Comments on Shiro Armstrong and Tom Westland "Escaping the middle income trap", 30/03/2016
Some comments point out some unsaid issues, including what a new Asia order would look like and how to bring that peacefully.
While I am an economist as opposed to international strategist, I would venture a hypothesis that the best scenario for a new Asia order to appear peacefully would be for China to work not only for its own interests but also for the interests of all Asian countries, so that Asia is truly for all Asians as a whole, irrespective for China to confront the US or not.
The underlying assumption is that Asians will benefit from a new Asia order.
If you don’t look after your neighbours, they will not support you in your endeavours.
I think that will need China to make some hard decisions and choices, including to make some compromises and perhaps sacrifices in the process for it to rise as a true and powerful leader in Asia. America will naturally fade from Asia or its assumed uncontested leadership in Asia will be diluted, in that process.
It will be wise for China if it can do that. I think there will be enough wise people in China for it to realise that is the best option forward.
Showing posts with label developing economies. Show all posts
Showing posts with label developing economies. Show all posts
2016-03-30
2014-02-27
Ethnic issue is only one of the many dimensions of some of China problems
Comments on Michael Clarke “Beijing redoubles
counter-terrorism efforts in Xinjiang” 26/02/2014, http://www.eastasiaforum.org/2014/02/26/beijing-redoubles-counter-terrorism-efforts-in-xinjiang/
Undoubtedly there have been serious ethnic problems in
Xinjiang and some of them may have been caused by policies and/or
implementations of policies and administration. However, attribute most
problems in Xinjiang as ethnic problems may mask other causes to the problems.
For example, there are many serious problems in areas that are mainly Han ethnic
people - the dominant and the largest ethnic group in China, such as demolishing
properties for new construction in cities or new urban areas. Some reports
indicate that there are tens of thousands of mass unrests a year in China, a
reflection of general problems as opposed to ethnic problems.In terms of the pipelines linking Xinjiang to Turkmenistan and Kazakhstan, it probably paled in significance when compared to the Three Gorges Dam that caused/forced millions of people to move and migrate to other new settlement areas.
Were the problems of the Three Gorges Dam project mainly an ethnic problem perceived by people outside China? Probably not.
Development may cause some destructions and China has not been skilful in dealing with many issues associated with development, such as dislocation of people and destruction of some historical, cultural, religious and ethnic heritages.
Development can and often does involve changes. No one can promise no changes to anything while making development a reality at all occasions involving either natural or man-made things. The key issues include costs and benefits any potential development means and how to protect those that should be protected and prioritise things and how to handle sensitive issues.
While that is a fact, exaggerating issues that may be general but at the same time involving minority ethnic groups does not necessarily contribute positively to finding better solutions to resolving them.
For example, here in Australia there are issues and different views of how the economy in Tasmania is going and how to balance the need for development and growing the economy and protect the environment. Such issues, while differing in degrees, are not too dissimilar to some of the development issues in China.
Having made the above comments, I would say that the arrest of Uyghur scholar Tohti was a regrettable event. There should ideally be greater freedom of speech for everyone in China.
2011-12-16
Two different issues in emissions
Comments on a comment on Amritha Thiyagarajan “Global climate financing must face greater scrutiny”, 13/12/2011, http://www.eastasiaforum.org/2011/12/13/global-climate-financing-must-face-greater-scrutiny/
Although what you said is true, there is, however, a clear and big difference between the visible part and the less visible part of emissions.
What you said is probably and largely the visible part of population like air quality and what quality. Those problems have largely been resolved in most developed countries.
The current issue that both Kyoto and ever since has been more focused on the less visible part of carbon dioxide that is said to cause global warming.
What you said is probably and largely the visible part of population like air quality and what quality. Those problems have largely been resolved in most developed countries.
The current issue that both Kyoto and ever since has been more focused on the less visible part of carbon dioxide that is said to cause global warming.
So, for China and many developing countries there are "double" tasks, one is to deal with the visible and local part, as sometimes shown on TV reports even by developed world such as in Australia about the air population in China, and the other is for the carbon dioxide.
Arguably, the first task has more rapid and localised effect on their people and countries.
Arguably, the first task has more rapid and localised effect on their people and countries.
It is useful to understand the differences.
2011-05-15
Development models
Comments Sandy Gordon “India and China: Mega-population, mega-corruption, mega-growth”, May 10th, 2011, http://www.eastasiaforum.org/2011/05/10/mega-population-mega-corruption-mega-growth/
Sandy Gordon's post indirectly raises a question, that is, is there a best model for a very large and developing or under-developed country to develop?
A large country is different in many respects to a small or perhaps a city country.
Professor Gordon suggests that "The Indian one delivers economic delay, but its long-term promise is rule of law and relative transparency. The system in China has provided for rapid, command-driven economic growth. When needed, land is quickly, and often corruptly, appropriated. But the Chinese system contains little promise of a long-term amelioration of the grievances of affected people."
Obviously neither is perfect, but Professor Gordon appears to prefer the India one for its long run promise.
There is nothing wrong with that, except when one considers Keynes’ remark that in the long run we are all dead.
But to be a little serious, the post exposes the difficulties with development. Countries are different in their histories, cultures and social traditions, as well as values. Let’s leave ideology aside and ask a question: is there a way to optimise development, subject to the initial conditions?
Further, let’s go a step further than simple linear paths and assume that nonlinearity can be achieved, can the optimal path for development for a country mean non-democratic for some and possibly a significant period or periods on the way to final prosperity?
If the answer is yes, what would it mean for some ‘universal values’?
Sandy Gordon's post indirectly raises a question, that is, is there a best model for a very large and developing or under-developed country to develop?
A large country is different in many respects to a small or perhaps a city country.
Professor Gordon suggests that "The Indian one delivers economic delay, but its long-term promise is rule of law and relative transparency. The system in China has provided for rapid, command-driven economic growth. When needed, land is quickly, and often corruptly, appropriated. But the Chinese system contains little promise of a long-term amelioration of the grievances of affected people."
Obviously neither is perfect, but Professor Gordon appears to prefer the India one for its long run promise.
There is nothing wrong with that, except when one considers Keynes’ remark that in the long run we are all dead.
But to be a little serious, the post exposes the difficulties with development. Countries are different in their histories, cultures and social traditions, as well as values. Let’s leave ideology aside and ask a question: is there a way to optimise development, subject to the initial conditions?
Further, let’s go a step further than simple linear paths and assume that nonlinearity can be achieved, can the optimal path for development for a country mean non-democratic for some and possibly a significant period or periods on the way to final prosperity?
If the answer is yes, what would it mean for some ‘universal values’?
2010-12-03
The world and different worlds
Comments on “The US is only hurting itself”, by Bill Gross, Pimco, 3/12/2010, http://www.businessspectator.com.au/bs.nsf/Article/global-demand-bill-gross-pimco-recession-pd20101202-BQSWL?OpenDocument&src=rot
There is some truth to what is being said here.
A global fundamental realignment in production and income is inevitable and will have to occur sooner than later.
The continuing reliance on cheap labour wages in developing countries to subsidise the living standard in the US and other developed world is unsustainable when large developing countries catch up in industrial production.
You either have high unemployment in the developed world, or have them produce enough industrial goods that can compete with the goods produced in large developing countries. In competition for the same goods, the process of income equalisation between the developed and the developing countries is likely to accelerate.
The recent near death financial and economic crises and the difficulties of the recoveries of the developed economies are a manifestation of the likely more severe tensions between the two world in the years and decades ahead.
The world as a whole has to find a win-win solution to the future for both worlds.
Maybe the G20 is a forum for that solution to be found.
There is some truth to what is being said here.
A global fundamental realignment in production and income is inevitable and will have to occur sooner than later.
The continuing reliance on cheap labour wages in developing countries to subsidise the living standard in the US and other developed world is unsustainable when large developing countries catch up in industrial production.
You either have high unemployment in the developed world, or have them produce enough industrial goods that can compete with the goods produced in large developing countries. In competition for the same goods, the process of income equalisation between the developed and the developing countries is likely to accelerate.
The recent near death financial and economic crises and the difficulties of the recoveries of the developed economies are a manifestation of the likely more severe tensions between the two world in the years and decades ahead.
The world as a whole has to find a win-win solution to the future for both worlds.
Maybe the G20 is a forum for that solution to be found.
2010-11-23
Interesting inconsisitency by Peter Hartcher
Comments on Peter Hartcher “India prospers in spite of scandals”, 23/11/2010, http://www.smh.com.au/opinion/politics/india-prospers-in-spite-of-scandals-20101122-1843u.html?posted=successful
It is interesting to see the inconsistency Peter Hartcher has shown in his approach to India and China.
He made a few summary points in his concluding remarks with the last one contrasting India with China.
Peter Hartcher can accept corruptions and economic growth with democratic India, but has great difficulties with China.
China has had a longer term rapid economic growth than India has so far and has a higher income and living standard.
But Peter Hartcher should also know that China also exposes corruptions and imposes severe punishment including death sentencing!
As in every country including India, the exposed corruption cases may be only a fraction of the real cases going on and China is no exception.
It is interesting to see the inconsistency Peter Hartcher has shown in his approach to India and China.
He made a few summary points in his concluding remarks with the last one contrasting India with China.
Peter Hartcher can accept corruptions and economic growth with democratic India, but has great difficulties with China.
China has had a longer term rapid economic growth than India has so far and has a higher income and living standard.
But Peter Hartcher should also know that China also exposes corruptions and imposes severe punishment including death sentencing!
As in every country including India, the exposed corruption cases may be only a fraction of the real cases going on and China is no exception.
2010-11-19
China's road to prosperity
Comments on Jane Golley “China’s rocky road to prosperity”, 18/11/2010, http://www.eastasiaforum.org/2010/11/18/chinas-rocky-road-to-prosperity/
As an economist, I have often been puzzled by a number of economic issues concerning economic development and management in both the industrialised and developing economies.
One is the so called international imbalances and related closely to that is China's heavy reliance on exports and investment for growth in the past up to now.
Just consider the issue of a country's growth as an optimisation issue. If there are international markets the country can export to fully utilise its domestic resources as much as possible, why should it not be an optimal choice? Japan did that before, Korea did that before and Taiwan did that before. When it became China's turn, now it's regarded as a problem that caused global imbalances! What a puzzle and what a joke!
So is my puzzle with investment. Let’s analyse the main differences between the industrialised and developing economies in traditional economics of the Solow growth model. The key difference is capital per capita or per worker. What and how can developing countries mitigate or eliminate that difference? It is investment. Is there any other way to increase capital without investment? I doubt it.
Another fundamental issue is how to manage the economy. China used to be a planned economy but has become largely a market economy. Traditional and orthodox economics tells us that it is macroeconomic policies, namely monetary and fiscal policies to get full employment and low inflation. Apart from that it is difficult to talk about economic structure because that becomes an autonomous by-product of good macroeconomic policy and private entrepreneurs. However, we are now confronted with China’s economic structural issues. What can we say about it?
Then we are confounded with political reforms, democracy or the lack of it. I remember that in the past there were the terms of Japan Inc, its industry policy and certain organisational characteristics, as well as some for Korea's. While I am not saying they were not democracy, those terms must have meant something, maybe that were not fully consistent with the orthodox western democracy and a liberal economy.
Japan’s road to prosperity in the second half of the last century had its uniqueness, so had Korea’s and Taiwan’s. China has and will have its own, even if it means it is at a much larger scale.
While I agree with Jane Golley’s point that ‘be prepared that some of our predictions may well turn out to be wrong’, I am not sure it is upside or downside biased.
For another issue altogether, the transitional or turning point in the Chinese economy in terms of the end of surplus labour means the argument that China’s currency is under-valued is low currency itself. It will be disastrous for China to bow to the US pressure to appreciate its currency prematurely. The rising labour costs will reduce current account surplus.
The argument for low carbon economy, while not irrelevant itself, is not unique to China and China's growth.
As an economist, I have often been puzzled by a number of economic issues concerning economic development and management in both the industrialised and developing economies.
One is the so called international imbalances and related closely to that is China's heavy reliance on exports and investment for growth in the past up to now.
Just consider the issue of a country's growth as an optimisation issue. If there are international markets the country can export to fully utilise its domestic resources as much as possible, why should it not be an optimal choice? Japan did that before, Korea did that before and Taiwan did that before. When it became China's turn, now it's regarded as a problem that caused global imbalances! What a puzzle and what a joke!
So is my puzzle with investment. Let’s analyse the main differences between the industrialised and developing economies in traditional economics of the Solow growth model. The key difference is capital per capita or per worker. What and how can developing countries mitigate or eliminate that difference? It is investment. Is there any other way to increase capital without investment? I doubt it.
Another fundamental issue is how to manage the economy. China used to be a planned economy but has become largely a market economy. Traditional and orthodox economics tells us that it is macroeconomic policies, namely monetary and fiscal policies to get full employment and low inflation. Apart from that it is difficult to talk about economic structure because that becomes an autonomous by-product of good macroeconomic policy and private entrepreneurs. However, we are now confronted with China’s economic structural issues. What can we say about it?
Then we are confounded with political reforms, democracy or the lack of it. I remember that in the past there were the terms of Japan Inc, its industry policy and certain organisational characteristics, as well as some for Korea's. While I am not saying they were not democracy, those terms must have meant something, maybe that were not fully consistent with the orthodox western democracy and a liberal economy.
Japan’s road to prosperity in the second half of the last century had its uniqueness, so had Korea’s and Taiwan’s. China has and will have its own, even if it means it is at a much larger scale.
While I agree with Jane Golley’s point that ‘be prepared that some of our predictions may well turn out to be wrong’, I am not sure it is upside or downside biased.
For another issue altogether, the transitional or turning point in the Chinese economy in terms of the end of surplus labour means the argument that China’s currency is under-valued is low currency itself. It will be disastrous for China to bow to the US pressure to appreciate its currency prematurely. The rising labour costs will reduce current account surplus.
The argument for low carbon economy, while not irrelevant itself, is not unique to China and China's growth.
2010-09-02
On China’s prospects for diminishing regional disparities
Comments on Jane Golley “China’s prospects for diminishing regional disparities”, 31/08/3010, http://www.eastasiaforum.org/2010/08/31/chinas-prospects-for-diminishing-regional-disparities/
If Chinese top policy makers are willing to use the most appropriate policies to coordinate the development strategies of the whole country inclusive of the eastern, central and the western regions, it should be possible for China to do much better than "regional inequality between the west and the rest of China is likely to be diminished marginally at best".
For example, they could use some sort of fiscal transfers and link them to encourage the private sector in the eastern region to invest in the other less well off regions to tilt a bit the balance between investing abroad and inland.
There are advantages in investing inland. For example, due to various reasons including cultural, language, systems, transport and market, the barriers or the costs and the risks of investing inland are likely to be much smaller, thus to raise the return to investment. It is also much easier to coordinate the required infrastructure development within a country, especially given the policy priority of the central government.
There are also vast labour supplies including skilled and educated personnel. Certainly it will be easier to train or educate workers if needed.
If Chinese top policy makers are willing to use the most appropriate policies to coordinate the development strategies of the whole country inclusive of the eastern, central and the western regions, it should be possible for China to do much better than "regional inequality between the west and the rest of China is likely to be diminished marginally at best".
For example, they could use some sort of fiscal transfers and link them to encourage the private sector in the eastern region to invest in the other less well off regions to tilt a bit the balance between investing abroad and inland.
There are advantages in investing inland. For example, due to various reasons including cultural, language, systems, transport and market, the barriers or the costs and the risks of investing inland are likely to be much smaller, thus to raise the return to investment. It is also much easier to coordinate the required infrastructure development within a country, especially given the policy priority of the central government.
There are also vast labour supplies including skilled and educated personnel. Certainly it will be easier to train or educate workers if needed.
2009-12-12
Copenhagen - a rich ploy?
Comments on Dennis Shanahan “China fights for its right to develop”, 12/12/2009, http://www.theaustralian.com.au/news/opinion/china-fights-for-its-right-to-develop/story-e6frg75f-1225809562949
Let's leaving the argument about the climate change science aside for the moment and make no conclusions about that.
While some climate change sceptics may say that the argument that human activities has been causing climate changes and global warming is a conspiracy, now it appears that it may look more like a conspiracy or a ploy of the rich countries to contain the development of developing countries, especially big developing countries, particularly China.
The rapid economic growth of China and other big developing economies might be seen by some as a threat to the rich countries’ living standards, life styles and even security.
Let's leave the the fact that it is the rich countries that have produced/caused the CO2 concentration in the atmosphere to the current level during the past century or so that is the cause if the theory that human activities have caused global warming is correct, because those countries even don't face up the reality that their emission levels are still several or tens of times of developing countries. The argument that China is the biggest emitter is more and more like to force China to split up or disintegrate, by deliberately ignoring its low per capita emissions of only a fraction of those of the developed countries.
UN acknowledges that there are still 150 millions people living in poverty in China, living in harsh winters without adequate heating. What does 150 million mean? It is about between six and seven times of Australia’s population.
So now it is known that Kevin Rudd, the Australian Prime Minister is one of the few who has drafted an agreement to reduce the responsibilities of the developed countries including Australia and the US, and increase the requirements for developing countries to put their development in jeopardy.
Isn’t it a conspiracy? Or doesn’t it sound like a rich ploy?
Let's leaving the argument about the climate change science aside for the moment and make no conclusions about that.
While some climate change sceptics may say that the argument that human activities has been causing climate changes and global warming is a conspiracy, now it appears that it may look more like a conspiracy or a ploy of the rich countries to contain the development of developing countries, especially big developing countries, particularly China.
The rapid economic growth of China and other big developing economies might be seen by some as a threat to the rich countries’ living standards, life styles and even security.
Let's leave the the fact that it is the rich countries that have produced/caused the CO2 concentration in the atmosphere to the current level during the past century or so that is the cause if the theory that human activities have caused global warming is correct, because those countries even don't face up the reality that their emission levels are still several or tens of times of developing countries. The argument that China is the biggest emitter is more and more like to force China to split up or disintegrate, by deliberately ignoring its low per capita emissions of only a fraction of those of the developed countries.
UN acknowledges that there are still 150 millions people living in poverty in China, living in harsh winters without adequate heating. What does 150 million mean? It is about between six and seven times of Australia’s population.
So now it is known that Kevin Rudd, the Australian Prime Minister is one of the few who has drafted an agreement to reduce the responsibilities of the developed countries including Australia and the US, and increase the requirements for developing countries to put their development in jeopardy.
Isn’t it a conspiracy? Or doesn’t it sound like a rich ploy?
2009-11-24
Challenges of the rapid rise of big developing economies
Comments on Michael Stutchbury “Up against a great wall”, 24/11/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/up_against_a_great_wall/
The Americans (and also most other industrialised countries included unfortunately) will have to adjust to the new world economic reality with the rise of big developing economies to increase the supply of goods and services globally.
It is reflected in cheaper labour, but can also make capital cheaper if those fast industrialising countries have high savings rates.
But the real catch is a realignment of the prices of goods and services internationally, with most prices of manufacturing goods and services that had been the main outputs of the industrialised countries to fall.
That means a reduction in the real wages of labour in the industrialised countries. This is just the results of standard trade theories.
Unfortunately, the Americans had misjudged the challenges to them and took only the good side of the cheaper capital and finances of the rise of big developing economies.
That caused their bubbles and the global financial crisis and with it the great global economic recession.
In this regard, Bergsten has been one of the very few who have a clearer mind.
All people should now rethink about the challenges and opportunities associated with the rapid rise of big developing economies.
The Americans need to live within their means, or trade assets or accumulated wealth for current consumptions, which means they can still run current account deficits, but only with greater lower future consumptions.
The Americans (and also most other industrialised countries included unfortunately) will have to adjust to the new world economic reality with the rise of big developing economies to increase the supply of goods and services globally.
It is reflected in cheaper labour, but can also make capital cheaper if those fast industrialising countries have high savings rates.
But the real catch is a realignment of the prices of goods and services internationally, with most prices of manufacturing goods and services that had been the main outputs of the industrialised countries to fall.
That means a reduction in the real wages of labour in the industrialised countries. This is just the results of standard trade theories.
Unfortunately, the Americans had misjudged the challenges to them and took only the good side of the cheaper capital and finances of the rise of big developing economies.
That caused their bubbles and the global financial crisis and with it the great global economic recession.
In this regard, Bergsten has been one of the very few who have a clearer mind.
All people should now rethink about the challenges and opportunities associated with the rapid rise of big developing economies.
The Americans need to live within their means, or trade assets or accumulated wealth for current consumptions, which means they can still run current account deficits, but only with greater lower future consumptions.
2009-09-24
International public goods for poor countries' growth?
Comments on Andrew Elek “The G20 and enhancing the availability of international public goods”, 24/09/2009, http://www.eastasiaforum.org/2009/09/22/enhancing-the-availability-of-international-public-goods/
The development process is very complex and there are so many factors that can contribute to both the failures and successes of a country's development.
The statement "In a series of papers, Raghuram Rajan, former chief economist of the IMF, and I were unable to find any positive effects of aid on long-run growth but did find evidence consistent with some of the negative effects of aid in depressing manufacturing exports and worsening domestic institutions,’ does not necessarily prove that the proposed alternatives will be able to achieve better outcomes than what the world bank has done in the past.
Firstly, there is no surety that the findings of that study are correct, given the so many factors in play.
Secondly, if specifically targeted aids cannot achieve positive long run growth, how can one reasonably think that the proposed by increasing the provisions of public goods by international financial organisations will do a better job to promote long run growth? Weren't public goods available in the past? Why will new public goods be different?
The proposal will make the link between inputs and outputs/outcomes much more weak and less transparent. It is unbelievable that will work.
It is like to treat a particular disease, the specifically developed medicine is only effective to some patients but not all patients. Now let's try something different. How about using a medicine that is for general health to cure that particular disease?
Will that approach work? Few would agree, probably. At least conventional logic suggests it will not.
The development process is very complex and there are so many factors that can contribute to both the failures and successes of a country's development.
The statement "In a series of papers, Raghuram Rajan, former chief economist of the IMF, and I were unable to find any positive effects of aid on long-run growth but did find evidence consistent with some of the negative effects of aid in depressing manufacturing exports and worsening domestic institutions,’ does not necessarily prove that the proposed alternatives will be able to achieve better outcomes than what the world bank has done in the past.
Firstly, there is no surety that the findings of that study are correct, given the so many factors in play.
Secondly, if specifically targeted aids cannot achieve positive long run growth, how can one reasonably think that the proposed by increasing the provisions of public goods by international financial organisations will do a better job to promote long run growth? Weren't public goods available in the past? Why will new public goods be different?
The proposal will make the link between inputs and outputs/outcomes much more weak and less transparent. It is unbelievable that will work.
It is like to treat a particular disease, the specifically developed medicine is only effective to some patients but not all patients. Now let's try something different. How about using a medicine that is for general health to cure that particular disease?
Will that approach work? Few would agree, probably. At least conventional logic suggests it will not.
2009-09-11
On Dutch disease - a reply to Raghbendra Jha's comments
Comments on Raghbendra Jha’s reply to my comments on his article “India and the Copenhagen summit”, 9/09/2009, http://www.eastasiaforum.org/2009/09/04/india-and-the-copenhagen-summit/
You only mentioned the influx of foreign currency as capital inflow, you have not mentioned the need to use that foreign exchange to: 1. purchase the technologies and equipment necessary to reduce emissions without slowing economic growth, 2. to import other urgently needed technologies, capital goods and inputs by developing countries, 3. why can't a developing country use any foreign exchange to invest abroad, if appreciation is a concern?
The Dutch disease has been over blown out of proportions in many potential real scenarios. It partly reflects a poor understanding of economic development in its totality and to have only focused on effects of part of trade on exchange rate. It ignores so many things and is therefore is so incomplete to be used as a useful guide to economic development policy.
So I am afraid that the concern for appreciation is completely unnecessary and even unfounded. It is likely to reflect a poor understanding of the working processes of reducing emissions and the needs of many developing countries for more foreign currency to improve their economic conditions.
You only mentioned the influx of foreign currency as capital inflow, you have not mentioned the need to use that foreign exchange to: 1. purchase the technologies and equipment necessary to reduce emissions without slowing economic growth, 2. to import other urgently needed technologies, capital goods and inputs by developing countries, 3. why can't a developing country use any foreign exchange to invest abroad, if appreciation is a concern?
The Dutch disease has been over blown out of proportions in many potential real scenarios. It partly reflects a poor understanding of economic development in its totality and to have only focused on effects of part of trade on exchange rate. It ignores so many things and is therefore is so incomplete to be used as a useful guide to economic development policy.
So I am afraid that the concern for appreciation is completely unnecessary and even unfounded. It is likely to reflect a poor understanding of the working processes of reducing emissions and the needs of many developing countries for more foreign currency to improve their economic conditions.
2009-07-24
Water consumption and sustainable development in China
This is a short comment (in Chinese) on zhongwei1983062 "王则柯：应向供水地区发放干旱补贴", 24/07/2009, http://www.pinggu.name/space-578405-do-blog-id-16583.html
水资源消耗大，原因很多。既有这里提到的，也有其他原因。不可以偏盖全
比如说，产业结构不同，水的消费就不同。
几十年发展，有问题，也有成绩。有些是学费。可全面看。
发扬成绩，解决问题，不断改善。
可持续，和不可持续，都是相对的，没有一成不变的。某段时间内不可持续，之后改了就可以变为持续的。
过去不合理的甚多，现在还有。逐步解决。
原罪感应有，自豪感也应有，才好向前。
水资源消耗大，原因很多。既有这里提到的，也有其他原因。不可以偏盖全
比如说，产业结构不同，水的消费就不同。
几十年发展，有问题，也有成绩。有些是学费。可全面看。
发扬成绩，解决问题，不断改善。
可持续，和不可持续，都是相对的，没有一成不变的。某段时间内不可持续，之后改了就可以变为持续的。
过去不合理的甚多，现在还有。逐步解决。
原罪感应有，自豪感也应有，才好向前。
2009-07-21
Australia China economic relations and international order
Comments on Peter Drysdale “Weekly editorial – Stern Hu and the Chinese steel industry”, 20/07/2009, http://www.eastasiaforum.org/2009/07/20/weekly-editorial-stern-hu-and-the-chinese-steel-industry/
The recent world financial and economic crisis and the roles different economies have played in dealing with the challenges posed by the crisis suggest that the world is in a verge of a significant reshape of international economic order, or a new framework of economic governance.
Developing economies are increasingly having more economic weight or clout, while the relative weight of industrialised economies are on the decline. The relative shift of economic weight between the two camps and the current international institutions governing international economic affairs in which the past powers dominate the say requires reconciliation and realignment to reflect the changed and changing world reality.
In that broad context, it seems that the Australia China economic relations are a small part of it in a strange and interesting sense, i.e. equality (or inequality) and respect in dealing with each other.
The Stern Hu case has the feature of coincidence in that context, although many commentators and the public have made all sorts of speculations and comments, based on limited information and own systems of thinking. How much are correct and relevant remains to be seen for a long time.
The comments or demands by some politicians in Australia on the case reflect a deep rooted misunderstanding or contempt of another country and its system. That is where inequality and disrespect were shown and could be felt by others.
Of course, information through official channels was also strangely scarce. But it requires good analysis to see whether it was the beginning of a new process, or it was a response in a process.
But it is important for any new international economic order and governance to be fair to all, irrespective the past justice or injustice, equality or inequality, as well as sizes of the economy. It should be a new beginning to reflect universal justice and equality.
The international community needs to work in that direction, with great efforts and speed.
The recent world financial and economic crisis and the roles different economies have played in dealing with the challenges posed by the crisis suggest that the world is in a verge of a significant reshape of international economic order, or a new framework of economic governance.
Developing economies are increasingly having more economic weight or clout, while the relative weight of industrialised economies are on the decline. The relative shift of economic weight between the two camps and the current international institutions governing international economic affairs in which the past powers dominate the say requires reconciliation and realignment to reflect the changed and changing world reality.
In that broad context, it seems that the Australia China economic relations are a small part of it in a strange and interesting sense, i.e. equality (or inequality) and respect in dealing with each other.
The Stern Hu case has the feature of coincidence in that context, although many commentators and the public have made all sorts of speculations and comments, based on limited information and own systems of thinking. How much are correct and relevant remains to be seen for a long time.
The comments or demands by some politicians in Australia on the case reflect a deep rooted misunderstanding or contempt of another country and its system. That is where inequality and disrespect were shown and could be felt by others.
Of course, information through official channels was also strangely scarce. But it requires good analysis to see whether it was the beginning of a new process, or it was a response in a process.
But it is important for any new international economic order and governance to be fair to all, irrespective the past justice or injustice, equality or inequality, as well as sizes of the economy. It should be a new beginning to reflect universal justice and equality.
The international community needs to work in that direction, with great efforts and speed.
2009-06-03
Saving, consumption and investment relationships - GDP identities
Second comments on Mario Lamberte “Some positive consequences of the Global Economic Crisis”, 1/06/2009, http://www.eastasiaforum.org/2009/06/01/some-positive-consequences-of-the-global-economic-crisis/
This is my second comments on this article, but still a very brief one. I just make two quick points here. One is the different presentations of the GDP and the other is about trade and external shocks.
Firstly, the different presentations of the GDP identity. The following is two of the different measures of GDP:
C + I + G + E -M = Y = C + S + T + Rf
Where Rf is net transfer to other countries and all others are as their normal representations. (for a reference to the above identities, see http://www.econ.ilstu.edu/hmohamma/441/lectures/lecture_02.htm).
If one looks only at the right hand side, it is easy to be confused by the inevitable trade off between savings and consumption, a point made in that article. But if one looks at the left hand side, one can easily see that to address high propensity to save, it is not necessarily to increase consumption. Instead, an increase in investment can accommodate high savings. Indeed, in conventional cases, savings are generally equal to investment in a closed economy. So, if there are investment opportunities in an economy, to invest the savings can be an effective way and likely a better way than increasing consumption, especially when capital is comparatively scarce, as in most developing economies in Asia. That is way I found either myself is so dumb in unable to understand the point in the article, or the point in the article is so ill conceived to mention only the increase of consumption and little about investment to accumulate capital.
Secondly, the role of trade in a modern economy. Let’s have a look at the left hand side of the GDP identity above. What Lamberte was concerned is that exports, E may not be growing as fast as it had been prior to the current world economic crisis because the US and Europe are in serious trouble and the US will need to adjust its savings and consumption. As a result, the trade / current account balance may not contribute to economic growth for many Asian economies, so the argument went.
It is possible that may be the case for the foreseeable period in the near future. But it is by no means a completely foregone conclusion. The US needs to increase its savings, both private and public. But that may not necessarily mean that their absolute levels of consumption and government spending will always fall to realise that. It may be a long and slow adjustment process, in which private consumption and government may still rise but at a slower pace than its GDP. That is to say, the proportion of the net increase in GDP devoted to savings will be larger than its existing actual proportion, but there will still some left for an increase in consumption and government spending.
Second, trade with the US may still be able to expand even when the consumption in the US is not to increase but to stay constant or even fall. The requirement is an increase in the so called intra-industry trade. There is no requirement that economic growth is the necessary condition for trade expansion.
Third, assuming that the US has ceased to be an engine of the world economic and trade growth, then other economies may take a greater role in the expansion of world economic and trade growth. Yes, it would be nice if the US could indefinitely absorb exports of other economies, especially from Asian ones. But the pattern of the world economy has been changing and the contribution of the US to world economic and trade growth, though very important as it has been, has been on the decline and will continue to do so, and even at an increasing pace.
That itself does not equate to a call for the developing economies in Asia to increase their consumption to boost their growth. To the contrary, given the role of capital in economic growth and the relatively low levels of per capita physical capital in those developing economies, the most effective way seems to be to increase investment rather than to increase the proportions of consumption, for long term growth and catch up.
That is why I find it difficult to understand there are so may people, both economists or not, high ranking officials and advisers included, are calling for China and other Asian developing economies to increase their consumption to solve the so called international imbalance. Can’t we just simply have a look at the GDP identities and to have a sense of what is needed for economic development and catch up for developing economies? There are not too many variables there. Is that too difficult to do or comprehend? Why?
Let’s have a debate!
This is my second comments on this article, but still a very brief one. I just make two quick points here. One is the different presentations of the GDP and the other is about trade and external shocks.
Firstly, the different presentations of the GDP identity. The following is two of the different measures of GDP:
C + I + G + E -M = Y = C + S + T + Rf
Where Rf is net transfer to other countries and all others are as their normal representations. (for a reference to the above identities, see http://www.econ.ilstu.edu/hmohamma/441/lectures/lecture_02.htm).
If one looks only at the right hand side, it is easy to be confused by the inevitable trade off between savings and consumption, a point made in that article. But if one looks at the left hand side, one can easily see that to address high propensity to save, it is not necessarily to increase consumption. Instead, an increase in investment can accommodate high savings. Indeed, in conventional cases, savings are generally equal to investment in a closed economy. So, if there are investment opportunities in an economy, to invest the savings can be an effective way and likely a better way than increasing consumption, especially when capital is comparatively scarce, as in most developing economies in Asia. That is way I found either myself is so dumb in unable to understand the point in the article, or the point in the article is so ill conceived to mention only the increase of consumption and little about investment to accumulate capital.
Secondly, the role of trade in a modern economy. Let’s have a look at the left hand side of the GDP identity above. What Lamberte was concerned is that exports, E may not be growing as fast as it had been prior to the current world economic crisis because the US and Europe are in serious trouble and the US will need to adjust its savings and consumption. As a result, the trade / current account balance may not contribute to economic growth for many Asian economies, so the argument went.
It is possible that may be the case for the foreseeable period in the near future. But it is by no means a completely foregone conclusion. The US needs to increase its savings, both private and public. But that may not necessarily mean that their absolute levels of consumption and government spending will always fall to realise that. It may be a long and slow adjustment process, in which private consumption and government may still rise but at a slower pace than its GDP. That is to say, the proportion of the net increase in GDP devoted to savings will be larger than its existing actual proportion, but there will still some left for an increase in consumption and government spending.
Second, trade with the US may still be able to expand even when the consumption in the US is not to increase but to stay constant or even fall. The requirement is an increase in the so called intra-industry trade. There is no requirement that economic growth is the necessary condition for trade expansion.
Third, assuming that the US has ceased to be an engine of the world economic and trade growth, then other economies may take a greater role in the expansion of world economic and trade growth. Yes, it would be nice if the US could indefinitely absorb exports of other economies, especially from Asian ones. But the pattern of the world economy has been changing and the contribution of the US to world economic and trade growth, though very important as it has been, has been on the decline and will continue to do so, and even at an increasing pace.
That itself does not equate to a call for the developing economies in Asia to increase their consumption to boost their growth. To the contrary, given the role of capital in economic growth and the relatively low levels of per capita physical capital in those developing economies, the most effective way seems to be to increase investment rather than to increase the proportions of consumption, for long term growth and catch up.
That is why I find it difficult to understand there are so may people, both economists or not, high ranking officials and advisers included, are calling for China and other Asian developing economies to increase their consumption to solve the so called international imbalance. Can’t we just simply have a look at the GDP identities and to have a sense of what is needed for economic development and catch up for developing economies? There are not too many variables there. Is that too difficult to do or comprehend? Why?
Let’s have a debate!
2009-05-22
A rapidly changing economic landscape of the world
Second comment on Ryo Sahashi “A three-tier approach to Asian regional architecture”, 20/05/2009, http://www.eastasiaforum.org/2009/05/20/a-three-tier-approach-to-asian-regional-architecture/
This is my second comment on this article. In this I will focus on a point regarding economic matters, as evident from the following excerpt from this article:
[Economically, the U.S., Japan, and other advanced economies - including EU countries - will maintain their global dominance, and their relatively strong position vis-à-vis newly emerging economies like China and India will continue for the foreseeable future.
It is unlikely that China and India (and possibly Russia) will form their own international institutions to provide an alternative for the established ones. It is important to keep a coalition of advanced economies in rule-based international institutions.]
While it is true that the US, Japan and the EU are now still world largest economies both individually and as a whole, the rise of some large developing economies is causing rapid changes to the world economic landscapes, with shifting in geoeconomic powers. The current financial and economic crisis is accelerating those changes. If anyone has any doubt about this, the G20 meeting in London in April can be a case study for people to derive some useful insights and helpful conclusions. It is not too difficult to see that the argument of “their global dominance, and their relatively strong position” of the US, Japan and EU is no longer necessarily correct.
Further, the trends of the relative shift of economic powers seen in the past decade or so will accelerate to an unprecedented degree over the coming decade, as the inevitable readjustments of large international imbalances between the US and some other countries in the wake of this world wide economic crisis. There are profound economic implications from these adjustments. The US is likely to see a lengthy period of slower growth with possibly higher inflation.
While this could, on the other hand, be a potential threat to some of the rapidly rising developing economies, some of them have advanced to such a degree that they can adjust their economic structure to accommodate their higher saving rates through channelling savings to more rapid capital accumulation. This may not be very easy and should take some time, but the result will be more rapid growth and faster shrinking of the gaps between the now advanced and developing economies.
Besides, an important consequence of the current crisis is that the authorities in many countries have to increase government deficits and debts to try to get the economies up and going again. The burdens of increased government debts are likely to be heavier in the US, Japan and the EU, relative to some of the rapidly rising developing economies. Efforts to reduce government deficits and debts will dampen the economy, further constraining its growth in the medium term. This headache is likely to persist in some advanced economies for some time to come.
Whether there is a need for the large and more rapidly growing developing economies to form their own international institutions to provide an alternative for the established ones is an open question. However, the existing main international economic institutions such as the IMF and the World Bank are likely to experience significant changes in their governance and approaches. Like it or not, the representations of developing economies in those institutions will strengthen at the expenses of the existing heavily represented advanced countries. This is not a rivalry between the advanced and developing countries, but simply a reflection of the new reality. The existing structure of governance simply cannot work effectively any more.
To conclude, the economic dominance of the three major advanced regions internationally will disappear at a frightening speed, if that has not happened already. The coalition of advanced economies is no more than a wishful thinking. Countries, advanced and developing alike, will seek every opportunity to advance their own economies. In that process, the more dynamic developing economies are more attractive than semi-stagnant ones. That is the beauty of evolution and human beings will continue to seek beauty and love beauty, among the laments and the noises of wingy from some minds who may feel the world is changing too fast for them to cope.
This is my second comment on this article. In this I will focus on a point regarding economic matters, as evident from the following excerpt from this article:
[Economically, the U.S., Japan, and other advanced economies - including EU countries - will maintain their global dominance, and their relatively strong position vis-à-vis newly emerging economies like China and India will continue for the foreseeable future.
It is unlikely that China and India (and possibly Russia) will form their own international institutions to provide an alternative for the established ones. It is important to keep a coalition of advanced economies in rule-based international institutions.]
While it is true that the US, Japan and the EU are now still world largest economies both individually and as a whole, the rise of some large developing economies is causing rapid changes to the world economic landscapes, with shifting in geoeconomic powers. The current financial and economic crisis is accelerating those changes. If anyone has any doubt about this, the G20 meeting in London in April can be a case study for people to derive some useful insights and helpful conclusions. It is not too difficult to see that the argument of “their global dominance, and their relatively strong position” of the US, Japan and EU is no longer necessarily correct.
Further, the trends of the relative shift of economic powers seen in the past decade or so will accelerate to an unprecedented degree over the coming decade, as the inevitable readjustments of large international imbalances between the US and some other countries in the wake of this world wide economic crisis. There are profound economic implications from these adjustments. The US is likely to see a lengthy period of slower growth with possibly higher inflation.
While this could, on the other hand, be a potential threat to some of the rapidly rising developing economies, some of them have advanced to such a degree that they can adjust their economic structure to accommodate their higher saving rates through channelling savings to more rapid capital accumulation. This may not be very easy and should take some time, but the result will be more rapid growth and faster shrinking of the gaps between the now advanced and developing economies.
Besides, an important consequence of the current crisis is that the authorities in many countries have to increase government deficits and debts to try to get the economies up and going again. The burdens of increased government debts are likely to be heavier in the US, Japan and the EU, relative to some of the rapidly rising developing economies. Efforts to reduce government deficits and debts will dampen the economy, further constraining its growth in the medium term. This headache is likely to persist in some advanced economies for some time to come.
Whether there is a need for the large and more rapidly growing developing economies to form their own international institutions to provide an alternative for the established ones is an open question. However, the existing main international economic institutions such as the IMF and the World Bank are likely to experience significant changes in their governance and approaches. Like it or not, the representations of developing economies in those institutions will strengthen at the expenses of the existing heavily represented advanced countries. This is not a rivalry between the advanced and developing countries, but simply a reflection of the new reality. The existing structure of governance simply cannot work effectively any more.
To conclude, the economic dominance of the three major advanced regions internationally will disappear at a frightening speed, if that has not happened already. The coalition of advanced economies is no more than a wishful thinking. Countries, advanced and developing alike, will seek every opportunity to advance their own economies. In that process, the more dynamic developing economies are more attractive than semi-stagnant ones. That is the beauty of evolution and human beings will continue to seek beauty and love beauty, among the laments and the noises of wingy from some minds who may feel the world is changing too fast for them to cope.
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