State Planning

Incentive to Tyrants Abroad

“This move by the FBI could snowball around the world. Why in the world would our government want to give repressive regimes in Russia and China a blueprint for forcing American companies to create a backdoor?” Wyden told the Guardian.

“Companies should comply with warrants to the extent they are able to do so, but no company should be forced to deliberately weaken its products. In the long run, the real losers will be Americans’ online safety and security.”

Via Apple encryption case risks influencing Russia and China, privacy experts say @ The Guardian.

Chinese Kleptocracy

OK, Politico did not use the exact term, but Charles Davidson and Jeffrey Gedmin make a pretty bold statement in today’s edition. China is a kleptocracy and this encourages instability in the country and in the global economy.

We have argued this pretty much since the founding of this website. A broad system of crony capitalism like the one in China creates distortions in the economy, prices are obfuscated, the connected become wealthy, dishonesty is compounded, until the facade eventually crumbles when the lies become apparent. To some degree that is what we are seeing now with the Chinese downturn.

Via Politico calls out China as the world’s Ultimate Crony Capitalist State @ Against Crony Capitalism.

The Limits of China Under Communism

There is no historical example of a closed imperial economy facing large capital-driven, open states and sustainably competing over a long term. That is not to say that China isn’t an economic powerhouse and a remarkable site of energy and potential. It is certainly both. But we also know Chinese debt — as secret as the state likes to keep it — is enormous, and that its financial system is like any other bubble. It is predicated on inflated earnings reports and expectations. The great “Beijing Consensus,” China’s absolute commitment to showing 8% growth every year, is unsustainable, at least through legitimate means. And without it, China is beginning to look like an enormous totalitarian ponzi scheme — a phenomenon common enough in world history, but extremely dangerous be near in the long run.

Via China: The new Spanish Empire?   

Reality Creeps up on Chinese State-Capitalism

Ambrose Evans-Pritchard writes about the Chinese government’s (publicly) dismissive reply to an International Monetary Fund warning about Chinese debt-fueled over-investment. A single sentence serves as an executive summary: All those extrapolation charts of a Chinese-led planet that enthralled us all in the BRICS hysteria of 2008 will look very silly indeed, unless China heeds the…

State-directed investment leaves China a crony-capitalist archetype

Controlling state enterprises rewards a few, but far too few: China has a related but different problem. Its politicians control too much of the money themselves. Politicians and elites in China enrich themselves, their friends, and their families by managing and siphoning China Inc., China’s state capitalist enterprise. Chinese industry is controlled by the state,…

Chinese State Capitalism Repeats – Perhaps Exceeds – Past Errors

China’s planners want the benefits of free, voluntary markets without allowing free, voluntary markets: China’s urbanization has risen from an insignificant share in the 1950s to more than half, depending on how migrant workers are counted. But Beijing’s scientific planners have decided this “natural” rate is too slow. So now, one quarter of a billion…

State-capitalist China cannot build cities to escape a debt problem

It’s simply erroneous to think that China can build city after city (via debt) to escape a debt-backed investment binge: But in a report this week, Michael Pettis, finance professor at Peking University’s Guanghua School of Management, points out that such thinking rests on a fallacy. Leave aside recurring reports of newly built Chinese cities…

GDP Data in State-Capitalist China: Often Bogus, Often a Distraction from Underlying, Systemic Weakness

William Pesek has it right about state-capitalist, investment over-intensive China. First, Chinese GDP and other metrics are simply dodgy: Even in the best of times, China’s data can be about as accurate as tossing a dart at a chart on the wall. It’s a structurally imbalanced economy distorted by top-down policies and considerable “gray activities”…

Beyond ‘Bossism’ – Less Hierarchy is a Good Thing

The end of state-favored businesses may bring smaller, more supple organizations. They’d be less prone to the problems of large-scale planning: Large, hierarchical firms seem likely to be beset by the incentive and knowledge problems that complicate the lives of state central planners. The larger an organization, the more likely it is that managers will…