The collapse of the collapse theory
A video link to the article can be found here: https://youtu.be/_CQ-4flcqb4
Western economists keep getting it wrong. The “collapse of China” has been around for years. Books have been written, articles have been published and videos have been produced for at least 20 years and keep being reiterated and always for different reasons.
James A Robinson suggests it’s because people aren’t free
Peter Zeihan suggests its because of the ageing population, oh and he believes the only reason China has grown strong is because of the “freedoms and protections” offered by the US navy, when they stop protecting the waters around China, China will collapse for different reasons.
Gordon Chang claimed in 2001 that it would happen by 2011 and then, 12 years ago suggested it was a year away. More specifically, according to his own website, he doesn’t even know why it will collapse, just that it will because of the inefficiency of State run enterprises and the inability of the Communist party to create an open and democratic society
Others suggest the debt to GDP ratio is too high and China can no longer sustain the level of debt, which happens to be considerably lower than that of the USA.
Australia’s Lowy Institute wrote an interesting article called the “collapse of the Chinese Collapse theory” and that’s what I’m going to talk about today.
China continues, even through the pandemic to grow and the world constantly wonders why they get this so wrong. How does China “lie its way” out of this collapse every year. Clearly, the only reasons China reports positive growth is because they are lying about, right?
For many, many, years, we’ve been inundated with reports about how the authoritarian government will accept no failures in reporting statistics — everyone is afraid to stand up to Beijing and afraid they will be removed from their posts, even shot if they get it wrong. Well, if that were true, then all the predictions would have been correct and the economy would have collapsed, except it didn’t!
Let’s take off the Western lenses and look at how it happens.
The first and most obvious thing is that those reports of authoritarianism were wrong. Quite obviously, China has a very different governance system to the West and the West don’t like it but, what they don’t like, doesn’t really matter to Chinese people, because they do like it.
There’s no way on earth a country could develop the way China has if everyone was forced to work, if everyone was kept in dire working conditions and if they had no free time, hated their employers, hated their boss and hated their country. So, there’s one theory that we should put straight to bed — Chinese people may not live in utopia but they are, for the most part, gainfully employed and relatively happy with the system they have — just because the same system doesn’t work in another country, doesn’t mean it’s a bad system, it just means it’s a different one.
The ageing population is correct, but an ageing population hasn’t caused a collapse yet and isn’t likely to in the future. People have forgotten, there is a culture here of looking after the elderly, it isn’t an imposition, it’s a responsibility that is accepted and, in many cases welcomed. I’ve heard Chinese people say their parents cared for them for many years now it’s time to repay them. People in China give gifts to their parents not just on the parent’s birthday, but on their own birthday as a way of saying thank you to them.
People here also save and invest for their retirement, something the West hasn’t done too well with many “social security” countries struggling with huge pension deficits. In the west, this could easily cause a financial crisis, it’s less likely to in China.
There won’t be enough jobs because of automation to support this ageing population is one of the claims, except that there will be less people working and more machines taking over mundane work — China has already addressed this future concern as it is the leader in AI, robotics, online healthcare. Investments totally billions of dollars have created AI towns and infrastructure which will help an ageing population to live a meaningful life. These investments recognise a problem and are providing working solutions to it already.
In the west, there may very well be an ageing population that is discarded and forgotten about, or too expensive to maintain. Already Canada is offering “assisted exits” if it all gets too much, this isn’t likely to happen in a society such as China with Confucian values which include, among other things, filial piety.
Which brings us to the last one of Debt to GDP ratio and, yes, there’s no doubt it’s high but there’s also no doubt it’s well-spent. In the last 10 years China has built more than double the number of new universities that exist in the UK. There are 42,000 kilometres of high-speed rail and more coming with over 11,000 new stations built to accommodate them in the last 20 years. People say this system runs at a loss and maybe it does but they don’t take into account the amount of GDP added by the ability to travel so freely and quickly to places that were once inaccessible
The World Bank acknowledges that China’s Poverty Alleviation scheme is a roaring success but economists and headlines ask: “at what cost”. The simple fact is that the cost is unimportant as China has opened economic opportunities to the 770 million people lifted out of poverty, opportunities that weren’t available to them 20 years ago and in doing so, they’ve created a very large number of new tax paying citizens. Where a region was once impoverished and a drain on society, that region is now adding to society — it might take another 20 or even 50 years to repay the cost and this is something Western economists can’t grasp — China isn’t looking for a one-to-three-year return on investment. China is thinking a generation ahead. As are the parents of children born in those communities who not only go on to become middle income earners but also go on to look after their ageing parents in 20–30 years-time.
If we stop thinking like western economists and journalists for a moment, we might actually see something special. A society that has constantly improved over the last 50 years and one that thinks beyond the next election cycle by planning years into the future to avoid these foolish predictions.
