As I said before, I will also occasionally write in Chinese to (hopefully) help key stakeholders in China to better understand ourselves, and the world.
Thanks for this, I'm a roughly HSK 5 level learner and currently making the transition from reading in textbooks and graded readers to reading real world Chinese, so I will (very slowly) make my through this.
Apologies if you do do expand more about this in the parts of the post I have not yet read, but I wanted to comment on your analogy to Roosevelt- specifically I wanted to say that there is a lot of mythmaking in discourse about Roosevelt's New Deal, and that it is important to separate these myths from reality.
Commonly it is said that FDR's New Deal saved America, I think this is the standard interpretation for many progressives. I do not dispute that the New Deal introduced many important innovations in regulation, social security etc. and indeed it did help to alleviate the symptoms of the Great Depression.
However was the New Deal the cure? In fact I would argue that it was not just the New Deal that saved America, but rather it was the New Deal followed by the massive increase in investment that happened during the US' rearmament for World War 2. If you look closely at GDP figures from that time, you can see the improvements from the New Deal policies lose momentum, followed by GDP growth going nicely again as America rearmed for the war. The final 'ingredient' for the cure was the huge shift in the international situation after WW2, in which America definitively became the number 1 economic power, replacing Britain globally, and Japan in the Asia-Pacific as the new hegemon.
If we go back to looking at China we can see the problems with the Roosevelt/New Deal comparisons. The government could do a big 'New Deal' to boost growth, but that can only get it so far- there is a very real risk that if they do this, they could get to the end of the program and end up with even more public debt and not that much more business confidence.
There is a little known Keynes quote about this problem that I like. Keynes said in a 1931 lecture that while he was ‘in favour of an admixture of public works’ he thought that ‘unless you socialize the country to a degree that is unlikely, you will get to the end of the public works programme…[and find that] you have shot your bolt and are no better off’.
Thank you so much for this long and thoughtful reply! I agree that the analogy stops at the actual policies, as US at the time was shifting from a total laissez-fair economy to a more Keynesian model, while China was "super-Keynesian" to begin with. What my analogy focuses on is really the one about effective public communication. I think there is a dire need for direct, folksy communication from top leadership during this time, just like what FDR did.
Ah I see! I definitely agree with this- reminds me of Andew Cuomo's daily briefings that he did as governor of New York during COVID, they were extremely well received (depsite the fact that his actual COVID policy was very bad)- during times of uncertainty people just want to be reassured that those in charge "get it"
Robert, as a communication scientist I applaud your insights into what 'works' in intercultural communication. Language is indeed key to develop the bridges to span the chasms of ignorance. You go mate. I don't have any skills in Chinese but looking forward to your English translation
I look forward to reading the English translation when it becomes available. But I don’t think China is in such a dire state as the US during the Great Depression. I know there is a lot of doom and gloom in the Western financial media, but I think they exaggerate China’s current economic weakness.
All countries go through down turns from time to time. The current downturn in China seems prolonged because (in my view), China is experiencing a “liquidity trap”. Its central bank policy rate is close to zero, and so monetary policy can’t do much to stimulate the economy.
The economist Paul Krugman (no fan of China) diagnosed this as the problem that the US and Europe faces after the 2008 financial crisis.
China’s current crisis was triggered by the collapse of its real estate demand, which weakened domestic demand so much that the real interest rate has fallen close to (maybe below!) zero. Per Krugman, what is needed is fiscal expansion.
For fiscal conservatives, fiscal expansion during a downturn seems like the wrong policy prescription, but it is precisely the right time for governments to borrow and spend. I could say more about this, but this comment is not the place for me to expand on this. Just Google “liquidity trap” and “zero lower bound” to find out more.
I don't think there is any doubt in anyone's mind that fiscal expansion is the answer, given the central govt's fiscal capacity, but liquidity theoretically does have room for expansion given high real rates. They probably don't want to move yields too much though, per tradition.
Going back to fundamentals and macro, fiscal spending ideally should go to productivity increasing investments over pure consumption. Taking time to sort out finding productivity improvements while the economy isn't in an acute crisis seems reasonable.
Thanks for your thoughts. I had understood that PBoC policy rates are actually near zero. So not much scope to reduce rates further. Injecting more money (eg by reducing the reserve ratio) might help, but the theoretical case for liquidity expansion to stimulate the economy is not well established. I know the Fed and EU have engaged in quantitative easing but (I understand) the theoretical basis for QE is not well established. Anyway, no harm trying.
Thanks for this, I'm a roughly HSK 5 level learner and currently making the transition from reading in textbooks and graded readers to reading real world Chinese, so I will (very slowly) make my through this.
Apologies if you do do expand more about this in the parts of the post I have not yet read, but I wanted to comment on your analogy to Roosevelt- specifically I wanted to say that there is a lot of mythmaking in discourse about Roosevelt's New Deal, and that it is important to separate these myths from reality.
Commonly it is said that FDR's New Deal saved America, I think this is the standard interpretation for many progressives. I do not dispute that the New Deal introduced many important innovations in regulation, social security etc. and indeed it did help to alleviate the symptoms of the Great Depression.
However was the New Deal the cure? In fact I would argue that it was not just the New Deal that saved America, but rather it was the New Deal followed by the massive increase in investment that happened during the US' rearmament for World War 2. If you look closely at GDP figures from that time, you can see the improvements from the New Deal policies lose momentum, followed by GDP growth going nicely again as America rearmed for the war. The final 'ingredient' for the cure was the huge shift in the international situation after WW2, in which America definitively became the number 1 economic power, replacing Britain globally, and Japan in the Asia-Pacific as the new hegemon.
If we go back to looking at China we can see the problems with the Roosevelt/New Deal comparisons. The government could do a big 'New Deal' to boost growth, but that can only get it so far- there is a very real risk that if they do this, they could get to the end of the program and end up with even more public debt and not that much more business confidence.
There is a little known Keynes quote about this problem that I like. Keynes said in a 1931 lecture that while he was ‘in favour of an admixture of public works’ he thought that ‘unless you socialize the country to a degree that is unlikely, you will get to the end of the public works programme…[and find that] you have shot your bolt and are no better off’.
Thank you so much for this long and thoughtful reply! I agree that the analogy stops at the actual policies, as US at the time was shifting from a total laissez-fair economy to a more Keynesian model, while China was "super-Keynesian" to begin with. What my analogy focuses on is really the one about effective public communication. I think there is a dire need for direct, folksy communication from top leadership during this time, just like what FDR did.
Ah I see! I definitely agree with this- reminds me of Andew Cuomo's daily briefings that he did as governor of New York during COVID, they were extremely well received (depsite the fact that his actual COVID policy was very bad)- during times of uncertainty people just want to be reassured that those in charge "get it"
Just curious, who do you think are "a small crop of people who are bearish 一小撮消极分子" about Chinese economy?
let me make this clear, it's a 反讽
一小撮is like a lot of people 🥺
I mean who are the 消极分子 lol
hahaha, tricky question, sometimes including me
Robert, as a communication scientist I applaud your insights into what 'works' in intercultural communication. Language is indeed key to develop the bridges to span the chasms of ignorance. You go mate. I don't have any skills in Chinese but looking forward to your English translation
I look forward to reading the English translation when it becomes available. But I don’t think China is in such a dire state as the US during the Great Depression. I know there is a lot of doom and gloom in the Western financial media, but I think they exaggerate China’s current economic weakness.
All countries go through down turns from time to time. The current downturn in China seems prolonged because (in my view), China is experiencing a “liquidity trap”. Its central bank policy rate is close to zero, and so monetary policy can’t do much to stimulate the economy.
The economist Paul Krugman (no fan of China) diagnosed this as the problem that the US and Europe faces after the 2008 financial crisis.
China’s current crisis was triggered by the collapse of its real estate demand, which weakened domestic demand so much that the real interest rate has fallen close to (maybe below!) zero. Per Krugman, what is needed is fiscal expansion.
For fiscal conservatives, fiscal expansion during a downturn seems like the wrong policy prescription, but it is precisely the right time for governments to borrow and spend. I could say more about this, but this comment is not the place for me to expand on this. Just Google “liquidity trap” and “zero lower bound” to find out more.
I don't think there is any doubt in anyone's mind that fiscal expansion is the answer, given the central govt's fiscal capacity, but liquidity theoretically does have room for expansion given high real rates. They probably don't want to move yields too much though, per tradition.
Going back to fundamentals and macro, fiscal spending ideally should go to productivity increasing investments over pure consumption. Taking time to sort out finding productivity improvements while the economy isn't in an acute crisis seems reasonable.
Thanks for your thoughts. I had understood that PBoC policy rates are actually near zero. So not much scope to reduce rates further. Injecting more money (eg by reducing the reserve ratio) might help, but the theoretical case for liquidity expansion to stimulate the economy is not well established. I know the Fed and EU have engaged in quantitative easing but (I understand) the theoretical basis for QE is not well established. Anyway, no harm trying.
Anyway, thanks for your insights.
Thanks Robert for this thought-provoking piece!
“这实际上是政府与农场、工业和交通的合作伙伴关系，不是利润的合作伙伴关系，因为利润仍然归于公民，而是计划的合作伙伴关系，以确保计划能够得到实施”
This seems to me is one of the most important points in resuscitating the Chinese economy - can it be done?