7 ms·

Here's a contrarian piece on the Chinese personal savings rate: no organized retirement benefits means all kinds of hiding of assets. http://brontecapital.blog

Here's a contrarian piece on the Chinese personal savings rate: no organized retirement benefits means all kinds of hiding of assets. http://brontecapital.blogspot.com/2012/06/macroeconomics-of-chinese-kleptocracy.html http://brontecapital.blogspot.com/2012/06/macroeconomics-of-...

nekojima 14y ago
If anything, that piece probably understates the problems mentioned. Though there has been recent moves to provide pension schemes for urban and rural workers, even if the programs are underfunded, it still covers a huge portion of the population, where before it was mostly urban and patch-work & underfunded at that. http://www.economist.com/node/21560274 http://www.economist.com/node/21560274
001sky 14y ago
Longevity in China is increasing rapidly and the one-child policy results in a grandchild potentially having four grandparents to look after. The “four grandparent policy” means the elderly cannot expect to be looked after in old age. Four grandparents, one grand-kid makes abandoning the old-folk looks easy and near certain. Nor can the elderly rely on a welfare state to look after them. There is no welfare state. So the Chinese save. Unless they save they will starve in old age. This has driven savings levels sometimes north of fifty percent of GDP. Asian savings rates have been high through all the key industrializations (Japan, Korea, Singapore etc). However Chinese savings rates are over double other Asian savings rates – this is the highest savings rate in history and the main cause is the one-child policy. - Summary of the argument
- vorg 14y ago
  > Four grandparents, one grand-kid Under present regulations, if two people marry, who are both "only children", then they can have two children. So four grandparents means two grandkids. The one-child policy is slowly changing into a two-child policy, via the slow rollout of many exemptions. I'm guessing the policy will morph into a complete two-child policy one day (though never completely disbanded because the National Family Control Administration workers will want keep their jobs).
eli_gottlieb 14y ago
You know, people really ought to listen to what the early capitalists and anti-capitalists said about overproduction more often. It's the never-solved problem of capitalism. EDIT: Thanks downvoters. I hope you enjoy your ever-falling profitability, your unsold and unsaleable goods, your deflating currency, your rising indebtedness as the real value of nominally-denominated debts increases, your unemployment crises.... All of it. Keep downmodding; share and enjoy!
- dredmorbius 14y ago
  Your post would be slightly more illuminating if you made more specific reference to whom you're referring to specifically, and where they commented on overproduction. Perhaps also a bit of the substance of what was said. Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products. Sometime clarity of exposition beats stridency for illumination.
  - eli_gottlieb 14y ago
    Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products. But we're not talking about the early industrial age. We're talking about today. I thought the article was actually lacking in that it didn't mention overproduction. This is the classic bane of industrialized economies: unsold inventory, rising unemployment, falling or negative inflation, falling asset yields, etc. The article describes China gaining the symptoms of overproduction. And, as many writers both pro- and anti-capitalist have noted, it tends to require a solution extrinsic to the market (think of Paul Krugman's "babysitting co-op parable"). To make things profitable again, someone or something has to purchase the excess inventory at some market-clearing price. Nominal private debts also need to be cleared from the market, allowing general price levels to adjust. Now here's the tough bit: overproduction is not the same as recession. Recession comes from malinvestment, and once capital is reallocated to genuinely productive uses it goes away. Some stimulus, especially infrastructure investment, also helps, but recessions are a natural part of the business cycle that end more or less on their own. Society just has to withstand the economic "bad weather". Overproduction crises, however, also known as depressions, don't go away on their own. Apparent malinvestment in an overproduction crisis is only a symptom, not a cause. If I could put forth a hypothesis, the actual cause is that one of the two big pillars of production has gotten way out of price-balance with the other. Those are labor and capital. In a healthy economy, labor is costly and productive, encouraging capital investment to get the most out of limited human labor-power. Capital, in turn, is well-priced for wide distribution and developed, increasing general productivity. Knock out either of these, and you've got problems. If labor is too cheap compared to capital (ie: right now and the Great Depression), then you'll get overproduction: aggregate demand from labor wages won't exist to purchase the products of capital, and they rot. You also get low productivity growth, because it's that much cheaper to just employ humans at menial tasks (see: the service industry) rather than to automate. (As an aside, computing is currently one of the few healthy fields: labor is expensive and capital (ie: FLOPs as well as investment dollars) is cheap, encouraging massive capital investments and productivity growth.) If you knock out capital by making it too expensive or unavailable when labor is strong, you get stagflation. The capital-owning class and the working class bounce between themselves the price shock in the cost of investment or technological capital. So unemployment gets high (because where's the capital to employ people?) while price levels rise in general (because labor and consumers refuse to "take one for the team"). So to get rid of an overproduction crisis, what we actually need to do is increase the cost of labor, which feeds into aggregate demand to purchase down inventory and increase the marginal profitability of capital investments. I'd say the best way to do this is usually by either direct strengthening of workers (ie: allow labor to organize, shorten the work-week, other stuff like that), or by infrastructure investment (which employs laborers as well as yielding positive capital externalities).

nekojima 14y ago

If anything, that piece probably understates the problems mentioned. Though there has been recent moves to provide pension schemes for urban and rural workers, even if the programs are underfunded, it still covers a huge portion of the population, where before it was mostly urban and patch-work & underfunded at that. http://www.economist.com/node/21560274 http://www.economist.com/node/21560274

001sky 14y ago

Longevity in China is increasing rapidly and the one-child policy results in a grandchild potentially having four grandparents to look after. The “four grandparent policy” means the elderly cannot expect to be looked after in old age. Four grandparents, one grand-kid makes abandoning the old-folk looks easy and near certain. Nor can the elderly rely on a welfare state to look after them. There is no welfare state. So the Chinese save. Unless they save they will starve in old age. This has driven savings levels sometimes north of fifty percent of GDP. Asian savings rates have been high through all the key industrializations (Japan, Korea, Singapore etc). However Chinese savings rates are over double other Asian savings rates – this is the highest savings rate in history and the main cause is the one-child policy. - Summary of the argument

vorg 14y ago
> Four grandparents, one grand-kid Under present regulations, if two people marry, who are both "only children", then they can have two children. So four grandparents means two grandkids. The one-child policy is slowly changing into a two-child policy, via the slow rollout of many exemptions. I'm guessing the policy will morph into a complete two-child policy one day (though never completely disbanded because the National Family Control Administration workers will want keep their jobs).

eli_gottlieb 14y ago

You know, people really ought to listen to what the early capitalists and anti-capitalists said about overproduction more often. It's the never-solved problem of capitalism. EDIT: Thanks downvoters. I hope you enjoy your ever-falling profitability, your unsold and unsaleable goods, your deflating currency, your rising indebtedness as the real value of nominally-denominated debts increases, your unemployment crises.... All of it. Keep downmodding; share and enjoy!

dredmorbius 14y ago
Your post would be slightly more illuminating if you made more specific reference to whom you're referring to specifically, and where they commented on overproduction. Perhaps also a bit of the substance of what was said. Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products. Sometime clarity of exposition beats stridency for illumination.
- eli_gottlieb 14y ago
  Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products. But we're not talking about the early industrial age. We're talking about today. I thought the article was actually lacking in that it didn't mention overproduction. This is the classic bane of industrialized economies: unsold inventory, rising unemployment, falling or negative inflation, falling asset yields, etc. The article describes China gaining the symptoms of overproduction. And, as many writers both pro- and anti-capitalist have noted, it tends to require a solution extrinsic to the market (think of Paul Krugman's "babysitting co-op parable"). To make things profitable again, someone or something has to purchase the excess inventory at some market-clearing price. Nominal private debts also need to be cleared from the market, allowing general price levels to adjust. Now here's the tough bit: overproduction is not the same as recession. Recession comes from malinvestment, and once capital is reallocated to genuinely productive uses it goes away. Some stimulus, especially infrastructure investment, also helps, but recessions are a natural part of the business cycle that end more or less on their own. Society just has to withstand the economic "bad weather". Overproduction crises, however, also known as depressions, don't go away on their own. Apparent malinvestment in an overproduction crisis is only a symptom, not a cause. If I could put forth a hypothesis, the actual cause is that one of the two big pillars of production has gotten way out of price-balance with the other. Those are labor and capital. In a healthy economy, labor is costly and productive, encouraging capital investment to get the most out of limited human labor-power. Capital, in turn, is well-priced for wide distribution and developed, increasing general productivity. Knock out either of these, and you've got problems. If labor is too cheap compared to capital (ie: right now and the Great Depression), then you'll get overproduction: aggregate demand from labor wages won't exist to purchase the products of capital, and they rot. You also get low productivity growth, because it's that much cheaper to just employ humans at menial tasks (see: the service industry) rather than to automate. (As an aside, computing is currently one of the few healthy fields: labor is expensive and capital (ie: FLOPs as well as investment dollars) is cheap, encouraging massive capital investments and productivity growth.) If you knock out capital by making it too expensive or unavailable when labor is strong, you get stagflation. The capital-owning class and the working class bounce between themselves the price shock in the cost of investment or technological capital. So unemployment gets high (because where's the capital to employ people?) while price levels rise in general (because labor and consumers refuse to "take one for the team"). So to get rid of an overproduction crisis, what we actually need to do is increase the cost of labor, which feeds into aggregate demand to purchase down inventory and increase the marginal profitability of capital investments. I'd say the best way to do this is usually by either direct strengthening of workers (ie: allow labor to organize, shorten the work-week, other stuff like that), or by infrastructure investment (which employs laborers as well as yielding positive capital externalities).