very useful comparison of expenditure authorities across countries:
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5% of people fall from the highest income quintile to the lowest, and 6% rise from the lowest to the highest over the course of a career in the United States.
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Want to understand the intricacies of China’s economy? Read Arthur Kroeber’s China’s Economy: What You Need to Know (2016).
Kroeber sets the expectation up front--China’s economy is like a jigsaw puzzle w/ pieces that constantly change. It takes humility & grit to grasp. 1/52
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Chalmers Johnson’s MITI already off to a very questionable start with this quote…and not even on page one!
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Aversion to highly capital intensive undertakings--often key to innovative industrial advances--appears to be a consistent mode of market failure. From Qing China & Tokugawa Japan's failure to launch, to contemporary neoliberal market dynamics.
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would disagree with Vries analysis here? I recall your recent (and excellent) book shying away from that conclusion.
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Vries doesn't just limit his attack against A&R to Japan:
"the thesis, infinitely repeated by A&R...that inclusive institutions would cause growth to emerge...is completely at odds not just with the historical record of Japan but of all major industrializing countries."
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A&R's definition of inclusive vs extractive institutions is presented in text below.
Vries derides the strikingly and "extremely naïve ‘optimism’ and historical incorrectness of Acemoglu’s and Robinson’s interpretation of the Meiji Restoration and its implications."
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One other thing is worth point out:
Vries comes aggressively at Acemoglu and Robinson for what he sees as their total misunderstanding of Japan's development. For Vries, Japan's development was not at all consistent with A&R's inclusive institutions = pro growth framework.
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Overall:
I wouldn’t recommend this book widely. But it has its utilities: provides a good survey of scholarship, assembles a bunch of fascinating data, and effectively conveys its core point: the Meiji state was fundamental to Japan averting a great divergence.
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3. The Meiji government unapologetically borrowed best practices and adapted / indigenized them in a fairly radical break from the Tokugawa period. It was a knowledge and innovation promoting state.
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And a lot of direct investment and indirect support for transportation and communication infrastructure, but also for Japan's domestic goods & services more broadly
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That meant clear property rights but also intensive state intervention into the economy, often employing "model factories" to broadly stimulate technology diffusion, but with the state itself also maintaining some of the largest enterprises:
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2. The Meiji government was fundamentally geared toward modernization. It was both a capitalistic and a developmental state.
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