Soviet Collapse Echoes in China’s Belt and Road
bloomberg.com
bloomberg.com
If one wanted to pick a positive story there would be the example of the American progressive era, the creation of the interstate system, the railway system during the 19th century, and so forth. Not every large infrastructure project is indicative of corruption, someone needs to build infrastructure, after all, I don't think we've somehow transcended the need for transportation.
That there's military or geopolitical motivation, especially as far as the land component of the belt and road initiative is concerned seems accurate, but doesn't strike me as particularly bad. From a Chinese perspective it obviously makes sense to invest into continental infrastructure because it does not control the sea.
Like the Soviet Union in the 1970s, China is coming to the end of a long labor-force boom, and hoping that an orgy of investment will keep the old magic going while stabilizing its fraying frontiers.
Cornelius Vanderbilt wasn't trying to overcome a graying America or shore up the Monroe Doctrine by building railroads in Latin America and Africa. If anything, I fail to see any justification for your comparisons between China and the progressive-era US.
For me, this narrative seems to be very typical of our European/American mindset. All great infrastructure plans are grandiose planning, we're done growing, we're 2 years away from the next crisis and so forth and projecting it onto China, which seems to have shaken off that very prediction over and over. China's current mode of development does not comply with our 'End of History' like narrative about how countries ought to develop, so we're stuck in a constant loop of shallow pessimistic analogies.
I would want to see an in-depth analysis of the project really looking at the consequences with an eye on the long-term effects rather than just stories about some harbor in Africa falling short of expectations. This is not illuminating.
> Failed projects like Sri Lanka’s Hambantota port may indeed be a way for China to quietly extend its strategic power around the world.
You won't find a neutral in-depth analysis of the project in Bloomberg (or FT, Economist,etc) as a substantial amount of stories about China are "wishful thinking" meant to be "self fulfilling prophecies" by influencing investors [1]. I mean mostly against China.
[1] David Fickling stories - see the ones about China. https://www.bloomberg.com/authors/AQrSL0m_2u4/david-fickling
Every media outlet has an undisclosed interest somewhere or at the very least a heavy bias sometimes. And it's highlighted more than ever when those trusted pillars of reporting like Bloomberg, FT, or the Economist come up with conflicting information.
Right now CCTV in China or RT in Russia are saying the same thing about the US, or the EU, or Japan, or Korea. And the people reading and listening are having the same discussion we're having just with different conclusions based on that trusted information.
It is possible to call bubbles, especially if they are as large and data is transparently available. It is really hard to tell the moment when it will pop, especially if it is connected with the government like in the soviet union or in China.
So when you're playing close to home positive stuff gets the fanfare, negative predictions are underplayed. You're talking about your own market after all. Why do you think it's so easy for these publications to hit at anything that's not domestic? The further away, the less friendly the player, the more scathing the prediction.
You won't find them because these aren't projects being developed (a) with private capital nor (b) for their economic merits. When a bridge is built in America, someone issues a bond. That issuance--both leading up to it and once in the wild--produces an incentive to do good analysis.
That incentive isn't there with Belt and Road. State-owned banks provide the capital. And the reasoning for the development is strategic, so you get geopolitical and military talking heads instead of good economists, whose services are ironically better allocated to analyzing other projects.
The US scenario you highlighted would be more comparable to Chinese investment in the last 25 years, no?
The clear difference between Soviet Union and China is that China has a growing and robust economy, with a firm grip on the situation whereas the Soviet Union was aching away on so many lies.
Chinese fabricated financials can be papered over with any kind of magic the state wants to apply to it - so long as the economy continues to move forward the numbers will say anything they want them to say.
The articles comparison may be overblown but it's not without reason.
I believe that the China boom has mostly been had, and we're going to see lower growth from here on in; that said, it'll be consistent and positive and they aren't going to disappear as a superpower.
The party has stated they can do this on their own, but given that their families' control of large parts of the economy has become a huge part of the problem they are unwilling to manage (which would have been hard anyways).
My feeling is business people and economists are upset that China utterly refuses to follow neoliberal economic polices. Preferring instead to follow old school Keynesian policies. Policy makers thus view China as economically in a state of sin.
Typically countries that try to follow Keynesian economic policies get hammered by western central banks and monetary institutions. However China is way both too large to be 'punished' like that and has iron fisted control of it's own currency. That leaves western and in particular US monetary authorities powerless to do anything.
Hence the constant butthurt blather for the last 30 years that that Chinese expansion only has 5 more years left before it collapses.
Notable: In 2008 the US and Europe followed neoliberal austerity policies to make sure that the banks and paper wealth were made whole. Resulting in a very slow recovery and increasing poverty and political blow back. China responded by building the worlds largest high speed rail network.
They aren’t going to be ‘punished’ by creditors because they don’t have significant debt. In fact, it’s more likely that China will be the one doing the punishing down the road.
Of course if you're referring to China's African colonies and their use of debt to control the local governments, then yes that's accurate.
US gov sells TBills, those TBills are bought by China.
The transaction you described also translates government debt into currency, which China also sits on, so it's a kind of an exchange debt.
So the US 'owes' China a gazillion dollars in services and stuff. One way or another.
[1]https://en.wikipedia.org/wiki/Primary_dealer#Primary_dealers...
US dollars are a form of debt to the US economy.
So If you hold TBills/TBonds, the US government owes you money.
If you hold USD, then the US economy owes you 'stuff' that you can exchange those dollars for.
Anyone who holds TBills/TBonds is lending to the US Government.
China holds a lot of both, ergo the US is indebted to them ... essentially, the US does borrow money from China. Though the sale may not be directly to China, ultimately, that's who's sitting on those bonds/cash.
China isn't the US's lender and they do not make any loans. They can't foreclose, because no loan exists. All they can do is take their coupons or sell the security to someone else who will do the same.
China can't starve the Treasury of money because the Treasury exclusively borrows reserves from the Federal Reserve.
Also worth noting is that with the stroke of a pen Congress and the President acting in concert could restore the Treasury's power to spend money into existence directly. The US creates securities as a matter of public policy, not because it actually needs them to finance itself.
So long as enough oil is denominated in dollars to satisfy US demand for imports, it doesn't really matter what currency other countries pay. A eurodollar crunch doesn't have any appreciable effect on US domestic prices and neither will a eurodollar glut. Petrodollars are eurodollars. [1]
To cut right into the meat of the issue, US issued currency will remain valuable until economic and political collapse destroy US consumer markets and productivity. Foreign asset holders cannot cause that by refusing to show up at treasury auctions. It would take a serious civil war, a world war where the mainland USA wasn't left untouched, or a similar multi-megadeath level catastrophe. And even then it wouldn't be impossible for the US to pull through as a going concern, as it were.
[1]https://ftalphaville.ft.com/2016/01/25/2151037/petrodollars-...
"China isn't the US's lender and they do not make any loans."
Yes, China is a lender to the US, in fact the largest lender [1]. Treasures are loans/bonds. Whoever owns them is a lender to the United States. It's economically the same thing as any other nation selling bonds.
"They can't foreclose, because no loan exists. All they can do is take their coupons or sell the security to someone else who will do the same."
It's the same thing as government debt in all other nations. If you loan money to Greece, you can sell that Greek debt to someone else. The economics of government debt are the same in the US, Canada, and US even if 'how it gets sold' is different.
"China can't starve the Treasury of money "
China can 'starve' any nation to the extent they are a lender to that nation. China's demand for Treasuries makes up part of the demand curve for Treasuries, along with all the the demand. In just the same way as there is demand for Greek, UK and Canadian bonds. Or stocks. Or corn, or whatever.
If China was the only buyer of US Treasuries you can dam well be sure they can 'starve the Treasury' - because if nobody is buying Treasuries, then the government is printing money.
"Also worth noting is that with the stroke of a pen Congress and the President acting in concert could restore the Treasury's power to spend money into existence directly."
Every nation on Earth can do this. It's called 'printing money'. It's not a new idea, and it has dramatic consequences including hyperinflation.
Summary:
China is the #1 lender to the US both in Treasuries (and by holding US dollars.)
US government debt operates differently, but economically is the same thing as government debt to basically any other nation.
The US does have the advantage of 'seignorage' which is to say that because so many people need US dollars to do so many things, that there is a nice bit of 'cushion' in demand for USD, but that's only worth so much.
Otherwise it's just like anywhere else: governments loan at a certain rate, or they can tax, or they can print money and see confidence lost in their currency.
[1] https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
> China can 'starve' any nation to the extent they are a lender to that nation. China's demand for Treasuries makes up part of the demand curve for Treasuries, along with all the the demand.
The Federal Reserve controls short term yields completely through its open market operations desk. It controls long term yields as well, because they are a function of expectations of short term yields. If China, or Russia, or anyone else stops buying treasuries, the Primary Dealers will pick up the slack, and they will always take that deal because no matter what the yields are they make money off it.
> If China was the only buyer of US Treasuries you can dam well be sure they can 'starve the Treasury' - because if nobody is buying Treasuries, then the government is printing money.
The Federal Reserve, not China, creates reserves every time the Treasury or a member bank asks it to, which is all the time. It's called an elastic money supply. Relatively few reserve notes are actually printed, because there isn't a lot of demand for Federal Reserve Notes compared to demand accounts.
>Every nation on Earth can do this. It's called 'printing money'. It's not a new idea, and it has dramatic consequences including hyperinflation.
Hyperinflation is a consequence of a collapse in productivity, not of money printing. Some governments turn to printing more money as their money becomes worthless, and there is a feedback loop, but that is a consequence not a cause. Hyperinflation can also occur when the money issuing sovereign effectively loses their sovereignty, fully or partially.
> China is the #1 lender to the US both in Treasuries (and by holding US dollars.)
The Federal Reserve is the USA's bank, not China. China is just another depositor at the Fed and whether they choose to store their capital account surplus with the USA in a interest free account (reserves) or an interest bearing account (treasuries) is irrelevant to the solvency of the US Treasury.
I hope this helped everyone else with an interest in understanding some of the widespread ideologically motivated ("money printing" is a shibboleth) misconceptions in this area.
I think the opposite is true, I think you're not grasping some basic economic issues and may need to re-look at the situation.
None of your responses are in fact responses to my points.
When the Federal Reserve conducts open market operations, it does create reserves out of nothing, but most Treasury securities are not bought by the Fed. The Federal Reserve can buy treasuries directly from the government via non-competitive bids, but generally buys and sells treasuries on the secondary market via primary dealers.
[1] https://www.treasurydirect.gov/indiv/products/prod_auctions_...
This is true, in the sense that the Treasury and the Fed work together extremely closely, and both are acting as or on behalf of the government. But strictly speaking, it's the Fed that conducts the auction because it is the Treasury's fiscal agent.[1][2]
The link you supplied provides useful information for a retail investor who wants to buy securities, but it's not and it isn't meant to be a description of the fine mechanics of government funding. In the event that the TT&L accounts[3] and Treasury's account at the Fed are together insufficient for Treasury's spending needs, then it creates securities and transfers them to the Fed for auction, in exchange the Fed debits Treasury's deposit account. This all follows from the statutory limitations on both entities. Treasury isn't legally permitted to carry a negative balance at the Fed, but the Fed legally can carry a negative balance on its own account. A primary benefit of and reason for this arrangement is it makes the funding predictable. Personally I find the system elegant in its (legally mandated) complexity.
Saying "the Treasury sells securities at auction" isn't really wrong, seeing as it's just a simplification that is acceptable in virtually every case with the sole exception being discussions like this one. It's a lot like saying "I sold some AAPL stock." You didn't really, your broker did. In everyday conversation there's nothing wrong with these simplifications.
[1]https://www.investopedia.com/articles/economics/08/treasury-...
[2]https://www.investopedia.com/terms/t/taaps.asp
[3]https://www.newyorkfed.org/aboutthefed/fedpoint/fed21.html
One great example of inflation is the housing market. Private sector banks create money from nothing, by balance sheet expansion, every time they originate a mortgage. Because the stock of housing is less than the demand, every time the banks create more money it drives prices up. Because money in the housing market mostly stays in the housing market, that is people usually take the proceeds from a sale and put them into a new house, there isn't too much spillover to non-housing markets. The same is true for student loans.
So as you can see, two of the largest examples of inflation in the US are caused by the private sector, not Treasury spending. Please note though that the Federal Government does set banking policy as well, along with various direct and indirect guaranty programs, so in that sense ultimately they are responsible.
For example:
https://www.bloomberg.com/news/articles/2018-07-18/a-china-b...
https://www.ft.com/content/ca28f58a-955d-11e8-b747-fb1e803ee... [Paywall]
> China’s huge leveraged bet on HSR has also generated many other benefits as it dramatically shrinks distances, transforms lives and boosts regional economies. The now three-hour, 1,100km train ride between Guangzhou and Wuhan used to take 11 hours, and tickets are now priced at just Rmb464.
Annual travel on China’s HSR lines — 1.7bn trips — exceeds travel on conventional rail services. And about half of all HSR trips are, like Mr Liu’s, business-related.
“When you think about that, a staggering 850m people are travelling [on HSR] to meet customers, get to their job, visit research centres and so on,” said Mr Ollivier.
If China Railway’s HSR network is ultimately able to pay for itself, it will be a testament to the miracles that can happen when the Chinese Communist party marshals the vast financial resources at its disposal to serve a common good. But if it cannot, there is little doubt who will have to make up the difference.
“China Railway’s debt is government-backed,” said Prof Li. “It won’t default.”
Economists just want 'real' numbers from China, numbers that reflect some kind of reality. That's before any ideology sits in.
If there were at least transparency there, we'd all be better off, that said if there were, the 'fudges' necessary to make things worse would be more obviously lies.
As far as 2008 - this was a failure of integrity from the bottom to the top: those taking home loans, mortgage lending staff, executives, those bundling up crap, the ratings agencies, and the laziness of those buying the bundles. It was a systematic failure of reason as well.
Were actual, material numbers to have been objectively published, we wouldn't have had a crisis in 2008, because nobody would have bought bundles of crap, and the market would have needed no correction because it wouldn't have gotten out of hand.
China's central policies surely irk some, of course they can do it if they please, but they cant reasonably contend to be 'free trade' or what not so long as there is such government intervention; they should not be in the WTO.
Everyone in the world would benefit from more objective clarity on all of this.
This is circular reasoning. The market works on the information that is available at a given time, which includes all the fudging of numbers that salespeople and marketers do as part of their quest for maximising their individual interest - being handsomely rewarded by the market for this.
There is a lot of information that does not have to be made public and people can do as they please with it - but this was not the cause of 2008, for the most part.
It's not circular logic because nobody really thinks that the market will stop corruption by itself.
And FYI if regulations and laws were not in place, forget about 'market correction', there would be no market to begin with. See: dysfunctional, corrupt states. They barely have 'markets'.
"but do you feel if regulatory bodies were given more power to execute on already existing laws"
I don't know. It might not be a matter of law or even policy, but failure of those in the office. Maybe they were understaffed, or had the wrong incentives.
Banks have tons of oversight committees and auditors, and they call kind of failed as well.
Major funds buying huge bundled up mortgages were maybe a little lazy in not doing diligence, but that's a 'market' thing not a regulatory thing.
It was a lot of big and small failures - market and regulatory, that caused 2008.
If everyone is cheating it's not going to work.
>>Typically countries that try to follow Keynesian economic policies get hammered by western central banks and monetary institutions.
This is a common trope/conspiracy-theory that's not substantiated by the numbers. Western countries don't follow neo-liberal economic policy, unless you consider an increasingly powerful and unaccountable regulatory state, growing social welfare spending provided at the taxpayer's expense, and interventionist central bank policy, to the tune of the Federal Reserve holding $4.5 trillion in assets now, "neoliberal".
By any broad-based metric of economic freedom, the West has been growing less economically liberal over the last 50 years.
The us interstate system was where there was trade already and not many alternate routes / better systems.
China's strategic concers are obvious and make sense...and yet if push came to shove and they were cut off from the sea, are they really trading via rail with Europe or others in that scenario anyway? / is incurring the costs of whole backup systems making sense?
Personally I don't have a clue how any of this plays out, just speaking to what the article is indicating.
...and the rail system seemed to follow along the path of most of the rivers.
Now fiber is also placed along these paths.
Easier and cheaper to pursue a Blue Water Navy than pump money into questionable projects in corrupt States -- projects who's success is anything but assured (See Malaysia PM planning to cancel all Chinese projects and the mess in Pakistan as recorded by WSJ recently).
> someone needs to build infrastructure, after all, I don't think we've somehow transcended the need for transportation.
It's more about the opportunity cost and ROI than the need, right?
And when did a Blue Water Navy become cheap? It's one of the most expensive military investments, especially if your plan is to break a potential US blockade.
No good deed goes unpunished. And in this case, the deeds often aren't even good. Locals from Ghana to Bangladesh complain about how China brings in their own workers rather than employ locals, and how the end result is shoddy work and more money in the pocket of corrupt officials.
Now it may buy influence from the goverment, but as I mentioned, governments are fickle things and power changes hands frequently.
All the same, I don't think this is irrational behavior from China -- they need to win friends and influence people.
> And when did a Blue Water Navy become cheap?
You'd have to compare the payback period for investing in slum upgrades in Indonesia vs investing in one's own Navy. In many cases it's never vs some intangible number of years.
My favorite is the yearly "end of china" report by gordon chang. I remember the guy talking about china's collapse in the 90s and he's been wrong since.
This describes the US better than China. The US spends 7.8% of it's GDP on the military, while China spends only 1.9%. If any country is over-exerting itself and "starving the economy of capital", that's America.
And according to the military, most of this higher than average spending is due to the military being voluntary, and needing to compete on wages in one of the highest earning countries in the world. Whether you agree with the military's assessment or not, it's true that a significant portion of US military spending is spent on wages/compensation. A lot (not all though) of the difference between the US and russia/china is due to the later having much cheaper labor.
Also the last sentence certainly isn't true... there are many countries that spend far more a percent of GDP on their military: Russia, Saudi Arabia, and the typical example of military excess: north korea.
It certainly doesn't follow that the richer and more valuable a country becomes (and therefore more expensive personnel), the smaller their military should be.
And yet china has ~4.5x the number of people as the US.
I believe that's a minority of the VA's expenditures, but sometimes it is hard to separate. For example, my grandfather receives a hearing aid from the VA — is that because of too much time spent around jet planes, or just due to age?
But you're right that much of the VA could be replaced with a national system.
It's like saying a government pension shouldn't be counted as part of the cost of employing government workers because the workers would still have to buy food and housing whether or not their career was with the government.
My original point is that nobody (at least publicly) knows the true spending on the US military because the accounting is so baroque. The VA is just one agency whose rather significant cost is typically forgotten when quoting these numbers, but it's far from the only example.
But I don't want to compare countries. I'm not sure if there's a "right" level of military spending, but I think pro-Military-Industrial-Complex forces in the US purposefully obscure the cost in order to not erode popular support.
Not as hard as it is to get a precise number on much money China spends on its military.
China's soldier support spending is pretty significant as well, probably much more so than the US.
But consider, the cost of labor effects everything the military does... Everyone in the entire chain commands a higher wage than they would in China/Russia, whether they hold a gun or not... researchers, assembly line workers, doctors, etc... pushing up the costs of everything the military buys.
https://blogs.worldbank.org/ppps/forecasting-infrastructure-...
1: The Asia Pacific is "hitting the knee on the curve" and modernizing its economy. Also, it's the most populous region on earth. It's why economic forecasters call the 2000-2100 period the Asian Century: https://en.wikipedia.org/wiki/Asian_Century
2: The Silk and Road Project ranges far outside "economically stagnant" areas. It's adjusted investments according to projected future growth, and also hedged into already modernized economies. It's as much about supply chain and trade routes as it is about direct economic investment. It connects China to Europe.
https://www.google.com/search?q=gwadar+port+china&ie=utf-8&o...
Now this part is just my opinion, but the really, really hard part is the proposed road or high-speed rail cargo link from Gwadar to Western China. The Karakorum highway is no joke. It's narrow, twisty, carved into steep rocky mountain passes. I've driven from Islamabad via Gilgit to the Chinese border. It will take many, many billions of dollars of tunneling and road construction to bring it up to the standard of a highway that can take a large volume of 20/40ft cargo container traffic. Right now trucks spend a great deal of time in 1st gear crawling along at 15km/h.
https://www.google.com/search?q=karakoram+highway&ie=utf-8&o...
Looking at the world as a grand chess board, the Belt and Road Initiative is a move which China turns this disadvantage into an edge. By promoting trades with neighbors, it gains geopolitical influence, potential integration into the local economies, and friendships with the political classes.
To match this, the US needs to further strengthen its ties with the countries in question. Several of which are projected to become some of the largest economies in the world by 2050 [1]. Regardless of the extent that the projection comes true, the regions from East Asia to South Asia, where about half of the world's population live in, clearly have great long-term strategic importance.
[1] https://www.pwc.com/gx/en/issues/economy/the-world-in-2050.h...
Just take a look at the projects completed so far, every single time they brought in their own people and companies to build oversized unnecessary infrastructure that remains mostly unused.
When countries default on those loans, things aren't quite bright.
The belt and road is already working. China-Finland train link connects Nordic countries with China in 10-12 days. They carry heavy and expensive machinery and machine parts between China and EU. Too heavy for air-travel economically and needs to arrive relatively fast.
"The value of freight between Europe and Yiwu, a much-touted overland rail hub near Shanghai, came to 2.27 billion yuan ($330 million) in the first four months of this year [snip] China’s top four ports alone process about the same value of cargo every three hours."
Also see this graph from the article: https://www.bloomberg.com/toaster/v2/charts/e6c45ea06db24277...
In nominal terms the US is the world's largest economy. Let's put it at ~$20tn gdp nominal with moderate growth. EU is about ~$17tn with less than moderate growth say and China is about ~$13tn and growing fast. Problem is that EU and China are at opposite ends of the Eurasian landmass. Anything that reduces trade times and cost between the poles of this massive continent and interconnects a combined ~$30tn economy is going to have an enormous impact.
But even so the article contradicts itself.
“The overwhelming majority of China's trade with Europe is by sea and air. Overland routes don't cut it”
What the detailed stats show is that by value rail is 2% and road is 6% of total trade. (Air is 28%). Take into account that,
“Just 10 years ago, regular direct freight services from China to Europe did not exist. Today, they connect roughly 35 Chinese cities with 34 European cities.”[1]
And that,
“Rail services are considerably cheaper than air and faster than sea”[2]
So 2% of trade captured in 10 years. So if people stop thinking in terms of years and start thinking in terms of decades it is obvious that improvements in land logistics will far surpass those of sea and air. By the middle of the century it is anybody's guess what fraction of total trade will be capture by road and rail but it could be very significant. From my reading most analyses put Khazakstan as one of the major bottlenecks, an upgrade there could have huge knock on effects. (And that's not even taking into consideration different sized rail gauges.)
[1] https://www.csis.org/analysis/rise-china-europe-railways
[2] https://csis-prod.s3.amazonaws.com/s3fs-public/180228_fig1.p...
This is about the fundamental capacity constraints and costs of rail versus maritime transport. The former will always be more expensive than the other, and always be further capacity constrained. The only thing that could change that is a quantum leap in several technologies, in which case the current investments become useless.
> “Rail services are considerably cheaper than air and faster than sea”
Where are you getting this quote?
This increases wear on the train and tracks. We might have materials breakthroughs that change the balance. But such materials would make (a) shipping more efficient and (b) large fractions of the existing Belt and Road obsolete.
> right now the China-Belgium trip can take 20 days by train (cf. https://www.train-chain.com/) and usually around 30 days by sea
Emphasis on can. In any case, there is a reason the world's commercial shippers are all focussing on Arctic maritime routes.
Rail is a neat way of controlling territory. It's better than trucking or flying, when it comes to cost. But water beats it at scale.
Yes. But it's also much faster. This creates new opportunities. Rail freight is not replacing sea or air freight, it's supplementing it.
Expensive but faster freight means that heavy but valuable items can be delivered faster. Heavy Air freight (>100 kg) typically costs 15-20 percent of the value of the goods. Rail wright can be expected to cost 5-10 percent easily, more for items weighing more than 1000 kg. That's value created by the rail.
When logistics starts to trust the route, the volumes and the cost or railway freight will increase. Railway freight is currently just 20-30% more expensive than ocean freight but takes only 10-15 days. Ocean freight takes two months.
Air freight for items above 500 kg is rarely cost effective. Rail freight opens up new possibilities for faster deliveries.
I'm sure it helped, but the U.S. was already by far the dominant power before that economic activity.
At the end of WWII, the U.S. produced half of the world's GDP, a staggering number. It was the only advanced country which was physically untouched by the war, it had troops stationed throughout Europe and the Pacific, and it was the only country with nuclear weapons.
It says a lot, IMHO, that the U.S. didn't pursue a global empire at that point.
I think that, politically, it would have never been accepted by the population or the (conscription-based) army. Also they ended with big not-quite empire with NATO soon after.
I agree, but the population is how the U.S. makes decisions (very broadly speaking) - that's the advantage of being a democracy.
I mean, there's a lot of practical reasons for post colonialism that don't have to do with any altruism on the part of the United States.
Malaysia and Indonesia control the Strait of Malacca, one of the world's busiest shipping lanes which doubled in traffic over the past decade [1]. The strait connects manufacturers in China to fast-growing large population centers in South Asia, including India, Pakistan and Bangladesh with over 1.5 billion people in total.
Most of the projects facilitate trades between South Asia, Southeast Asia, and China. About half of the world's population live in these regions [2].
The projects to connect China to Russia and Europe serve two major purposes:
1) Energy security: Over 40% of the oil China imports comes from the Middle East [3], where it does not have much influence. Even imports from elsewhere are largely shipped over the seas which China does not control.
2) Geopolitical influence through trade and investment
[1] http://www.seatrade-maritime.com/news/asia/exclusive-malacca...
Also: https://www.shipmap.org/
[2] More People Live Inside This Circle Than Outside Of It https://brilliantmaps.com/population-circle/
[3] http://www.worldstopexports.com/top-15-crude-oil-suppliers-t...
"The strait is the main shipping channel between the Indian Ocean and the Pacific Ocean, linking major Asian economies such as India, Indonesia, Malaysia, Singapore, China, Japan, Taiwan, and South Korea. Over 94,000 vessels pass through the strait each year (2008) making it the busiest strait in the world, carrying about 25% of the world's traded goods, including oil, Chinese manufactured products, coal, palm oil and Indonesian coffee. About a quarter of all oil carried by sea passes through the Strait, mainly from Persian Gulf suppliers to Asian markets. In 2007, an estimated 13.7 million barrels per day were transported through the strait, increasing to an estimated 15.2 million barrels per day in 2011."
What? The economy recovered, it could have gotten much more worse if Obama did nothing. Even Bush realized that, whatever became Obama's stimulus was planned before Obama took office, and passed with bipartisan support. It only became a whipping boy later because the Republicans saw and took the political opportunity.
> but they do appear to at least get a road when they pay for a road.
Yes, but the villages who live on the road probably can't pay the high tolls to use it.
No they don't, that is completely a red herring.
> I'm envious of all the new things they're building with all their 'fake' growth.
We could have HSR also if we were willing to pay for it...if we thought it made sense to our economic growth. And the Chinese have taken out a lot of debt to pay for it, it wasn't free, and the only profitable line ATM is the one between Beijing and Shanghai. HSR might work out in the future, HSR might lead to economic growth, but these are bets like anything else.
I've taken HSR between Beijing and almost Guangzhou (my wife's hometown doesn't have an airport but has an HSR station). It was fairly empty much of the way during the 6 hour or so trip.
I mean, better is better. Let's not pretend that USA can still build the infrastructure as it needs, better than China.
On the other hand, China's infrastructure project are funded by cheap labors. That's maybe more relevant than financial models. Also they have little resistance from the locals affected by the projects. Here we cannot even build apartments higher than certain number...
They were paid for by investors and bank loans. The governments direct contribution is not that large. If HSR isn't going to pay off, those investors are losing their shirts.
> Let's not pretend that USA can still build the infrastructure as it needs, better than China.
The USA takes advantage of cheaper goods from other countries. It can totally survive without that, but we like more stuff.
China Railway is a SOE, so it is technically the government. It took out a lot of debt to do HSR, and technically that isn't considered public debt and is rather listed as corporate debt (if SOE debt was considered public debt, China's public debt would obviously be much higher than the USA). Anyways, see https://www.ft.com/content/ca28f58a-955d-11e8-b747-fb1e803ee... for a better read.
Highways in China are mostly financed in similar ways actually, which is why all of the newer ones have pretty high tolls.
[1]: http://carnegieendowment.org/chinafinancialmarkets/75355
[2]: https://www.caixinglobal.com/2017-10-20/china-must-guard-aga...
I'd like to read more about what was happening then, was it largely military investment?
Plus all the numbers coming from inside USSR were inflated or imagined. Steel output was verified by CIA probably through satellite imagery, which turned out to be wildly false because industrial plant efficiency was nowhere near the West's.
Slave labor in the post-renaissance era cannot compete with other types of labor.
If it could then the South would have fared much better in the US Civil War and everyone and their grandmother would have industrialized economies in Africa by now. Or at the very least Ethiopia should have, which was never a colony of anyone for any meaningful period of time.
Not to mention, the North Korean Famine of 1994-1998, in which 3% of population died, would not have been a thing.
As for countless prisoners, they were working for survival with no compensation.
In late 20s this was the deal:
- Poor peasantry cannot provide wheat due to very poor productivity. They use primitive and crude tools, because by definition they cannot afford anything better and can barely even feed themselves, let alone produce any meaningful surplus that can be exchanged for goods or money.
- Rich peasantry is not incentivized to, since the state has monopoly on pricing and is the only legal buyer.
- It's impossible to offer industrial goods to the peasants in exchange for wheat because all resources are directed toward industrialization to create means of production.
- There are foodstamps in the cities, food becomes more expensive, the workers are discontent.
- The state loses most of it's export revenue because the global price of wheat declines as the Great Depression begins.
- The West refuses to trade with USSR even in exchange for gold.
The entire point of collectivization was to raise workforce productivity in agriculture to free enough people to work in cities and to allow these farms to be able to buy industrial goods.
Forced collectivization mostly stopped in 1932-1933, you could run a farm on your own if you wanted to, but you would have been taxed at a much higher rate than a collective farm.
The other key point is that state monopoly allows for concentration of capital that cannot otherwise be achieved in a dirt poor country. Would an efficient soviet land owner (or a foreign investor) have invested in a tractor factory in 1929?
The answer is: No, because the demand simply did not exist. And even if it would have appeared, it would have been much easier for a land owner to just buy Ford's tractors worth $300-350 each, not invest in a tractor factory.
And even though the West refused to trade, the US engineers played pivotal role in construction of key soviet factories and plants:
So tell me, are you keen to invest into a tractor plant if it takes the lives of your family? Improves productivity for those that survive alright?
Much of the productive capital assets in Germany were simply lifted up and taken into the Soviet Union.
I only have personal anecdotes to back that up having grown up in one of those satellite countries.
After the collapse of the Bloc most of those countries lost their industrial capacity, some have not yet recovered, some only recovered on outsource.
Are they not? Does USA drain resources from China?
And politically, you've got what you've got, especially as a small country. Things could go massively worse. The USSR had complete freedom of action and it was pretty benign for several reasons. Maybe you have feeling that it sucked big time, but the reference point should be 1984 in real life.
How am I bringing up politics?
From your last reply: >The USSR had complete freedom of action and it was pretty benign for several reasons. Maybe you have feeling that it sucked big time, but the reference point should be 1984 in real life.
I don't understand what you are saying here in any way. But, relating the USSR to "benign" is so far from the historic truth that I have no idea how to respond.
This conversation is likely no longer appropriate for HN, so have a nice day comrade?
If we're talking about 1950s especially, I can see how this link is relevant. Unfortunately I can't validate any clauses that are there.
However, in a general context of Soviet-Romanian relationship, USSR imported a huge amount of Romanian furniture, footwear, clothes and other consumer goods. I assume these were paid for nicely. As far as I know Romania had uniquely severe economic problems during communist period even when compared with neighbouring countries, but I don't think you should blame USSR solely for that.
Of course, during the entire cold war the USSR "overspent" on the military compared to the Western economies. But, during the WWII the economy was understandably 100% focused on the war. So even if the kept "overspending" on the military after the war, there was still a lot of industrial capacity left over that could be used for rebuilding and industrialization.
If something won't return a profit to a high probability, then it's not built.
Japan has seen problems with the same Soviet top-down style, where there are a lot of excess infrastructure projects throughout Japan, particularly in rural areas.
Japan avoided the Soviet implosion, but it has still gone through a large period of flat growth since the early 90's.
Deflation has been a major problem since 1991 and still is.
China could be the exception to this top-down style and find a way to high growth despite it's inefficiencies, but I am betting that it all catches up to them suddenly. Maybe not for a few years, but it will most definitely happen like it has happened to every country that has adopted the top-down Japanese style modernization.
>"It’s worth considering all this misdirected spending in the context of the Soviet Union’s decline. Around the middle decades of the 20th century, Moscow presided over a China-style economic miracle that caused many in the West to fear they would be overtaken."
My personal opinion is that China's free market is real, but the state intervention is still fairly heavy for a "free market economy". What does that translate into in terms of China's chance to avoid collapse? I don't know.
China has a large, powerful and I would assume expensive militarily, but has not deployed significant number of troops in the past few decades (since Korea?), and in any case has never occupied a foreign country.
That's a huge amount of resources available to spend on infrastructure and "soft" power. The Chinese approach seems much more likely to succeed than the Soviet one.
China did make it all the way to Hanoi during the Sino-Vietnam war back in 1979. I'm not sure what definition of occupy you want to use here.
I'm not sure that Tibet would agree with you.
Otherwise Tibet was supposed to be Chinese territory afterwards even if the Chinese dynasties following the Yuan didn't actively govern it and mostly left them to their own devices.
It was more of an anexation of adjoining territory based on historical claims (fabricated or not), like Germany with Alsace Lorraine, Russia with Crimea or the US with certain parts of northern Mexico.
The point was not so much about seizure of territory but the huge cost of a prolonged occupation with local resistance.
I was definitely not trying to legitimize the invasion of Tibet nor downplaying the suffering of the Tibetan people, so thank you for bringing this up.
Even though so very much has changed in China since the Great Leap Forward in the 50s and 60s, I wonder how carefully the consequences of poor planning, overstretching one's resources, shifting economic conditions and miscalculation were taken into account.
https://www.cnn.com/travel/article/trans-siberian-road/index...
The article presents a chart of top investments. The top 3 are all in Malaysia, costing from $8.4B to $14.1B. OK, China is spending a lot of money in this Belt & Road thing.
The article details how the China-Myanmar gas and oil pipelines (a $2.5B investment) are under-utilized. Now we see that some of that money could have been spent more wisely.
The article points out that the majority of China's trade with Europe is by sea and the Malacca Strait is a choking point. The article doesn't say, but it seems to validate that the both investments above are good ideas:
* This validates that the vast investment in Malaysia is a really good idea. By having Malaysia's economy integrated with, or even reliant on China's economy, China secures the trade route by sea.
* This also validates that the China-Myanmar pipelines may also be a good idea, even if they are under-utilized now. It hedges the risk of the Malaysia investment, and gives China more leverage when it comes to issues in the Malacca Strait. Even at peace time, Malaysia, Indonesia, or the US could threaten to deny Chinese ships passage of the Strait and apply a lot of leverage to China. That leverage is gone with the Myanmar pipelines. It is under-utilized now and will probably remain under-utilized because it's a strategic tool.
The article then shows how the Soviet economy went down due to investments in Siberia. I strongly feel it is the wrong comparison: not only because Malaysia and Myanmar are very different places from Siberia, but also because Siberia is part of Russia while Malaysia and Myanmar are not part of China. I am not implying that foreign investments are automatically better than domestic investments, but the analogy is a poor one here.
The article also shows how China's domestic investment is shifting from the east coast to the west inland areas, apparently trying to draw a better analogy with Russia's decline. That looks like a more valid point to me, but why the sudden shift to domestic investments near the end? Probably it is because the author wants to conclude the article with the following sentence:
> China’s rise this century was driven by its embrace of world trade and the coastal provinces most exposed to it. In this retreat inland, it’s sowing the seeds of decline.
But if the reader still remembers the earlier parts of the article, they should see that China is doing several things:
* Foreign investments along the traditional maritime trade routes -- most notably Malaysia
* Foreign investments along the new land trade routes -- I understand this to hedge the risk of maritime trade routes being blockaded
* Domestic investments to less-developed areas
This is hardly a "retreat inland", it is diversification of investments. Sounds good to me.
Something smells of anti-China propaganda in this highly speculative piece.
Yes.
https://en.m.wikipedia.org/wiki/Economic_history_of_India
Colonization is a terrible thing.
example: * British increased the area of irrigated land by a factor of eight, contrasting with 5% under the Mughals.
It's industrial revolution that caused the increase in irrigated land. It's possible that in the absence of British rule, Indian kingdoms would have found a way to trade its resources for agricultural equipments and engineers. Unlike China and Japan, Indian kingdoms weren't isolationist, and were well connected to Europe and Persia.
Do you have a citation for this? For the entire 300 years of the Mughal Empire? How accurate would that information even have been in say the early part of 16th century?
No one should be surprised that that India and China were the big dogs for most of history. Perhaps more surprising are that:
a) This continued well into the 19th century, and
b) India was bigger than China in medieval times.
I'd say that (b) is not a fair comparison, China is just one empire, India is a whole bunch. While (a) should not be a surprise that economic size lags behind whatever structural strengths might have made European powers famous and powerful for a while.
The idea that you can even estimate percentage of world GDP 2000 years ago is laughable.
No there's actually nothing standard unsurprising about it. GDP before the industrial revolution meant something entirely different than after it.
That infographic was largely debunked when it came out. Most notably:
"Before the Industrial Revolution, there wasn't really any such thing as lasting income growth from productivity. In the thousands of years before the Industrial Revolution, civilization was stuck in the Malthusian Trap. If lots of people died, incomes tended to go up, as fewer workers benefited from a stable supply of crops. If lots of people were born, however, incomes would fall, which often led to more deaths. That explains the "trap," and it also explains why populations so closely approximated GDP around the world.
So, one way to read the graph, very broadly speaking, is that everything to the left of 1800 is an approximation of population distribution around the world and everything to the right of 1800 is a demonstration of productivity divergences around the world" [1]
>"a) This continued well into the 19th century, and"
No India's economy in 19th century is very much the British economy the is was the time of the Raj.
>"b) India was bigger than China in medieval times."
This is also untrue. The Medieval era some 900 years(end of the beginning of the 5th until the 14th century.) India was not bigger than China during this millennium. India in the Medieval Era was ruled by many regional dynasties[2], while China was unified by the 3rd century BC [3].
[1] https://www.theatlantic.com/business/archive/2012/06/the-eco...
[2] https://en.wikipedia.org/wiki/Medieval_India
[3] https://en.wikipedia.org/wiki/Qin%27s_wars_of_unification
Additionally Mughal rule in South Asia stretched from what is modern Pakistan, to Kabul in Afghanistan and Bengal in the East. So the idea that there would been numbers specifically just India is kind of ridiculous.
India had a highly developed set of kingdoms even before the British invasion, and in an alternate history where British had never invaded India, they'd have built the railway and industrialized anyway.
Of course I suppose if a fish did the same thing we might have a foundering flounder.
Many founders do founder.
verb (used without object)
(of a ship, boat, etc.) to fill with water and sink.
to fall or sink down, as buildings, ground, etc.:
Built on a former lake bed, the building has foundered nearly ten feet.
to become wrecked; fail utterly:
The project foundered because public support was lacking.
to stumble, break down, or go lame, as a horse:
to become ill from overeating.
Veterinary Pathology. (of a horse) to suffer from laminitis.