Keynesian economics with Chinese characteristics

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.

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13 Responses to Keynesian economics with Chinese characteristics

  1. FlyingPigs says:

    How Dare You!

  2. Mark M says:

    Perhaps this is the thread where this could posted …
    Jordan Peterson responds to “real communism has never been tried”

    Biff! Pow! Whack!

  3. H B Bear says:

    China is the World’s biggest economics experiment in history – ever. It is a work in progress at this stage and will be for decades yet. We should all hope they do a better job than their virus research. Capitalism, the market mechanism, the UK and the USA have the runs on the board and are enjoying a beer in the shed.

  4. TPL001 says:

    Indeed. But value is subjective. Only individuals value things that satisfy urgent needs and wants. Keynes transfixed the world with his general theory. It is an attempt to justify an increase in the centralisation of the state. Modern macroeconomics, and yes even of the Monetarist type, assume that producers and consumers in the market cannot figure it out. So Keynes steps in with his version of smoke and mirrors, and sells his snake oil to nation states wanting a reason to grab more power.

    And, voila! Now we have grown adults with advanced PhDs — or maybe not! — in central banks trying to persuade us that zero interest rates and massive government transfer payments and greater debt are the road to prosperity. Macroeconomics is a justification for the imposition of the state’s version of “objective” value, as IT decides what is important, over against the urgent and important needs of individuals (such as toothpaste, and sheets, and peanuts, and ice cream, and oranges, and electricity, and car tyres, and places to live, and road signs, and dog food, and yoga classes, and the umpteenth iteration of that software, and restaurant meals, and certainty of income, and so on). Further, some individuals benefit from their make work schemes — building bridges to nowhere, or empty skyscrapers! — and usually it begins with them and their mates. Follow the money!

  5. Mark M says:

    The video about stealing Germany’s coal, this link might suit this thread …

    Via the Reference Frame, 2011: The Nazi father of global warming apocalypse

    A surname some might have seen else where: Günther Schwab.

    The World Economic Forum, Klaus Schwab and the great reset, aka build back better.

    I quickly searched for a family connection, and it seems I wasn’t the first.

    Your mission, should you choose to accept it …

  6. Mother Lode says:

    I remember in the 90’s when the stories of China’s meteoric growth was being reported being a little sceptical – thinks I to meself “Why is everyone trusting their figures?”

    Poor untutored me, at the time, naively thought it was just bulltish numbers they released as if no one was checking them. Now I perceive that much of their growth is government mandated – as stupid as the school halls fiasco from the KRudd-Gillard years but on a vastly larger scale.

    That is why the figures were accepted by international authorities – to them it is true economic growth rather than a fiddling of figures by inflating the non-value (merely expenditure) ‘G’ in the GDP equation.

    Funny thing I was in Japan at the time and they were trying to buoy up their foundering economy with massive government spending programs. Three-lane highways to country villages because the ruling LDP (no relation) relied on rural votes and were in incestuously in bed with construction firms. What was putting the colour into China’s cheeks at the time was exsanguinating Japan.

  7. Morsie says:

    I wonder if its a Chinese/lending practice thing. Living in Malaysia I saw similar albeit on a much smaller scale. Heaps and heaps of brand new shophouses ( three story buildings )
    all empty .
    It seems that having a tenant is not a necessary prerequisite for completing a building and certaily does not prevent finance being obtained.
    Perhaps China does the same thing on a grander scale but its got out of hand.

  8. Andre Lewis says:

    China emulating North Korea. Plenty of grand hotels, offices and apartments in Pyongyang but lights off and nobody home.

  9. PeterW says:

    Mark M says:
    May 27, 2021 at 5:56 am
    Perhaps this is the thread where this could posted …
    Jordan Peterson responds to “real communism has never been tried”

    More than partially describes a couple of inveterate socialist on this forum.

    So self-convinced that their ideology is going to bring in heaven-on-earth that it justifies any amount of lying, bullying and tyranny.

  10. Baa Humbug says:

    I saw a short Youtube video made by a couple of blokes who lived in China for a long time, married Chinese girls and spoke the lingo. They are also in real estate.
    Apparently, if a Chinese bloke wants a good wife (rare commodity), he must have at least one nice looking home, preferably multiple homes and apartments.
    So all sorts of nice looking but shoddy homes are built, often with nobody ever living in them. I’m guessing same goes for apartments.

    The potential brides also demand a home or apartment for her country bumpkin parents and siblings. The blokes get into large debts to acquire these homes. If they’re unsuccessful in attracting a Chinese wife, they sell off the extra properties to the next love sick youngster, and go and get a Vietnamese or Cambodian wife who doesn’t demand as much as the Chinese one. She just wants some money sent to her family regularly.

    Because there are hundreds of millions of young men wanting brides, there is no shortage of demand for nice looking but built dirt cheap properties. This boom could go on for another 50 years without skipping a beat.

  11. Kneel says:

    “This boom could go on for another 50 years without skipping a beat.”

    Unlikely – China will get “old” well before it gets “rich”. Doubly so if they are wasting resources on such empty buildings. This is an unavoidable consequence of the “one child” policy. And that is also why they are so harsh on Moo-slims – they will be out-bred and disappear up their own fundamental orifices otherwise. And they know it.

  12. Deano says:

    I think China has set up its economy brilliantly. Brilliantly for the 20th century that is where mass production ruled. New technologies mean we are moving into an era of production where labor costs and economies-of-scale don’t require anywhere near the numbers of units produced to lower costs. Individual style and inventiveness are already very apparent in the western consumer tastes and China, with its strict CCP culture will be left behind….once again!

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