Ah, the genius that is authoritarian capitalism!

COMMENT: "Bad loans could take their toll on China's growth," by Michael Pettis, Financial Times, 22 April 2010.

Beijing commited itself to a massive government stimulus, second only to our own. To some, that proves--yet again--the "superiority" of authoritarian capitalism.

To me, it proves the Chinese read Keynes.

Last time China faced a great wave of bad bank loans about a decade ago, it pursued a series of policies, detailed here, that essentially represented a transfer of wealth from unlucky depositors to the state, banks, and businesses. As a result, household income declined to alarming levels.

No question that China's got the bucks to fund any rescues. It's just that the average person will end up paying in the end--again. That means the quest for more domestic consumption will be thwarted.

Despite the current fads in thinking, there ain't no such thing as a free lunch--or a government smarter than markets.

Comments

[Gilbert Garza]

If I were an average person in China I would be glad that we as a nation had reserves to invest in more infrastructure to keep the source of prosperity going. I would be looking to a better future seeing myself and others like me working saving investing and already moving to form the new better version of a dynamic forwarding looking middle class. Rightly or wrongly I wouldn’t feel the need to put a Western historical context and spin to our economics.

[David Dunn]

I can't see any evidence that China's economy is continuing to open up. Instead I see an increase of state control at the expense of private enterprise. This policy is about preserving CCP power not economic growth. With the US and European export markets now sluggish China seems to be relying on a property bubble for economic growth. In my view the source of Chinese economic growth has been Chinese entrepreneurs and foreign investors, coincident with the reduction of government interference. Current economic prospects don't sound good. On this I agree with Thomas Friedman who said words to the effect "Don't short China but instead short the Chinese Communist Party."