Overinvestment in China?

Investment Bubble Builds New China,” by Joseph Kahn, New York Times, 23 March 2005, http://www.nytimes.com/2005/03/23/business/worldbusiness/23invest.html (from Dawn’s Early Light).

Bill Rice, whose blog I added to tdaxp’s blogroll today, had earlier pointed on this article from the New York Times

But to an extent that is alarming some Chinese and Western economists, such investment itself is a main driver of China’s economy, which grew at a 9.5 percent pace last year. The investment binge, like any bubble, could produce unneeded factories and underused highways and power plants, weakening the country’s already shaky financial system.

So far, so good. China may be making foolish decisions, such as superhighways to nowhere or worthless airbases which don’t do anyone any good. Kahn’s piece also reports the obvious, that increasing the amount of available capital decreases the marginal utility of capital

Mr. Xu said the economic payoff from these huge investments had fallen sharply. He estimates that 15 years ago, China generated 50 cents of growth for each dollar it invested in fixed assets – roads, subways, and steel mills and the like. That return has fallen to about 20 cents for each dollar invested, he says.

I don’t know if he’s speaking in real or nominal money, but a 20% return is fantastic for investors. But it points to an economy starved of capital. Imagine if financing a dam on a credit card was a wise decision. That’s an economy that needs more money, now. But then..

Senior Chinese officials and most private economists agree that investment rates cannot remain at such levels without setting off high inflation, unneeded capacity and fresh piles of bad bank loans. The question is how much investment must come down and whether the reduction will cause a slump in the broad economy.

Too Much, or Too Little, Capital?

Nyt collapses into pop-Keynesianism. Among other criticisms…

  1. If new public-sector investment achieves anywhere near a 20% return, it shows a dramatic undercapitalization of the Middle Kingdom.
  2. Investment now reduces marginal costs later. Heavy investment should reduce future prices considerably (as goods can get to market cheaper, etc.).
  3. Bad bank loans have much more to do with a crooked banking system than capitalization. Crooked banks will get into trouble because they make stupid decisions, not because of the size of investmnets. Bank failures can happen in investment climates good and bad.

Eventually, the article almost finds its way back

They said China would have to limit investment to the high 30’s as a percentage of the gross domestic product to avoid widespread waste. Yet doing so would probably cause the overall growth rate to dive to perhaps half its current level. “At the heart of the imbalances in the Chinese economy,” they wrote, “is an unsustainable investment boom that has been in the making for at least four years and that will probably take at least several years to undo.”

Ah ha! So now the real problem is misdirected investment. That probably has a lot to do with one-party dictatorship and Nigeria-scale corruption. The solution is transparency and the rule of law, not starving China of investment.

And again, when arguing that investment has been misdirected from people into roads

Jiang Jihong, an official of the Communications Bureau of the Guangxi government, said local officials took the environment into consideration and adjusted the route to minimize the geological impact. But she said the highway was vital for the area’s overall development.

Yet some experts say that China’s poor inland provinces may need good schools and affordable health care more than elevated expressways.

Regardless, if there was too much capital in China the solution is obvious… allow the Chinese to invest internationally. Let capital flow from where there is more to less. This would also weaken the Renminbi, which would make Chinese products cheaper relative to other goods, which would make China more profitable for investment, which would cause capital to flow back into China…. In other words, adopt rational economic policies. Don’t complain about overinvestment.

An aggrevating article. Obviously written by someone interested in economist who understands big words, but without the knowledge or training to comprehend the situation. Disappointing.

Child Pain, Abortion Reduction, and Strategic Despair

Notes on the ‘Unborn Child Pain Awareness Act of 2005’,” by PN, Blog 702, 4 February 2005, http://www.daubertontheweb.com/2005/02/notes-on-unborn-child-pain-awareness.html.

The Woman’s View,” by Jodi Enda, American Prospect, 8 April 2005, http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=9362.

What better way to end an Easter? The liberal American Prospect gripes

Most recently, abortion battlers have proposed the Unborn Child Pain Awareness Act, which would require that providers inform women that fetuses can feel pain after 20 weeks gestation, and to offer them fetal anesthesia. (Tellingly, they don’t offer money so that poor women could afford to spare their fetuses this trauma.) Pro-choice groups have been left standing on the side again.

What better way to emphasize the nature of hacking and vacuuming? Every part of this is perfect. Blog 702 quotes some of the wording

You are considering having an abortion of an unborn child who will have developed, at the time of the abortion, approximately XX weeks after fertilization. The Congress of the United States has determined that at this stage of development, an unborn child has the physical structures necessary to experience pain. There is substantial evidence that by this point, unborn children draw away from surgical instruments in a manner which in an infant or an adult would be interpreted as a response to pain. Congress finds that there is substantial evidence that the process of being killed in an abortion will cause the unborn child pain, even though you receive a pain-reducing drug or drugs. Under the Federal Unborn Child Pain Awareness Act of 2004, you have the option of choosing to have anesthesia or other pain-reducing drug or drugs administered directly to the pain-capable unborn child if you so desire. The purpose of administering such drug or drugs would be to reduce or eliminate the capacity of the unborn child to experience pain during the abortion procedure. In some cases, there may be some additional risk to you associated with administering such a drug.

Indescribably good. B702 then describes some penalties for not complaying, such as a hundred-thousand dollar fine for the first offense. Yet the American Prospect article gives even more good news.

Some people say abortion laws are foolish, because it merely swaps safe for unsafe abortions. They are wrong. Abortion laws reduce the number of abortions.

As a result of restrictive laws, violence, and the stigma that has become attached to abortion, fewer doctors and other health-care professionals are providing them. The number of abortion providers declined from a high of 2,908 in 1982 to 1,819 in 2000, a 37-percent drop, according to the Guttmacher Institute. Almost no nonmetropolitan area had an abortion provider in 2000, the institute reported, which might explain why the abortion rate among women in small towns and rural areas is half that of women in metropolitan areas.

State restrictions almost certainly have caused some women, perhaps thousands a year, to forgo abortions. Research suggests that Wisconsin’s two-day waiting period might have contributed to a 21-percent decline in abortions there. Shawn Towey, spokeswoman for the National Network of Abortion Funds, a group comprising 102 organizations that provides money and support for low-income women seeking abortions, estimates that 60,000 women a year find the restrictions so onerous that they carry their babies to term. The Guttmacher Institute stated in a 2001 report that between 18 percent and 35 percent of Medicaid-eligible women who want to have abortions continue their pregnancies if public funding isn’t available.

“The biggest chunk of women who are unable to get abortions right now are poor women on Medicaid,” said Towey. While 17 states do pay for the abortions of low-income women, 33 do not. “The big irony,” she said, “is that low-income women get later abortions because they have to delay to save the money.” The Guttmacher report said that 22 percent of Medicaid-eligible women who had second-trimester abortions would have ended their pregnancies earlier if the government paid.

And behind every one of these numbers lies the story of a child.

We are winning. And almost as important, they think they are losing.

The good news, if there is any, is that women’s rights activists are waking up to their public-relations problem. “I think we have to face the reality that public support for abortion is eroding,” said Martha Burk, chair of the National Council of Women’s Organizations. “I think we’ve clearly lost the terminology war. They keep coming up with very reasonable-sounding restrictions, and we are unable to counter that. … The movement is in a bind.”

Neither were pro-choice leaders helped by the 2004 Democratic nominee for president, John Kerry, who said that he personally opposed abortion but supported a woman’s right to choose. “He seemed equivocal. He ceded the moral high ground to the other side,” Feldt told The Associated Press after resigning from Planned Parenthood in January.

Strategic despair is vital. It’s the moment when one realizes there are too many of them. Strategic Despair can lose a winning cause. It destroys an already defeated one.

So there you have my final post of the day. New Congressional action to reduce the number of abortions, proof that Congressional action actually does reduce the number of abortion, and strategic despair from those who wish to increase the number of abortions.

Happy Easter!

Carolingia or Latinite

The EU and the Arabs II — Kojeve’s Latin Empire,” by Marc Schulman, American Future, 27 March 2005, http://americanfuture.typepad.com/american_future/2005/03/the_eu_and_the__1.html (from Zen Pundit).

Eastertide moves all men to ponder post-War foreign policy. At the same time I penned by thoughts on a Carolingian (Franco-German) Explanation for a French “No” Vote, AF ponders a Latinite (Italo-Franco-Spanish) bent to French actions

The fullest embodiment of the principles of the French Revolution were for Kojeve the countries of postwar Western Europe . . . For these were societies with no fundamental “contradictions” remaining: self-satisfied and self-sustaining, they had no further great political goals to struggle for and could preoccupy themselves with economic activity alone . . . The end of history, he believed, meant the end not only of large political struggles and conflicts, but the end of philosophy as well: the European Community was therefore an appropriate institutional embodiment of the end of history.

Kojeve’s franco- and euro-centrism, which would certainly have been appealing to de Gaulle, is already apparent: the French, not the American, Revolution ushered in modernity, and the countries of Western Europe, not the United States, were the primary manifestations of modernity.

Does not the phrase “they had no further great political goals to struggle for and could preoccupy themselves with economic activity alone” apply to today’s Europe, which, in contrast to the United States, has no political goals other than stability and no faith other than materialism?

Latinité: France Looks South

More importantly, Schulman argues that the dream of Latinite propelled France’s EU policy. Specifically,

The European countries in the Latin Empire have a common “mentality”:

the differences of the national characters cannot mask the fundamental unity of the Latin “mentality” . . . this mentality is specifically characterized by that art of leisure which is the source of art in general, by the aptitude for creating this “sweetness of living” which has nothing to do with material comfort, by that “dolce far niente” itself which degenerates into pure laziness only if it does not follow a productive and fertile labor (to which the Latin Empire will give birth through the sole fact of its existence).

This shared mentality is what differentiates the Latin Empire:

this mentality not only assures the Latin people of their real — that is to say political and economic — union. It also, in a way, justifies this union in the eyes of the world and of History. Of the world, for if the two other imperial Unions will probably always be superior to the Latin Union in the domain of economic work and of political struggles, one is entitled to suppose that they will never know how to devote themselves to the perfection of their leisure as could, under favorable circumstances, the unified Latin West; and of History, for by supposing that national and social conflicts will definitely be eliminated some day (which is perhaps less distant than is thought), it must be admitted that it is precisely to the organization and the “humanization” of its free time that future humanity will have to devote its efforts.

Leisure instead of work, harmony instead of conflict. Are these not building blocks of the European Union, and the sources of much of the European criticism of America?

Further, this Latinite is distinct from the Anglosphere or Sovietism

While the Latin Empire must be as politically united as the British Commonwealth or the USSR, it is not necessary to copy the social and economic organization of the two rival empires:

there is nothing to suggest that the “liberalism” of great unregulated cartels and massive unemployment dear to the Anglo-Saxon bloc, and the leveling and sometimes “barbaric” “statism” of the Soviet Union, exhaust all possibilities of rational economic and social organization. In particular, it is especially clear that a “Soviet” imperial structure has nothing to do with “communism,” and can be easily separated from it.

The Alternative: Carolingia
France Looks East

After a detour on French views of the Islamic “other,” AF sums up

Needless to say, there is an obvious continuity between Kojeve’s advice of sixty years ago and today’s French foreign policy. Kojeve proposes nothing less than the formation of a European Union that would led by France, counter the power of the Anglo-Saxons and the Soviets (multipolarity instead of bipolarity), and keep others out of the Mediterranean area, which just happens to be where the Arab states are located. Independence from America (and Britain) was a theme in his advice to de Gaulle. The General took Kojeve’s advice; while in power, he vetoed UK membership in the European Community and withdrew France from a NATO that was dominated by the United States. In 2003, Chirac followed his advice by attempting to keep the United States (and Britain) out of what the French have long believed to be their sphere of influence. He could not stop it, but he made it more difficult.

Respectfully, I disagree. Post-War France showed no interest in reviving a Latin Empire. Among other reasons.

  1. Before the Great War, a Latin Monetary Union actually existed. France did not seek to revive this, and Latin Europe only shares a common currency now because of the Euro.
  2. While Rome and Paris signed the Treaty of Rome, Madrid did not. Spain did not even join the European Club until 1980. If a new Latin Empire was France’s goal, it is doubtful the Republic would have let a little matter of dictatorship get in its way.
  3. French Post-War policy cenetered on harmozing with Germany. It makes no sense to call an Italo-French-German Club “Latin.”
The European Union: What France Actually Got
France Drowned?

All of these problems are solved by viewing French Post-War policy as Carolignian. France’s post-1945 goal was to harmonize all things with Germany, to create a Western European nation-state. Latinite is a valid theory to the extent it overlaps with this Carolingian perspective.