China on the home stretch

When I started studying economics (1973) you’d read stories about how China’s per capita GDP was about $100.  Then a few years later it would be $200, then $400, then $800, then $1600, then $3200, then $6400.  Some of that is inflation, but you get the idea.

Now the IMF has China at about $10,000 and the World Bank says $12,000.  In comparison, places like Japan, France and Britain are all around $36,000.  China is 2 more doublings away from being a rich country.  This tells me that the next two decades will be crucial.  One of two things will happen, either of which would dramatically affect China:

1.  China quickly becomes rich (and probably democratic.)

2.  More likely, China’s growth slows dramatically.   They still become rich, but it takes more than 2 decades.

Westerners often frame this issue in terms of politics.  Will China become democratic or will the Communist Party hang on to power?  Why does it have to be an either or choice?  Singapore seems to be the model for many Chinese policymakers, and in that country the quasi-dictatorship keeps winning elections as the political system becomes increasingly democratic.  This is probably the long term goal of China’s leaders (although I’m not at all confident they will succeed.)

Tyler Cowen linked to an excellent essay that discusses how economic forces are pushing the government toward a shift in the economic model.  Michael Pettis has been talking about this problem for years.  The old model simply won’t work much longer. After reading the first link, consider the political angle discussed in this news story:

President Xi Jinping told top officials he was disregarding “life, death and reputation” to fight corruption in a terse speech signalling a possible dispute and doubts among party elites over the campaign.

An official mainland newspaper and a person familiar with the matter confirmed the president’s statement.

Xi was believed to have made the remark in a closed-door Politburo meeting on June 26, the details of which were publicly revealed only when the city newspaper Changbaishan Daily on Monday reported that local officials received instructions from the president.

“[I] had left life and death, as well as my personal reputation, out of consideration in the combat against corruption,” Xi said, according to Changbaishan city’s party chief, Li Wei.

Li said the top leadership’s remarks emphasised a sense of crisis, and some of the words were “shockingly” sharp and harsh. However, he did not provide more details.

.  .  .

The Changbaishan Daily also said that Xi urged graft busters to focus on four types of officials: those who are strongly opposed by the public; those who have not restrained themselves after the party’s 18th congress in 2012; younger cadres in key positions; and those who might potentially take on more important roles.

The daily’s article was soon deleted from the website as some internet operators said they received a gag order from propaganda authorities.

A person familiar with the president’s speech told the South China Morning Post earlier that Xi made the strongly worded speech to the Politburo to counter some critics and silence doubts against his anti-corruption campaign.

Xi warned the party elites that nothing would be off limits in his anti-graft drive, the person said.

The president also rebuked the “school of thought” that the relentless drive against errant officials would only plunge the country in chaos and that Xi, in the end, would “eat humble pie”.

According to the person, Xi retorted: “What is there to be scared of?”

Zhang Ming, a political scientist at Renmin University in Beiing, said the remarks showed the anti-corruption campaign had certainly threatened some interest groups in the upper echelons.

“The combat between Xi and the interest groups has been white-hot and Xi also realised that [it] is make or break,” he said.

I think the best way to read this is not to focus on the veracity of Xi’s claims, but rather the purpose that is being served by this statement.  Especially by the fact that it was published.  It seems pretty obvious that Xi is much more of a politician that Hu Jintao, everyone agrees on that point.  My impression from talking to Chinese people is that Xi’s anti-corruption campaign is very popular. There’s a lot of resentment at the lavish lifestyle of corrupt officials.  Westerners often view China as being “corrupt”, but it’s also worth noting that Chinese culture puts a lot of emphasis on the importance of merit.  As we’ve seen in Singapore, Chinese culture is also consistent with a strikingly non-corrupt bureaucracy, a meritocracy.  In a political sense, China is up for grabs.  As an analogy, both North and South Korea are in some sense embodiments of “Korean culture.” Ditto for Mao’s China and capitalist Taiwan.  Culture is surprisingly plastic in some dimensions, less so in others.

China will probably start moving toward democracy long before it becomes democratic in the Western sense. It seems to me that Xi’s speech should be viewed as a sort of campaign speech, trying to position the Communist Party, or at least his wing of the Communist Party, in the way that Lee successfully positioned the ruling party in Singapore.  If there is to be a battle, Xi wants the public on his side, especially the 90 million members of the Communist Party (most of whom are average urban residents.)

PS.  Tyler also linked to a review of a book on Chinese minorities, which seemed somewhat misleading to me:

Thousands of Western tourists visit the temples of Tibet, the spice markets of Xinjiang and the lush jungles of Yunnan each year. David Eimer did, too, repeatedly, over the past decade, but he had a larger purpose in mind: to investigate the nature of Chinese rule in the restive border regions where its 55 ethnic minorities live.

Those minorities number more than 100 million but as a group are all but invisible to the outside world, their situation complicated by the seeming paradox of being citizens of China without being part of the Chinese people.  .  .  .

Because Mr. Eimer is not bound by diplomatic or journalistic niceties, he can be blunt in the terminology he uses. To him, China is not so much a state or a nation as a “huge, unwieldy and unstable empire,” with the Han in the dominant position that the Austrians, Turks or English once enjoyed in empires now vanished. Uighurs and Tibetans, consequently, are peoples resisting “the colonization of their country,” that last word being one Beijing abhors and considers an expression of “splittism.”

It’s hard to think of a worse comparison for China than the “English” empire.  First a few numbers. Of the 105 million minority population in China, 6.3 million are Tibetan and 10 million are Uyghurs.  That’s slightly over 1% of China’s population.  These are the two groups that one can at least imagine might form independent countries some day (although I doubt it.)  The rest tend to live in eastern China, in provinces where the Han population is larger than the minority population.  Even Yunnan province is 67% Han.  The other groups are not pushing for independence, and it seems inconceivable to me that any majority Han province would ever break away from China.

If you look at a map of China by ethnicity, the Tibetans are a particularly interesting group. Although not at all numerous, they occupy an enormous region spanning several different provinces.  Almost all of Qinghai is Tibetan, as is the entire western half of Sichuan.  Yet they have 1.5% of Sichuan’s population.  If you add in Xinjiang, (where the Uyghurs are concentrated) you are basically talking about the entire western third of China.   (China is roughly the size of the US, including Alaska.)  That’s a big region, and it helps explain why the issue is so sensitive to the Chinese.  Terrorism in Xinjiang is a rapidly growing problem for China.  The province is 43% Uyghur and 41% Han, to give you a sense of how difficult the ethnic situation would be to resolve. Think Northern Ireland, or Israel/Palestine, or some other chronic trouble spot, not British Empire.

A better analogy for China (in terms of demographics, not human rights) would be Canada, where there are lots of indigenous people in the vast, thinly populated north, or the US, or Brazil, or Australia.  But none of those 4 countries has a large indigenous muslim population. The human rights abuses currently taking place in China can (hopefully) be fixed over time.  But I’m not at all sure that would make the Tibetan and Uyghur issues go away.  Xinjiang is nothing like India, where the British could just walk away.

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41 Responses to “China on the home stretch”

  1. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    6. August 2014 at 09:04

    ‘Corruption’ in Commiespeak means capitalistic acts between consenting adults. I.e. the people who accomplish things. Like Pacific Construction Group’s Yan Jiehe;

    ‘The company pays salaries five times those of its competitors and ferries its execs in a fleet of black Mercedes-Benzes. “The key difference between private companies and SOEs isn’t low-level workers,” says Xuan Xiaowei, an expert on SOEs at China’s Development Research Center. “The key is the upper-level workers. The culture is different””how they promote. SOE culture is a bureaucracy.”’

    The guy moves mountains. Literally;

    ‘3,000 machines and 6,000 workers moved 100 million cubic meters of dirt, hauling the tops of mountains to fill the ravines, says Pacific’s director “¨of projects in the region, Xu Shengmei, who hails from Yan’s hometown.

    ‘For years the government had wanted to raze Lanzhou’s surrounding mountains. Part of the reason was to relieve pollution; the hills hemmed in the city’s thick, sooty air. A more pressing concern, though, was to create new living space in a city that is nearly as congested with high rises as Shanghai. A number of SOEs tried and failed to decapitate the mountains in the ’90s. Funding always seemed to dry up. When Lanzhou’s government resurrected the idea recently, estimating that another 1 million residents would move into the city of 3.9 million over the next five to 10 years, Pacific was the only company willing to take on the challenge.’

  2. Gravatar of AbsoluteZero AbsoluteZero
    6. August 2014 at 09:33

    Scott, good observations, on all counts.

    Completely agree with your interpretation of Xi’s speech. (And very glad you link to the SCMP article. Just curious, is that a regular source for you?) The key is it was published. What many people in the West don’t seem to realize is the top guys in China do campaign. Within the party there is an obvious, technical need, but they also do it with the general public, particularly at key junctures. This is one, actually rather obvious, example.

    Also: “China will probably start moving toward democracy long before it becomes democratic in the Western sense.” Very good way to put it.

    Agree that comparing China to the “English” empire is not appropriate. In fact, I can easily imagine some Chinese people finding such a comparison offensive.

  3. Gravatar of am am
    6. August 2014 at 09:56

    I hope the poster quoted recognised that the fight against corruption in China is to ensure the survival of the party.

    Den realised economic progress was required to prevent a revolution against the Party. Progress against corruption is much the same and Xi knows it.

  4. Gravatar of Edward Edward
    6. August 2014 at 10:21

    Matthew Yglesias has an interesting article Scott,
    Your thoughts?

  5. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    6. August 2014 at 10:31

    Maybe Yglesias should spend a little time thinking about the maximum wage policy of the NCAA.

  6. Gravatar of Gabe Gabe
    6. August 2014 at 10:42

    Surprised to see such dogmatic adulation of “democracy”. Democracy is just an alternative tool of control for the elite. The rapid economic growth in america took place due to individual freedoms and a strong dislike of regulation and big government.

    The worship of “Democracy” has helped provide the back door for the corrupt elite to gradually creep in and destroy the golden goose(individual freedoms and free markets) and replace it with a big brother/war machine leviathan.

    Our two parties are controlled by the same elite forces just as effectively as the elections in the USSR were controlled. In fact it works better(for the corrupt elite) here because much of the population is fooled into thinking they have a “choice”.

  7. Gravatar of Benny Lava Benny Lava
    6. August 2014 at 11:52

    Interesting. I am particularly curious as to how a democratic transition will play out in China. What if it doesn’t?

  8. Gravatar of Kevin Erdmann Kevin Erdmann
    6. August 2014 at 12:03

    That Yglesias piece was actually kind of persuasive.

    I think we should start, though, with the rain forests. If you think about it, there is a sort of arms race for height. There are a lot of trees wasting a lot of resources to capture the most sunlight, with the obvious negative externality that they cast shade on the forest floor below. It’s a lot of resources going to a zero sum game.

    So, let’s set a maximum height on the rain forest. Maybe instead of those tall trees, we’ll get some more bushes, with lots of positive externalities – places for cute little critters to hide, etc. The trick is to set the height just right so that you get rid of that pesky upper canopy but you don’t cut away the lower canopy.

    Yes, this will lead to fewer plants and animals. But, we need to get away from this dogma that ecosystems are about creating the most life. They should be about allowing the right kinds of life. And we now have research about which species are good and which are bad.

  9. Gravatar of ssumner ssumner
    6. August 2014 at 12:14

    Thanks Absolute zero.

    Edward, I’m opposed to MTRs beyond the point where revenue maxes out. I’m also opposed to MTRs at the maximum revenue point.

    Gabe, Not sure which post you are commenting on . . .

    Benny, There is no “if”, it’s “when.” All countries will eventually be democratic.

  10. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    6. August 2014 at 12:23

    By 2015 or 2016, China will overtake Romania and Bulgaria on GDP per capita terms. Both Romania and Bulgaria are EU members.

  11. Gravatar of Brett Brett
    6. August 2014 at 12:33

    I think whether China gets to the “Japan” level or beyond depends on how competitive and innovative their domestic market is. When it comes to economies, it helps to either be a city-state or a big country – city-states can benefit from easier governance and benefits of density of skill/knowledge, while big countries can fuel growth off of their internal market to avoid getting in trouble when the Export Led Industrialization model stops producing gains provided that their internal markets remain competitive.

    Not so convinced that Xi is going to get more than symbolic gains out of his anti-corruption campaign. It’s an authoritarian regime, which means you fundamentally have to keep your military and civilian supporters appeased somehow – and China’s done that until now by buying off Party Members with special positions and privileges in the government and SOEs.

  12. Gravatar of Steve Steve
    6. August 2014 at 13:20

    It’s strange that Yglesias would write an column titled “The Case For A Maximum Wage” when the entire substance of the column favored an additional higher income tax bracket at super-high income levels. He even admitted that this tax bracket must exclude capital income. Almost reasonable!

  13. Gravatar of Steven Kopits Steven Kopits
    6. August 2014 at 15:13

    The best I’ve read on China:

  14. Gravatar of Saturos Saturos
    6. August 2014 at 18:12

    One day I hope to understand what your meaning of culture is and how it constrains prediction.

  15. Gravatar of Lorenzo from Oz Lorenzo from Oz
    6. August 2014 at 18:36

    Steven Kopits. You did not check Scott’s link, did you? That was the piece he linked to first.

  16. Gravatar of LC LC
    6. August 2014 at 18:58

    Good observations Scott.

    As someone who has spent considerable amount of time in Xinjiang (born and raised there, in fact), I can tell you the situation is not as black and white as the press and these “travelogues” make out. There are lots of Han and minority cooperation when needed as well. After all, sometimes survival depends on it.

    Second thing about the review that bothered me was the mention of Manchus as a disappeared group. Nothing could be further from the truth. It’s not the Chinese who oppressed Manchus, but the Manchus who ruled China wanted to be more Chinese like and made every effort to be perceived Chinese. In the process, they gradually lost their language root. If you go to National Palace Museum in Taipei and look at the calligraphy (in Chinese) and paintings of Qing Dynasty emperors, they are some of the best in history of China.

    Third thing that bothers me about this review and the recent Obama comments is they paint a picture of China as “fragile”. This is an invention of Communist party to serve their needs. China as a nation is as strong as any in the world. Just witness last 200 years, through defeats in wars, tyranny, civil war, China stayed together. The identity of China got stronger. We shouldn’t push the notion of a fragile China. We need to remind Chinese they’re strong and can handle anything, including a rocky transition to free market and vibrant democracy.

  17. Gravatar of Lorenzo from Oz Lorenzo from Oz
    6. August 2014 at 19:25

    Gabe: the long term trajectory in the West has been the story of the bargaining state. Democracy is just the widest ambit of bargaining, an outcome of needing to mobilise a wide level of political support. And the Western bargaining state is not smaller than that in other civilisations, it was orders of magnitude bigger and has been for centuries–in 1800, Britain (pop. 300m).

  18. Gravatar of Lorenzo from Oz Lorenzo from Oz
    6. August 2014 at 19:26

    Gabe: the long term trajectory in the West has been the story of the bargaining state. Democracy is just the widest ambit of bargaining, an outcome of needing to mobilise a wide level of political support. And the Western bargaining state is not smaller than that in other civilisations, it was orders of magnitude bigger and has been for centuries–in 1800, Britain (pop. less than 20m) had the same number of officials as Qing China (pop. more than 300m).

  19. Gravatar of Lorenzo from Oz Lorenzo from Oz
    6. August 2014 at 19:27

    Sorry for the double post, unexpected HTML invocation cut some crucial bits out.

  20. Gravatar of Lorenzo from Oz Lorenzo from Oz
    6. August 2014 at 19:43

    On the anti-corruption drive, this is Mancur Olson meets ibn Khaldun. Corruption not only dissipates popular support, it also dissipates central control in local collusion networks (see Mancur Olson’s last book). This is an old pattern in Chinese history. Indeed, there is a rather nice paper by TH Sng on the dynastic decline cycle as principal-agent problem.

    Leninist regimes, like (as it happens) Islamic regimes, preach worldly salvation. Which makes them prone to the ibn Khaldun cycle of rise and decline–the Soviet Union went through it in a mere 74 years. A pattern you can trace through its leaders:
    First, a group bound by common feeling (asabiyyah) seizes power (Lenin 1917-1924). Then the ruler separates himself from the original group to entrench his own power (Stalin 1924-1953). Then the regime slowly decays as group solidarity fades and corruption erodes social resilience and regime power (Khruschev, Brezhnev, Andropov, Chernenko 1953-1985). Until the regime finally collapses (Gorbachev 1985-1991).

    (I have a recent post on this at my website. )

    Endemic corruption is the thing which brings down Chinese dynasties. And, as it happens, command economies. (Something else is the trigger for collapse, but endemic corruption is what makes the regime ready to collapse.)

    One wit described contemporary Chinese politics as the Communist Party trying to become the Kuomintang while the Kuomintang tries to become the DPP. Well, yes, but targeting corruption specifically is a good move.

    A word of caution for President Xi, however. Egypt’s Mubarak regime was brought down because the economic reformers under Mubarak Jnr started targeting the Egyptian Army’s corporate empire. So, the Army (temporarily) switched sides, long enough to convince the business elite who was less of a problem, the army or the Islamists.
    President Xi better be sure that any anti-corruption drive in the Army is not seen as a general threat by the generals (or else be very confident of his control thereof).

  21. Gravatar of Ben J Ben J
    6. August 2014 at 19:50

    Patrick R Sullivan,

    Matt Yglesias has written at length about how the NCAA’s refusal to compensate the people that are forced to work for it is morally bankrupt. I’m not sure what point you are trying to make.

  22. Gravatar of Benjamin Cole Benjamin Cole
    6. August 2014 at 21:57

    I hereby rebuke Scott Sumner!

    Once again, Sumner writes about China, its economic progress, its economic outlook–and does not mention the People’s Bank of China!

    The People’s Bank of China now has a 4 percent inflation target. It has had moderate inflation targets of many years.

    How is it one of the Founding Fathers of Market Monetarism—Sumner—does not note that the PBoC has not suffocated its economy, ala the Bank of Japan, or the current ECB, or the Fed?

    The Hong Kong Monetary Authority has stated that the PBoC “has a revealed preference for growth.” Duh.

    No doubt, China’s heavy infrastructure spending is key, no doubt a work ethic is key, and a strong Han culture is key. But the PBoC is key too. Japan has infrastructure spending, a work ethic and a strong culture too. But it had a lousy central bank.

    The Han Chinese are one of the world’s great and imperialist ethnic groups, usually by migration and slow annexation and mixing with contiguous territories. This had been going on for hundreds, if not thousands of years.

    I wonder too if the Han form of imperialism always conforms to stereotypes. For example, it is known that the Silk Road was manned by Caucasians in centuries past, and that Genghis Khan is said to have had red hair and green eyes. Somewhere along the line the race changed, and not by fire.

    It could be that men along the Silk Road and Genghis Khan took Han wives. Repeat that process for just a few generations….

    But I sense that inter-marriage solution is not in the making for Tibet, as Han women do not like to marry Tibetans. Tibet should probably become an autonomous state. Why China is wasting so much energy on Tibet…but then, the USA wasted how much on Afghanistan?

    The gropings of an empire are not always sensible….

  23. Gravatar of TravisV TravisV
    7. August 2014 at 03:26

    Benjamin Cole,

    Are you saying I should short the S&P 500 and buy Chinese stocks? 🙂 🙂

  24. Gravatar of Benjamin Cole Benjamin Cole
    7. August 2014 at 03:57


    Hey, EMT and all that and I don’t know.

    But, warning: In a little-noticed story, it was reported in the NYROB a few years back that the Chinese Communist Party retains control of all Chinese companies, even ones listed on public exchanges. They do this through voting stock and board seats.

    Maybe this makes Chinese stocks ultimately bulletproof. The CCP will just direct business to favored companies. The Chinese stock market has been squishy for a while however.

    If I could, I would invest in a resort favored by mainland Chinese, or buy a bar in such a place. Chinese will been resorting and traveling in huge numbers in years ahead. Any place you see Chinese buying property is probably a good place to buy land. Perth Aussie, Vancouver etc.

  25. Gravatar of Nick Nick
    7. August 2014 at 04:13

    There are many ways to capture return from growth in china. The term ‘Chinese stocks’ is misleading there’s such a variety … A shares, shanghai / Hong Kong traded equities, and of course US listed companies like Wynnd Resorts. Anyway, even if you spread your money out across a wide variety of Chinese equity exposure a very large part of your return is going to depend on how the exchange rate evolves. I’m not sure you want to throw an s+p short on top of all that 😉

  26. Gravatar of Becky Hargrove Becky Hargrove
    7. August 2014 at 04:46

    Your explanation of democracy as bargaining power is most helpful.

  27. Gravatar of ssumner ssumner
    7. August 2014 at 06:11

    Saturos, You asked:

    “One day I hope to understand what your meaning of culture is and how it constrains prediction.”

    I predict that in 50 years North Korea will be much richer than Afghanistan and Haiti, for cultural reasons.

    LC, Good point. I’d add that China is one of the least expansionist of all the great powers in world history. The US gets hysterical about the Chinese claiming a few tiny islets in what even US maps call the “South China Sea.”

    Lorenzo, Excellent comments, as usual.

    Ben, You said:

    “No doubt, China’s heavy infrastructure spending is key, no doubt a work ethic is key, and a strong Han culture is key. But the PBoC is key too. Japan has infrastructure spending, a work ethic and a strong culture too. But it had a lousy central bank.”

    None of those factors are key in my view. The main reason China is growing fast is that it is gradually giving up communism. Japan can’t do that, because it was never communist. Japan couldn’t grow fast even if it had a higher inflation target, except for a brief period.

  28. Gravatar of LC LC
    7. August 2014 at 07:27

    Thanks Scott, but in my opinion, the “South China Sea” is geopolitics between 2 powers, US and China. US does have some valid points, but US is failing to see that most of Chinese moves is targeted toward US, i.e. somewhat similar move as “Monroe Doctrine” to exert one’s (superior) influence in some corner of world. I don’t pretend to understand all the motives and behind the scene moves, but Peter Lee has some interesting interpretations of the dynamic.

  29. Gravatar of ChargerCarl ChargerCarl
    7. August 2014 at 07:51

    “LC, Good point. I’d add that China is one of the least expansionist of all the great powers in world history. The US gets hysterical about the Chinese claiming a few tiny islets in what even US maps call the “South China Sea.”

    huh? do you also think Mexico owns everything in the “Gulf of Mexico” too or something?

    Chinese claims are pretty damn provocative if you ask me. They practically claim the shores of Brunei:

  30. Gravatar of Major.Freedom Major.Freedom
    7. August 2014 at 09:25

    Democracy is often presented as a social system that is “susceptible” to corruption. What is corruption? The phenomena most commonly referred to when people talk about corruption is the “abuse” of political power by government officials to “illegitimately” enrich themselves.

    The words in quotes are crucial. Abuse of political power implies there can be non-abusive uses of political power. Government officials illegitimately enriching themselves implies there can be legitimate enriching of themselves.

    What are non-abusive uses of political power that legitimately enrich government officials? If we do not assume the circular logic notion that as long as the democratic process is followed there can be no corruption by definition, and instead discern and realize a superior standard external to all politics, including democracy, to really understand what democracy is through constrasting and comparing with that external standard, then what can we learn?

    One thing we can learn about democracy is that there are no non-abusive uses of political power and there are no legitimate enriching of government officials. Democracy is, in other words, inherently and structurally corrupt.

    Lorzenzo, you explained, I think on the face of it satisfactorily, the collapse of the Soviet Union due to what you are implying was corrupt from the start. A small group of people seizing power, followed by the highest powers distancing themselves from the group, followed by collapse.

    You of course are using an external standard to make the judgment that thw USSR was corrupt from the first. The standard you are using is of course democracy. The uses of political power by the communists was “abused” from this standard. The enriching if themselves was “illegitimate” from this standard.

    Are we trapped into using only other political systems as the standard to judge whether there is corruption, illegitimate enriching of politicians, and abuses of power in a given political system? Of course not! We can use the standard that you and your colleagues here use with each other on this blog, the same standard you use with your family. That standard is individual private property. It isn’t dogmatic or unrealistic. It is what the overwhelming bulk of the population understand and utilize in their actual lives. The only ones who don’t use it are the relatively small group of people you call government.

    From the standard that you use with Sumner and others on this blog, democracy is inherently corrupt. Imagine if all the regular commenters here voted by majority vote to take your house, or order you at gunpoint to stop producing X and instead produce non-X, and to give us a portion of your income that we decide. You and everyone here would consider that inherently abusive and inherently illegitimate enriching. Yet in the context here, it was democratic. Would those same occurences against you be any less abusive or illegitimate if there were simply more of us? Of course not again! Violence and corruption do not become peace and legitimacy if it used by more people than who don’t. The US was never meant to be a democracy by the way. It was meant to be a constitutional republic. This was to better safeguard the minority from the majority. It was flawed of course, because it sanctioned illegitimate violence from the start.

    All democracies in history have eventually collapsed. Not because they were non-corrupt from the start and only after became corrupt. It was because they were always corrupt, and it was only a matter of time before the corruption grew and overwhelmed.

    The US is highly corrupt, much more now than during its founding. It is not a coincidence that the corruption only kept growing from the start, and significantly accelerated from the democratic ideology of the “progressive era”, and since the US has been the sole world power, the inherent corruption of democracy unshackled has exploded.

  31. Gravatar of ssumner ssumner
    7. August 2014 at 09:30

    LC, Yes, there is a lot of politics involved.

    ChargerCarl, If I had to choose between China and Brunei, I’d give those little islands to China. I’m not saying they have an open and shut case, but they have as much right to them as anyone else. In any case, it’s a minor issue.

  32. Gravatar of benjamin cole benjamin cole
    7. August 2014 at 15:56

    Re China: Giving up communism is key too. Structural impediments are important.

    But the MM perspective should include a well-managed central bank when discussing China’s success. That is MM’s addition to the conversation.

  33. Gravatar of Lorenzo from Oz Lorenzo from Oz
    7. August 2014 at 17:13

    Becky: It is a perspective that has been bubbling up in a quite a lot of scholarship over the years. Yoram Barzel has published a thought-provoking paper on it, using English history as the benchmark.

    Charles Tilly’s 1992 Coercion, Capital and European States AD 990-1992 also looks at things from that sort of perspective

    A 2011 paper examines the representative/parliamentary and authoritarian paths for state formation in Europe, so applying the Tilly dichotomy.

  34. Gravatar of Lorenzo from Oz Lorenzo from Oz
    7. August 2014 at 20:58

    The map of where ethnic minorities are–out on plains or highlands–invokes James C Scott’s The Art of Not Being Governed where ethnic identities are protean to political/ecological boundaries about who is, or is not, controlled by agrarian states.

    Thus “Miao” who remain in the lowlands within range of the tax collector become “Han” while “Han” who flee the state into the mountains become “Miao”.

  35. Gravatar of ssumner ssumner
    8. August 2014 at 04:40

    Ben, My fear is that people would assume I’m saying that if only the Japanese had a good central bank, they too could grow at 7%.

    Lorenzo. Interesting. Is the Han/Miao example a real one or a hypothetical?

  36. Gravatar of benjamin cole benjamin cole
    8. August 2014 at 16:05

    Well, that is an interesting question how quickly a developed economy can expand. Another interesting question is how quickly China would have expanded if it had had a central bank dogmatically committed to a zero inflation rate.

  37. Gravatar of Lorenzo from Oz Lorenzo from Oz
    9. August 2014 at 12:18

    At least in part real. (That is to say, there likely were Miao and Han originally, it just that the boundary is permeable over the long term.)

    Scott’s book (from which I take this) has further and better particulars.

  38. Gravatar of Lorenzo from Oz Lorenzo from Oz
    9. August 2014 at 12:36

    I am just using the Miao and the Han as an examples, Scott argues (on the basis of a lot of supporting scholarship) that it has been a general pattern ever since agrarian states developed.

  39. Gravatar of Lorenzo from Oz Lorenzo from Oz
    9. August 2014 at 18:09

    To put it another way, over the longer term and in aggregate, ethnic memberships are ways of managing ecological boundaries so as to resist the taxation and conscription efforts of states (plus disease outbreaks in the farmed lowlands).

    Culture as endogenous to rational choice.

  40. Gravatar of ssumner ssumner
    10. August 2014 at 06:55

    Ben, I think China would have still grown fast with a zero inflation rate, because inflation doesn’t matter. They could have had 10% NGDP growth and 0% inflation.

    Lorenzo, Very interesting.

  41. Gravatar of TravisV TravisV
    11. August 2014 at 06:55

    Is China’s monetary policy easing? See new stories below:

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