
Will China’s Economy Hit a Great Wall? - deafcalculus
https://www.nytimes.com/2019/01/15/opinion/will-chinas-economy-hit-a-great-wall.html
======
nopinsight
Endogenous growth theory, for which Paul Romer won a 2018 Nobel prize in
economics, implies that long-term economic prosperity depends on the spread of
knowledge and technological innovation in the economy. [1]

If these are the primary factors, then the closest analogues to China would be
other East Asian economies like Japan and South Korea. These nations greatly
value education, with top-tiered performance in international tests, and
invest heavily in R&D.

An oft-repeated criticism that authoritarianism constrains scientific and
technological creativity is still unproven and will be tested in the coming
decades by China. [2]

[1] From Wikipedia: “Endogenous growth theory holds that economic growth is
primarily the result of endogenous and not external forces.[1] Endogenous
growth theory holds that investment in human capital, innovation, and
knowledge are significant contributors to economic growth.”

[https://www.nobelprize.org/prizes/economic-
sciences/2018/pre...](https://www.nobelprize.org/prizes/economic-
sciences/2018/press-release/)
[https://en.m.wikipedia.org/wiki/Endogenous_growth_theory](https://en.m.wikipedia.org/wiki/Endogenous_growth_theory)

[2] How China could dominate science.
[https://www.economist.com/leaders/2019/01/12/how-china-
could...](https://www.economist.com/leaders/2019/01/12/how-china-could-
dominate-science)

~~~
speedplane
> Endogenous growth theory, ... implies that long-term economic prosperity
> depends on the spread of knowledge and technological innovation

What if Moore's law wasn't really an exponential, but more of a step function
over the past 50 years. What if it was a one-time fluke that greatly advanced
society, but we're gearing up for a long haul of flat or linear growth?

It explains a lot, including why China is able to quickly catch up to the U.S.
in tech. If U.S. tech was really growing exponentially, it would be impossible
for China to gain ground even if it was growing at an equal exponential rate.
It also explains why iPhone sales are down. It isn't because of lower consumer
demand or market saturation, those are just symptoms of a larger problem. It's
because the rate of innovation is slowing down.

We've relied on Moore's law of exponential growth for three generations, but
it's sadly dying (if not dead). The ramifications will affect everything.

~~~
nopinsight
Catching up is usually faster than pushing the state of the art further.

I think the smartphone industry’s slower growth is more the result of
diminishing returns from the form factor than the cessation of Moore’s law.

~~~
speedplane
> Catching up is usually faster than pushing the state of the art further.

Not so for exponential growth. e^x will always be greater than e^(x-t).

~~~
nopinsight
The base for an economic growth model does not need to be _e_ and generally
would not be the same for different economies. The base for catching up
economies is usually higher than developed economies (say 1.2 vs 1.1).

In any case, a simple exponential equation is too simplistic for real
economies.

------
FreedomToCreate
This is an perfect example of a news for the sake of news. The author twice
points out that he could be wrong and that they can't really predict at all.

I guess if things do go south, he will be able to use this article to point
out that he had predicted it and that he is a economic guru.

~~~
conanbatt
Honestly, all economic reporting should come with a small box showing the
author making a bet on his own analysis. At least if he turns out to be wrong,
you would know he was honest and really believed it and that he paid a price
for his mistake.

------
mrandish
As usual, Krugman has little to say and takes his time not saying it.

~~~
Mikeb85
Krugman won a Nobel Memorial prize for studies on a fairly specific topic and
since then, hasn't done much other than be a political pundit. At least he's
kind of admitting to being wrong with his predictions concerning China.

------
lyndonjohnsonbe
The best thing said in the article is "Many people have been predicting a
China crisis for a long time, and it has kept on not happening". Since China
has a planned economy with a strong grip from the government, they could keep
things going for a while. No planned economy has ever gotten so big

~~~
simonh
The state enterprise side of the economy is planned, but the private
capitalist - sorry, communist with Chinese characteristics - sector accounts
for 60% of GDP growth and half of fiscal revenue[0].

That strong grip does more harm than good IMHO. Just look at how appallingly
badly they mismanaged their domestic stock markets over the last few years.

[0]
[http://www.xinhuanet.com/english/2018-03/06/c_137020127.htm](http://www.xinhuanet.com/english/2018-03/06/c_137020127.htm)

------
yostrovs
Seemingly an empty article, as though the author had nothing else to write
about.

~~~
keyle
He came up with a great title and then he thought the article should happen.
Also he's paid to write.

------
onetimemanytime
>> _The case for crisis seems compelling – but I said that in 2011, too._

Just a matter of time son, you will be proven right one day. Just keep
repeating it.

------
rossdavidh
I respect anyone who is willing to point out when they were wrong before.

In regard to China, I think that they (like the Soviet Union before them) were
very good at playing catch-up, because command economies are very good at
getting everybody on board to do the thing which everyone knows needs to be
done. "Do this, or we will put you in prison or worse."

However, once you have (mostly) caught up, it becomes less obvious what the
next thing to do is. Literal moonshot? Fiberoptic internet to every house in
the nation? Particle accelerator that can hit energies never before reached?
Every student gets a spot in a university?

Some of these might be good ideas, some might be boondoggles. It's hard to
know, when you're nearing the front of the pack. The Soviet Union was great at
playing catch-up until, sometime in the mid 60's, they were too close to the
forefront to be able to clearly see what needed to be done next.

China's Communist Party is great at getting everyone to do what they have
decided to do. I think it is going to be harder for them to figure out what an
economy, of their size and relatively advanced state, should be doing next. If
they guess wrong, it will be ugly.

~~~
PhilWright
I would agree that a developing economy can copy the best practices and latest
technology from the leading economies to, relatively, quickly catch up.

You say that the USSR got close to the leading economies in the mid 60's. But
that does not explain why they fell so far behind afterwards. How come they
did not continue to be just behind for the succeeding decades?

~~~
simonh
The west had institutions and processes for developing new technologies and
infrastructure and evolving or renewing and replacing them efficiently. What
the USSR did was simply copy what the West had, but at the end of doing so
instead of having their own institutions and processes for developing new
technology and infrastructure, they had a broken cookie-cutter for an outdated
version of an industrialized society the west was already moving beyond. They
had no process for evolving it into the future, because they had no real
process for getting there themselves in the first place.

It's not that they couldn't develop any new technology. They had, and still
have centres of excellence and technology sectors they’re very good at, just
not enough across the whole economy.

This is why Russia is still such a backwater. It has never developed it's own
internal marketplace for ideas, innovation, entrepreneur-ism and technical
evolution. The Resource Curse and attendant corruption and political rent
seeking has hit them hard. I believe that China has largely avoided this
mistake.

~~~
userulluipeste
Besides other problems that USSR had, like the pervasive corruption and the
lack of incentives for taking initiative in almost anything, it's worth
considering that it achieved economic development by large scale investments.
That meant huge farms, huge factories, huge everything please! The good was
the immediate results of the said investments thanks to the good (enough)
efficiency as the economies of scale kicked in. The bad was in the costs
required to keep those damn behemoths competitive as the world evolved! Factor
in the fact that the _declared_ reason behind those huge investments was not
economic efficiency but employment of people, and you get something that will
have trouble in the long term keeping up with their counterparts in the
capitalist world. That was short-term (political) capital seeking policy at
its best! That however, mattered less because usually it was just about some
bureaucrat's career bet for getting results fast, cashing out in time the
political merits, and then exit by propelling himself to another position
somewhere, a game played up to the highest levels (e.g. Leonid Brezhnev and
Virgin Lands Campaign). The ending question is, does China differ in this
regard?

------
woodandsteel
Something very interesting about this comments section. For years now when HN
had a link about problems with the Chinese economy, there would be number of
comments from China defenders who would say no, things are fine and the
government knows exactly what it is doing. I strongly suspected many of them
were paid government trolls.

This time we are aren't getting any such comments. Instead we have gotten a
number of attacks on Krugman, without saying anything specific about how his
analysis is wrong.

I could be mistaken, but I am guessing that the troll minders see they can't
make a real defense, so they are trying to just distract readers away from
what Krugman had to say.

------
vkaku
The manufacturing economy is done. They're trying to re-invent themselves.

They may become the next Japan.

------
m0zg
[https://www.youtube.com/watch?v=cZ5dVBa3grw](https://www.youtube.com/watch?v=cZ5dVBa3grw).
I don't know why anyone still reads or listens to this clown.

~~~
yostrovs
I think it's because he's a Nobel winner that agrees with the sympathies of
the readers of the New York Times. This way the readers can think they're
smart, since they can understand the writing of a Nobel, while not being
challenged to actually have to think about something they may not agree with.

------
thedudeabides5
yes, obvi

