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Home Publications Blogs Beat the Press Did China Make a Mistake Putting Unemployed Workers to Work?

Did China Make a Mistake Putting Unemployed Workers to Work?

Friday, 18 June 2010 05:16

The Post apparently thinks so. It told readers that a year and a half after China initiated a massive infrastructure focused stimulus program that kept its economy growing at near double-digit rates:

"many economists and others here are asking pointed questions: Does China really need all this infrastructure? And what's going to happen when the bills come due?"

Let's think about this one for a moment. China built or rebuilt roads, bridges, railroads, schools, hospitals and other public buildings all over the country. Were some of these projects wasteful -- absolutely. China's economic managers are surely very competent, but when you spend $800 billion quickly, you can be certain that a significant amount of money will be wasted.

So, what was the cost? Well, if only we had smart, prudent, deficit hawk types running things in China, the people who worked on these projects could have been unemployed. The Chinese really lost an opportunity by not listening to those deficit hawk types.

And, what about when the bill comes due? After all, China only has a couple of trillion dollars in foreign exchange reserves and a current account surplus of more than 6 percent of GDP (this would be more than $900 billion annually in the U.S.). With economy growing just 9-10 percent a year, they must be terrified about the looming debt crisis. Arghhhhhhhh!

Comments (6)Add Comment
written by izzatzo, June 18, 2010 6:59
Teabaggers are currently rounding up traitors in the US for sedition, caught smuggling thousands of copies of Keyne's masterpiece to China, "The General Theory of Employment, Interest and Money", which was classified as top secret for national security purposes by Boy Monarch Bush. Asked why, a spokesperson admitted it's too late, but they just want revenge for the deficit hawks.
Another point worth mentioning
written by Ryan Toso, June 18, 2010 3:22
Is that China's capital to labor ratio is about 1/20th of America's. It's doubtful that China is experiencing diminishing returns to capital anytime soon, or that their infrastructure is superfluous.
written by Calgacus, June 18, 2010 5:21
Wish we had problems like that. China is behaving completely unfairly to the rest of the world. (And worse, their neighbor Australia may be emulating them a bit.) Non-insane economic policy is just plain cheating. The real art of economic management is to inflict the most ludicrous and historically proven-to-fail-in-both-theory-and-fact policies you can imagine on the poor slobs who have to work for a living. After some slobs somehow manage to stay afloat, you must then blame them for their lack of moral fiber causing the failure of your policies.
written by purple, June 19, 2010 4:23
Most people I know in China want to immigrate to the U.S, and the long waiting lists for a visa card support this. Only a few US finance types want to set up in Hong Kong.

We'd do well not to exaggerate China's strengths because immigration flows tell us what people really think. And China's leadership is more than capable of hubris as history has shown over and over again.
written by Professor Dick, June 19, 2010 6:09
Dean, have u read the late Giovanni Arrighi? He was predicting in the nineties that the financial hypertrophy that the US was experiencing was symptomatic of a passing of the hegemonic baton to China, much as the rise of "the city" in London a century before (at the expense of British industry) was helping to finance the rise of the US.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.