Today, the vast majority of the companies that accounted for the rise of the Internet in the late 20th and early 21st centuries are gone, but it’s not the culmination of that difficult leap into a better future. The Internet better defines life as we know it, and that’s exactly because the government didn’t intervene in the face of the thousands of mediocre or bad companies that went bankrupt around 2001.
It’s a question worth pondering as U. S. economic experts begin to write autopsy analyses of China’s economy, while arguing that “a world dominated by China is even less likely than ever. “The words in quotation marks are taken from an editorial published in the Washington Post about China’s “booming economy. “Presumably, in 2001 domestic and foreign editorialists wrote articles about the United States. That’s why economic wording can be a bit silly.
The Post’s editorial notes on China that “more than 50 primary developers are running out of cash or defaulting on their payments. “Fears abound that insolvency will leave millions of housing projects unfinished. “Bad news? Not exactly. Best of all, no one dies. Bankruptcy or failure will not result in the disappearance of the painters from the companies or from the paintings made so far through those companies, since the old painters and unfinished paintings will be sold at low value through others. As for the debts that will remain unpaid, the world is full of investment budgets that will fearlessly buy up defaulting Chinese debt and, in some cases, recruit billionaires to enter the proverbial burning house. This is where it gets weird.
Instead of asking the government to step aside so that Chinese markets can become healthily transparent, the Post editorial board argues that “the government could simply take over unfinished houses to secure their finishing touches and invoices. ” “The latter is the fashionable equivalent of US politicians intervening to save theglobe. com, eToys. com and NetZero from bankruptcy and obsolescence following the aforementioned web boom.
The Post then argues that to “cope with its aging population, China could also expand its thin social safety net. ” Has Social Security been as effective or profitable here? The same editorial argues that a safety net “could simply help the economy; people save instead of spend due to lack of government support. This is doubly wrong. On the one hand, governments do not collect yuan and dollars from the sky to distribute them, but they get them from others. If they increase demand in one sector, they will have to decrease it in another. Second, economic expansion is the result of investment, and investment arises from unspent wealth. We all like to consume , but savers are the engines of expansion.
In the U. S. , though with China’s aging population leading the way, evidence can be uncovered that Americans think a lot about our own “social safety net” in the vast expansion of private-sector savings vehicles on which more and more Americans depend. Security will pay so little. It’s simply a way of saying that if an aging society is a challenge (as opposed to a bullish signal that other people are living longer), the government is in no position to address it.
All this said, the Post’s editorial makes good points. It notes that China’s stock market has lost $6 trillion in value. This could be related to Xi Jinping’s less passionate embrace of markets, but then as Post columnist George Will has long pointed out, nothing is forever. Neither is Xi. Furthermore, the decline could alternatively signal a healthy correction that will ultimately feed a healthy recovery as wealth is released from the bad and mediocre to the good and great.
Much more especially for Americans as a whole, the editorial emphasizes that “China remains a major trading partner of the United States. “Yes. See above. The closed economy is the global economy, and if the Chinese economy falls, it will be felt here.
For now, however, there is no evidence that “forever” has come to China, as evidenced by the degree to which American corporations are betting on a larger one in this country. As for Xi’s refusal to do much in reaction to China’s economic problems, the view here is that his inaction stance shows a point of sound economic wisdom that is not always evident among his critics. In economics, failure is your friend.