By Per Bylund: China: A Keynesian Monster. I have seen this for myself.
Chinese city skylines in the economic development zones consist of business district skyscrapers mixed high-rise apartment complexes at least 30 stories high. The latter exist in groups of a dozen or so buildings of identical designs shooting far up into the sky, sometimes placed in the outskirts to facilitate the city’s expansion or change travel patterns according to some (central) master plan for the city.
The boxy skylines are interrupted by vast numbers of tower cranes in the many construction projects that produce more high-rises and skyscrapers at impressive speeds. The city is conquering the countryside and devouring the surroundings much like a swarm of locusts.
This image is one of production, a society experiencing enormous economic growth and wealth creation.
But traveling as the day gives in to night shows a very different picture of these sprawling Chinese cities. While the setting sun makes the tower cranes stand out even more, what is obviously missing is the sign of civilization: artificial lighting. Many of these newly constructed buildings become silhouettes against the sunset that are as dark as a dead tree trunk.
One can stand in the middle of the city watching the glass-and-metal skyscrapers wrapped in neon lighting, as one would expect. Yet among them see many dark shapes of buildings that are empty – if not dead. These buildings are not necessarily new and move-in ready, they are simply uninhabited and unused.
This is the lesson Bylund is trying to get across.
What China teaches us about economics and economic policy is the lesson that is generally not provided in college classrooms: the important distinction within production between value creation and capital consumption.
The story of China’s economic development is to a great extent one of unsustainable, centrally planned growth specifically in terms of GDP — but a lack of sustainable value creation, capital accumulation, and entrepreneurship.
Production creates jobs even if what is produced is wasteful infrastructure projects, ghost cities, or only ghost buildings in otherwise inhabited cities. But those jobs only exist for as long as the projects are underway – that is, for as long as there is already created capital available to consume, domestically or attracted from abroad.
Production without value added, as discussed here.
This same issue is discussed here, but this time in relation to Nazi Germany. Centrally planned economies look superficially great, but are actually a mess.
Found at Small Dead Animals.