Comments on Meiyan Wang and Fang Cai "Migrant workers key driver of Chinese consumption", 10/12/2015
It makes perfect sense to provide the same public services and social security to rural-urban migrants. A main question is whether the national and local governments have the means, mainly the revenue to do so. If they have then it will be all fine. If they don’t, then the question is how they can have the revenue to do so.
There should be a national policy mandating a deadline for achieving the equality between rural-urban migrants and the permanent residents, recognising the differential capacity between different regions. The central government may also need to use its financial power to assist some regional governments in the process.
Personally, though, I am a bit sceptical about the consumption-led (more generally a demand driven model) rapid economic growth model for a developing economy. If consumption can lead the development of a developing country, then every country could do it easily. The basic logic is that you have the income in hand first before you can consume.
I think it is conceptually easier to have production-driven through a combination of investment and productivity enhancing, supply-driven model (using international trade to balance the difference between production and consumption). While the current surplus capacities in some industries in China represent a serious problem and may take years to be overcome, businesses and the government need to consider how to raise productivity in many other sectors. Surplus in the capacity of some industry can occur in any countries: the current international mining and oil industries are examples.
Having said that, there will be an effect on growth if the rural-urban migrants are afforded equal services as their permanent counterparts.
Showing posts with label consumption. Show all posts
Showing posts with label consumption. Show all posts
2015-12-10
2010-04-29
Savings, consumption and investment, as well as external balance
Comments on Mohamed Ariff “Asia’s obligations in the new order”, 28/04/2010, http://www.eastasiaforum.org/2010/04/28/asias-obligations-in-the-new-order/
Statements like the following are misleading and unhelpful, because they ignore the role investment in the saving equation:
"East Asia needs to consume more and save less, just as the US needs to consume less and save more, which means that the US and East Asia need to export more and import more, respectively."
It is highly questionable and likely to be illogic and pointless to force any person to consume more and save less, if that person has pursued his own welfare and be optimal in terms of decisions on saving, consumption AS WELL AS investment.
The so called external imbalances are not necessarily caused by savings, or consumption, because investment can play a balancing role, in another word, can "rebalance" the external "imbalance", without affecting internal savings and consumption.
It is a simple matter of analysis, isn't it?
Statements like the following are misleading and unhelpful, because they ignore the role investment in the saving equation:
"East Asia needs to consume more and save less, just as the US needs to consume less and save more, which means that the US and East Asia need to export more and import more, respectively."
It is highly questionable and likely to be illogic and pointless to force any person to consume more and save less, if that person has pursued his own welfare and be optimal in terms of decisions on saving, consumption AS WELL AS investment.
The so called external imbalances are not necessarily caused by savings, or consumption, because investment can play a balancing role, in another word, can "rebalance" the external "imbalance", without affecting internal savings and consumption.
It is a simple matter of analysis, isn't it?
2009-10-02
Wealth effect of government debt on consumption
Comments on Alan Kohler “Desperation masked by euphoria”, 1/10/2009, http://www.businessspectator.com.au/bs.nsf/Article/IMF-bank-write-downs-capital-raisings-double-dip-r-pd20091001-WDS7W?OpenDocument&src=sph
The problems with increased government debts are that sooner or later, it will be factored into a nation's wealth and into consumption and savings.
Most high debt countries developed countries so far have not seen that effect, but it will catch up with them one day, even though it is difficult to say how long that will be given that bubbles can be very persistent.
Japan's since the 1990 is a good example of the effect of wealth dive on consumption and the economy and its experience will be repeated by quite a number of countries.
Alternatively, some countries might run inflation reduce the burden of government debt for the government, but that can only be a disguised taxing instrument and most nations cannot escape the wealth effect of high debt.
Maybe the US will be the last one given its safe haven status so far and the fact that a large part of its government debt is held by other nations. Lucky Americans!
The problems with increased government debts are that sooner or later, it will be factored into a nation's wealth and into consumption and savings.
Most high debt countries developed countries so far have not seen that effect, but it will catch up with them one day, even though it is difficult to say how long that will be given that bubbles can be very persistent.
Japan's since the 1990 is a good example of the effect of wealth dive on consumption and the economy and its experience will be repeated by quite a number of countries.
Alternatively, some countries might run inflation reduce the burden of government debt for the government, but that can only be a disguised taxing instrument and most nations cannot escape the wealth effect of high debt.
Maybe the US will be the last one given its safe haven status so far and the fact that a large part of its government debt is held by other nations. Lucky Americans!
2009-07-23
What to do when exports falls?
Comments on huangyihello “扩大需求、恢复经济也可以在供给上做文章”, 23/07/2009, http://www.pinggu.name/space-1125736-do-blog-id-16296.html
I am delighted to read this article. huangyihello has raised a very good point in the current debate.
In addition to those two points, there is also an important point very few people have discussed, that is, to increase investment (physical capital) for future more rapid growth. This is a more difficult issue at a higher level than just considering consumption along. It is a change of product mix at another level.
Also, even when using cash handouts to people, consideration should be given to how they are distributed and whether there are other better options than pure cash handouts. For example, government may provide interest-free loans to people to buy goods. The latter can reduce the potential burden for future people, because cash handouts increase government debts and any government debts will have to be repaid.
Government does not have free money, although it can print money. Even printing money has its costs of inflation and devaluation of current assets for their owners.
I am delighted to read this article. huangyihello has raised a very good point in the current debate.
In addition to those two points, there is also an important point very few people have discussed, that is, to increase investment (physical capital) for future more rapid growth. This is a more difficult issue at a higher level than just considering consumption along. It is a change of product mix at another level.
Also, even when using cash handouts to people, consideration should be given to how they are distributed and whether there are other better options than pure cash handouts. For example, government may provide interest-free loans to people to buy goods. The latter can reduce the potential burden for future people, because cash handouts increase government debts and any government debts will have to be repaid.
Government does not have free money, although it can print money. Even printing money has its costs of inflation and devaluation of current assets for their owners.
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