Fairly Recently: Must- and Should-Reads, and Writings... (January 2, 2019)

Martin Wolf: The Future Might Not Belong to China: "China has had a hugely impressive four decades. After their triumph in the cold war, both the west and the cause of liberal democracy have stumbled. Should we conclude that an autocratic China is sure to become the world’s dominant power in the next few decades? My answer is: no. That is a possible future, not a certain one...

...The view widely held in the 1980s that Japan would be “number one” turned out to be badly mistaken. In 1956, Nikita Khrushchev, then first secretary of the Communist party of the Soviet Union, told the west that “We will bury you!” He proved utterly wrong.... Mistakes: extrapolating... assuming... rapid economic growth will be indefinitely sustained; and exaggerating the benefits of centralised direction... [which] in the long run... is likely to become rigid and so brittle....

China’s investment rate, at 44 per cent of gross domestic product in 2017, is unsustainably high.... Not surprisingly, returns on investment have collapsed.... China has also hit the buffers on export-driven growth, at a lower level of income per head than other high-growth east Asian economies.... Future demand will depend on the emergence of a mass-consumer market, while growth of supply will require an upsurge in growth of “total factor productivity”...

For one and a half decades, China has benefited from the reforms introduced by Zhu Rongji, premier from 1998 to 2003. No comparable reforms have happened since his time. Today, credit is still being preferentially allocated to state businesses, while state influence over large private businesses is growing. All this is likely to distort the allocation of resources and slow the rate of innovation and economic progress.... China may well fail to replicate the success of other east Asian high-growth economies... because the distortions in its economy are so large and the global environment is going to be so much more hostile....

The most interesting other economy is not Europe, which seems destined for a slow relative decline, but India... far poorer than China ... has great potential for fast catch-up growth....

The triumph of despotism is still far from inevitable. Autocracies can fail, just as democracies can thrive. China confronts huge economic challenges. Meanwhile, democracies must learn from their mistakes and focus on renewing their politics and policies...


#noted

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