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Command economies are macro efficient, micro inefficient, as opposed to pure capitalism, which is generally micro efficient, macro inefficient

adventured 8y ago
China's economy isn't effecient at the macro level and never has been. It's wildly inefficient, with those inefficiencies previously covered over by the former rapid rate of growth. You can see that inefficiency coming to light now, as they over-invest into stagnant state owned enterprises in their credit markets and deprive the private market of capital. That despite most of the employment, innovation, and growth formerly coming from the private sector. The reason they're doing that, is to fake growth, the only place they can immediately force-allocate stimulus spending is in the giant stagnant state owned enterprises. Several years ago all of their economic metrics went hard south, despite their claims about growth everything was indicating a near recessionary environment, so they fired up big stimulus programs and inflated assets such as real-estate. That stimulus was overwhelmingly focused on things they didn't actually need and it has resulted in mediocre growth. They're facing the exact same situation again now. Their productivity rate has collapsed since they shifted to that perma stimulus model seven years ago or so. Once your productivity implodes, you can only grow by shoving capital or labor at a problem. They have a contracting labor market, so their options there are now mostly exhausted. Which is why China now has to constantly run capital stimulus programs with big shots of capital or credit lending to the state enterprises. Their economy is no longer growing rapidly organically. Each subsequent round of this produces reduced returns, because the last thing China actually needs is to produce a lot more steel or concrete or buildings (they have extreme vacancy problems in their real-estate market), and those are the easy targets for juicing the economy in a command style from the top. It also resulted in loading up their local economies with enormous amounts of debt, as the local regions & munis are part of the stimulus shoveling process of moving capital into the state enterprises and real-estate.
- nopinsight 8y ago
  What do you think of the upcoming $300 billion tax cut which they recently announced and increasing their European-level R&D spending (see my other comment) further?
  - simonh 8y ago
    I think it's a great move in the right direction. Someone there has a decent idea what they're doing, I just hope they get a chance to see it through. China is likely to face some tough challenges in the next few years and maintaining discipline will not be easy.
barry-cotter 8y ago
If you can point to any facet of Soviet, Pol Pot or Maoist economic history that makes them look efficient please do so. The best one can say about any of them as far as I can see is that they were far superior to war and reasonable at heavy industry.
- chillacy 8y ago
  The US also entered a more command economy during wartime, when industries were nationalized or coerced into producing wartime supplies.

adventured 8y ago

China's economy isn't effecient at the macro level and never has been. It's wildly inefficient, with those inefficiencies previously covered over by the former rapid rate of growth. You can see that inefficiency coming to light now, as they over-invest into stagnant state owned enterprises in their credit markets and deprive the private market of capital. That despite most of the employment, innovation, and growth formerly coming from the private sector. The reason they're doing that, is to fake growth, the only place they can immediately force-allocate stimulus spending is in the giant stagnant state owned enterprises. Several years ago all of their economic metrics went hard south, despite their claims about growth everything was indicating a near recessionary environment, so they fired up big stimulus programs and inflated assets such as real-estate. That stimulus was overwhelmingly focused on things they didn't actually need and it has resulted in mediocre growth. They're facing the exact same situation again now. Their productivity rate has collapsed since they shifted to that perma stimulus model seven years ago or so. Once your productivity implodes, you can only grow by shoving capital or labor at a problem. They have a contracting labor market, so their options there are now mostly exhausted. Which is why China now has to constantly run capital stimulus programs with big shots of capital or credit lending to the state enterprises. Their economy is no longer growing rapidly organically. Each subsequent round of this produces reduced returns, because the last thing China actually needs is to produce a lot more steel or concrete or buildings (they have extreme vacancy problems in their real-estate market), and those are the easy targets for juicing the economy in a command style from the top. It also resulted in loading up their local economies with enormous amounts of debt, as the local regions & munis are part of the stimulus shoveling process of moving capital into the state enterprises and real-estate.

nopinsight 8y ago
What do you think of the upcoming $300 billion tax cut which they recently announced and increasing their European-level R&D spending (see my other comment) further?
- simonh 8y ago
  I think it's a great move in the right direction. Someone there has a decent idea what they're doing, I just hope they get a chance to see it through. China is likely to face some tough challenges in the next few years and maintaining discipline will not be easy.

barry-cotter 8y ago

If you can point to any facet of Soviet, Pol Pot or Maoist economic history that makes them look efficient please do so. The best one can say about any of them as far as I can see is that they were far superior to war and reasonable at heavy industry.

chillacy 8y ago
The US also entered a more command economy during wartime, when industries were nationalized or coerced into producing wartime supplies.