Thursday, October 28, 2021
Saturday, October 23, 2021
Friday, October 22, 2021
Is the Chinese Economy in Trouble ?
By Paul Krugman |
These are scary times in America, with one of our major parties careening into authoritarianism and the other having difficulty moving forward thanks to two uncooperative senators. Most of what I write, inevitably, focuses on the troubled prospects for our republic. But everyone needs a break. So today I want to talk about a happier topic: The risks of an economic crisis in China. |
OK, not exactly happier. But a change in subject, anyway. |
Warnings about the Chinese economy aren’t new — but until now the worriers, myself included, have been consistently wrong. Back in 2013 I suggested that China’s growth model was becoming unsustainable, and that its economy might be about to hit a Great Wall; obviously that didn’t happen. |
Yet the more closely you look at how China has been able to keep its economy going, the more problematic it looks. Basically, China has masked underlying imbalances by creating an immense housing bubble. And it’s hard to see how this ends well. |
The background: The reforms introduced by Deng Xiaoping at the end of the 1970s created an economic miracle. China, which was desperately poor, is now a middle-income nation, and given its size, that makes it an economic superpower. But China’s economic growth has been gradually slowing. Here’s a five-year moving average of the country’s growth rate: |
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There’s nothing mysterious about this slowdown. China was able to achieve incredibly rapid growth through a combination of technological borrowing from more advanced nations and a huge transfer of population from rural areas to cities. As its technological sophistication grew and the reservoir of rural labor shrank, growth was bound to slow. In addition, the one-child policy gave China the kind of demography we usually associate with richer countries: The working-age population peaked a few years ago and is now shrinking: |
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In and of themselves, slower growth and a demographic transition needn’t imply a crisis. But here’s the problem: Chinese spending patterns haven’t adjusted to the needs of a slower-growth economy. In particular, the country still has a very high savings rate, so to maintain full employment it needs to invest an incredibly high share of G.D.P. — more than 40 percent. |
What drives investment? Normally, it depends a lot on how fast the economy is growing: growth is what creates a demand for new factories, office buildings, shopping malls and so on. So very high investment as a share of G.D.P. is sustainable if the economy is growing at 9 or 10 percent a year. If growth drops to 3 or 4 percent, however, the returns on investment drop. That’s why China really needs to change its economic mix — to save less and consume more. |
But Chinese savings have stayed stubbornly high — and yes, excessive saving is an economic problem. |
A few years ago a study from the International Monetary Fund tried to explain high Chinese savings. It suggested that the biggest culprit was the same demographic transition that is one cause of slowing growth: A declining birthrate means that Chinese adults can’t expect their children to support them later in life, so they save a lot to prepare for retirement. This demographic factor is reinforced by the weakness of China’s social safety net: People can’t count on the government to support them in their later years or to pay for health care, so they feel the need to accumulate assets as a precaution. |
Chinese policymakers know all this, but somehow haven’t been able to deal with these underlying issues. Instead, they’ve kept the rate of investment very high despite slowing growth — mainly by encouraging huge spending on housing construction. A 2020 paper by Kenneth Rogoff and Yuanchen Yang shows that Chinese investment in real estate now greatly exceeds U.S. levels at the height of the 2000s housing bubble, both in dollar terms and as a share of G.D.P.: |
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Rogoff and Yang also show both that housing prices in China are extremely high relative to incomes and that the real estate sector has become an incredibly large share of China’s economy. |
None of this looks sustainable, which is why many observers worry that the debt problems of the giant property developer Evergrande are just the leading edge of a broader economic crisis. |
I’ve already pointed out that until now China has been able to defy the doomsayers. So you might be tempted to give Chinese policymakers the benefit of the doubt, and assume that they’ll manage to deal with this situation. It turns out, however, that they haven’t really been dealing with their economy’s underlying problems, they’ve been masking those problems by creating a housing bubble that will ultimately magnify the problem. |
But why should the rest of the world care? China, which maintains controls on the flow of capital into and out of the country, isn’t deeply integrated with world financial markets. So the fall of Evergrande isn’t likely to provoke a global financial crisis in the same way that the fall of Lehman Brothers did in 2008. A Chinese slowdown would have some economic spillover via reduced Chinese demand, especially for raw materials. But in purely economic terms, the global economic risks from China’s problems don’t look all that large. |
China does, however, have an autocratic government — the kind of government that in other times and places has tended to respond to internal problems by looking for an external enemy. And China is also a superpower. It’s not hard to tell scary stories about where all this might lead. |
And with that, I return you to your regular worries about what’s going on in the United States. |
Wednesday, October 20, 2021
How Lobbyists Destroyed Paid Family Leave in BBB
This 3-Minute Video Explains How Richie Neal Turned Paid Family Leave Into Insurance Giveaway
"Passing a poorly designed paid leave proposal is a dangerous political game for Democrats," warns policy analyst Matt Bruenig.
Tuesday, October 19, 2021
Climate Survival - at risk
Climate survival
Michael Klare
This summer we witnessed, with brutal clarity, the Beginning of the End: the end of Earth as we know it — a world of lush forests, bountiful croplands, livable cities, and survivable coastlines. In its place, we saw the early manifestations of a climate-damaged planet, with scorched forests, parched fields, scalding cities, and storm-wracked coastlines. In a desperate bid to prevent far worse, leaders from around the world will soon gather in Glasgow, Scotland, for a U.N. Climate Summit. You can count on one thing, though: all their plans will fall far short of what’s needed unless backed by the only strategy that can save the planet: a U.S.-China Climate Survival Alliance.
Of course, politicians, scientific groups, and environmental organizations will offer plans of every sort in Glasgow to reduce global carbon emissions and slow the process of planetary incineration. President Biden’s representatives will tout his promise to promote renewable energy and install electric-car-charging stations nationwide, while President Macron of France will offer his own ambitious proposals, as will many other leaders. However, no combination of these, even if carried out, would prove sufficient to prevent global disaster — not as long as China and the U.S. continue to prioritize trade competition and war preparations over planetary survival.
Read more
https://portside.org/2021-10-18/how-save-world-climate-armageddon
Union Strikes and Workers
The John Deere Strike Shows the Tight Labor Market Is Ready to Pop
https://portside.org/2021-10-18/john-deere-strike-shows-tight-labor-market-ready-pop
Portside Date: October 18, 2021
Author: Jonah Furman and Gabriel Winant
Date of source: October 17, 2021
The Intercept in partnership with Labor Notes
Shortly before midnight on Wednesday, production workers at a John Deere facility in Waterloo, Iowa, started shutting down the plant, quenching the furnaces in the foundry. The plant was already mostly empty, with Deere telling overnight workers to stay home. Three days earlier, union members at United Auto Workers meetings in Iowa, Illinois, and Kansas had voted overwhelmingly to reject a proposed contract that gave subinflation raises and eliminated pensions for all new hires. The rejection came as a surprise to both the union leadership and the company; even some of the workers who had voted no and authorized a strike were surprised that it was actually happening. The 10,000 workers who walked off the job are striking Deere for the first time in 35 years. “Just confirmed Waterloo has their picket signs,” one worker said before the strike began. “Shit’s about to get real.”
Read more.
https://portside.org/2021-10-18/john-deere-strike-shows-tight-labor-market-ready-pop
Portside Date: October 18, 2021
Friday, October 15, 2021
Sen Refuses to Agree to Corporate Tax Increase
Report: Sinema Digs In Heels To Oppose Corporate Tax Hike While Blocking Reconciliation
At least part of the standstill over Democrats’ $3.5 trillion reconciliation bill is still rooted in Sen. Kyrsten Sinema’s (D-AZ) refusal to up taxes on corporations and wealthy Americans, according to Insider.
The senator’s objection to President Joe Biden’s proposed tax increases, which are crucial to paying for the sweeping legislation, has been a sticking point in her negotiations with the White House since at least September, as the New York Times first reported at the time.
Amid talks with the White House, Sinema is currently attending fundraisers for the Democratic Senatorial Campaign Committee (DSCC) in Europe.
John LaBombard, a spokesperson for the senator, told the New York Times that she’s held “several calls” with Biden, Senate Majority Leader Chuck Schumer’s (D-NY) team and other Senate and House colleagues this week.
Insider’s report comes as Sinema remains publicly tight-lipped about her counterproposal to the reconciliation bill, much to the frustration to the rest of her Democratic colleagues, particularly progressives.
Sinema has reportedly told House Democrats this week that she won’t vote for the reconciliation bill until the bipartisan infrastructure bill she helped craft passes first.
