What’s Really Driving China’s Growth
A fat guy on a donkey. Really. That’s what’s driving China’s growth.
It sure as heck isn’t China’s government.
Economic growth and prosperity stands on the shoulders of countless people making self interested choices that will benefit themselves without initiating violence against others.
Savings is Fueling China’s Growth
What is the choice that really drives significant growth? Savings. For what are savings, if not the choice to consume (destroy or degrade) later, and not today?
Saving is the only way to fuel economic growth and capital formation, and is done by individuals, not by government.
In China, people save a lot. And that fuels enormous growth. That along with putting to good use all of the knowledge available in today’s world.
But without the first (savings), the second (implementation of already developed knowledge, such as technology) would not be possible. There just wouldn’t be the resources to do so.
What Government is Good For
The only thing the government can do to help economic growth, besides getting out of the way, is protect the life and property of others. Almost anything else that it does is harmful, generally to the overall economic health of a country, specifically to those who are sacrificed for the ‘benefit’ of others.
It was only through China’s government doing less harm that growth was made possible. It is true that whenever governments do too much harm, it is not possible to save much of anything or create much of value. See China’s past for examples.
But it does not follow that government choice is the driver of growth and prosperity. That’s like saying that bully in the schoolyard helped you grow and develop as a person because he decided to steal from you or beat you up a little less every year.
No, economic growth is fueled by the choices of individuals, separate from government.
That brings us back to the fat guy on the donkey. It’s a crass metaphor, but you could say the fat guy is anyone that chooses to save, and the donkey the workers who put those savings to good work. Thrift and industry, in the traditional sense.
Where’s the government in this picture? Exactly – nowhere to be seen.
the source of the economic development happening here lies however in the following ways:
the cost of natural resources
rob of the labour(esp, poor immigrants)
use of technology(mostly “invited from overseas”)
You really think that the great majority of Chinese economic development came through the low cost of natural resources, forced labor, and stolen technology?
How about other countries that do the same (steal technology, make use of very cheap resources, have access to cheap labor) but still can’t seem to develop like China?
Your point that there is rampant piracy is taken – this has attributed to some economic development by China that would not have happened if they hadn’t stolen such intellectual property.
The one about exploitation of labor is more complicated. As long as the laborers voluntarily agree to and understand their working conditions and pay, they are better off by definition. That’s not to say that other injustices don’t happen to many workers & farmers in China.
All wrong.
China is purely developing with FOREIGN money from Taiwan.
I guess there is not even one successful “Chinese” company without m oney or technology from Taiwan.
Martin,
That’s a funny view of things, and just a little bit ignorant of the fact that savings (of which there is plenty in China) are what allow capital formation.
You’re saying that there have been no real savings in China, despite the massive official numbers? That all of the savings that have fueled China’s enormous growth have come from Taiwan?
Chinese culture also plays an important role – a culture that value science and engineering more than anything else.
Martin,
I’m from Taiwan! Don’t ever forget that Four Asian Tigers are Hong Kong, Singapore, South Korea, and Taiwan! China today follow footsteps of Four Asian Tigers! And, yes, our East Asian Cultures do highly value science, engineering, high saving, entrepreneurships, and so forth more than any other Retarded WANNABE Failed States out there!! >=)
Martin,
Don’t ever implied that Taiwan is some how in control of China because we certainly don’t! Nor is China in control of Taiwan’s affairs! China, on the hands, had very capable Economists and Leaders of their owns unlilke those SubPrime Fools in the West for sure…. haha!! >=P
PS! China can follow any Economic Models of Four Asian Tigers as they see fit! Of course, I would prefer that they follow Taiwan’s Model and get rid off the ridiculous One-Child Policy in favor of more humane Two-Child Policy! However, I think Chinese Leaders prefer Singapore Model instead and stick to their One-Child Policy!! =/
Its obvious that captial is needed for any form of economic growth and in China private savings do play a major part in this. In addition though, Foreign Direct Investment and trade are the other two main drivers of economic growth and its very ignorant and simplistic of you to suggest just domestic savings are the key.
See figures on China’s trade surplus with the US as an example of how important trade and international business is to China.
Also, it is investment of these savings into infrastructure, business and trade that drives economic growth, not just mearly saving! If people in China just save, and do ot spend any of their earnings on goods and services, or invest it in housing or finance than the economy does not grow.
One of the main problems currently with the Chinese economy (and directly releavnt to the trade surplus with the US), is that it is too reliant on export markets much like the Asian tigers in the past.
Development of a strong domestic market is needed for China to maintain prolonged economic growth, not just savings!
For this to happen, investment in industry and infrastructure will be need, especially in central and western China, and this is were the role of government comes in.
While the Chinese govt is far from efficient, spending on infrastructure, especially related to trade, has been the driving force behind China’s economic growth and the resultant trade surpluses China enjoys has given the govt funds to carry on investing in infrastructure.
Look at India, another nation with a large population and cheap labour, in comparison it has fallen short of China due to crumbling infrastructure.
You need to think more about this topic before posting ignorant, half thought out views. As if all Chinese just sat around saving, there would be a decline in industry, greater unemployment and economic decline.
Savings is always the primary driver of growth – without it capital accumulation is impossible, as there are no real resources freed up to lengthen the structure of production.
Of course FDI and trade have helped China. Any country with low labor costs that is open to FDI and has a decent system set up to protect private property rights will attract FDI. Any country that is able to freely trade with other countries (or rather any country that lets individuals within it trade freely with individuals in other countries) will benefit tremendously.
The amount of trade with the US is surely significant. The trade of real goods always benefits both parties, otherwise they would not engage in the trade. The more trade there is, the more benefits both sides receive.
But China’s trade surplus is not something that helps China grow (although it may boost GDP numbers, it surely doesn’t increase real wealth) – the reason why is that China’s central bank prints money to buy dollars off the hands of exporters (indirectly through other banks). It’s a subsidy to exporters, that the average Chinese person pays through inflation. And it’s a sure bet that China will lose a lot of real value as the trillion+ in bonds it holds in reserve lose value to inflation driven by the Federal Reserve.
One of the main reason’s that China’s economy is so reliant on exports is the massive subsidy given to exporters by the central bank buying up all dollars. But supply creates its own demand, as the recent rise in Chinese domestic consumption and any rational look at history will tell you.
I do agree with you that it matters how savings are invested. But this is more a question of economic freedom and protection of property rights than infrastructure planning by the government.
Ah yes… spending on infrastructure and trade has been the “driving force” behind China’s growth. A half truth, as opening up to trade with the rest of the world has undoubtedly made China much more wealthy. What about the other half? If China’s spending on infrastructure in the last several decades has driven its growth, why didn’t an even higher percentage of spending on infrastructure from the 50′s to 70′s drive growth? Maybe because it’s not government that creates wealth through spending, since it can only take resources and labor from the private sector to spend on unprofitable investments?
And if all Chinese sat around saving, prices would fall, real resources would be freed for real economic growth, and all of the inefficient businesses around would go out of business and be bought out by more efficient competitors or newly formed businesses that snap up the assets of the old company on the cheap. Of course, you don’t believe this, because despite research proving otherwise, you think that deflation causes economic decline.
Also, the rich and growing parts of China are obviously much freer in economic terms than India. There are many measures that show this that I’ve read in the past, but I don’t have specifics on hand.
I don’t appreciate the accusations of ignorance – I once thought through things exactly like you do (especially after my major in Economics in college), but after dozens of more logically grounded economics books realized what I learned in college was all BS.
I agree that savings is not the only thing driving China’s growth, but still believe it to be the primary force (when combined with sufficient economic freedoms).