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Subject: What's your take of this piece of opinion about China?
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chinadaily
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What's your take of this piece of opinion about China?
Despite the government's hype, China has a long way to go to reach prosperity
By Lester Thurow
Published: August 20, 2007
China claims that its economy is growing at a rate of 10 percent to 11 percent a year, and China's official analysts say that their country will catch up with the United States long before the 22nd century arrives. Don't believe it.
First, let's deal with the implausibility of the official Chinese statistics. Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas was not growing, as stated by the Chinese government, the economy in Chinese cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace.
Furthermore, Chinese statistics conflict with those of Hong Kong, the semiautonomous territory that serves as the financial capital of much of southern China. In 2001, Hong Kong had a recession, which is to say that it reported that its gross domestic product fell.
Guangdong, the adjacent Chinese province, reported that its GDP in 2001 grew 10 percent.
What are the chances that this number is correct? Very slim.
Economic growth rates can be inferred from electricity consumption.
In every country in the world, electricity use has generally grown faster than the gross domestic product. Electricity is necessary for nearly all productive activities, and because of inefficiencies, the consumption of electricity has generally outstripped economic growth. Rising energy costs have resulted in more efficient use of electricity, but especially in the developing world, economic growth has still generally lagged behind growth in electricity.
But if China's official numbers are to be believed, there are provinces in China where the GDP has been growing faster than energy use. That is unlikely, since the government's statistics also say that energy use per unit of gross domestic product is going up - not down, as claimed in provincial GDP statistics.
Among the world's 12 most rapidly growing economies during the past 10 years, the gross domestic product has grown only 45 percent as fast as electricity consumption. In the early 1970s, Japan was shutting down its electricity-guzzling aluminum industry. During this period, the gross domestic product grew 60 percent as fast as electricity consumption, the highest recorded level among industrialized countries.
Using those numbers as a guide, if we consider China's actual electricity use, which is relatively easy to measure, and do a little math, we come up with this estimate: The GDP in China has been growing somewhere between 4.5 percent, using the average for a rapidly growing country, to 6 percent a year, using the highest rate for Japan, not at the 10 percent rate claimed in official statistics.
The official statistic for China's overall growth rate is best regarded as an approximate growth rate of the economy of its cities.
China also claims that it will catch up with the United States and become the world's largest economy well before the turn of the next century.
There is an equally simple reason that neither of these predictions is likely to be realized. It simply takes more than 100 years for a large, less economically developed country to catch up with the world leader in per capita income.
One need look only at the history of the United States, which had a much higher growth rate than Britain in the 19th century, yet did not catch up until World War I. Or consider Japan and the United States.
Now, about 150 years after Japan started to modernize during the Meiji restoration, Japanese per capita GDP is still only 80 percent of that of the United States in terms of purchasing power parity - although, in nominal terms, it has caught up.
The United States is not standing still. In fact, its per capita income grew faster than nearly all other big countries from 1990 to 2007. Europe's per capita income fell from 85 percent of that of the United States in 1990 to 66 percent in 2007, according to International Monetary Fund statistics.
So let's say that the inflation-adjusted growth rate for China is 4 percent a year. This is optimistic, because China will certainly have some bad years in the next century. Every country does - remember the Great Depression in the United States. A 4 percent rate is faster than any big country has ever grown for 100 years. But assume that China can do it. Assume, too, that the United States grows at the 3 percent rate it has averaged for the past 15 years.
Now project the two growth rates forward: the inflation-adjusted per-capita GDP of China would be less than $40,000 in 2100, versus almost $650,000 in the United States. That's because China starts at $1,000 per capita and the United States at $43,000. If, in 2100, China has four times as many people as the United States, as it does now, China would still not have a total GDP equal to that of the United States.
But it is unlikely to have four times as many people. It is always a mistake to project population growth rates for a century, but let's do it anyway: With a one-child policy and a sex ratio that favors boys (many men won't find wives), China should experience a decline in population in the 21st century.
Yet let's assume for a moment that the population of China remains constant, at 1.3 billion.
If immigration to the United States continued at the current rate, the U.S. population would rise. If the population grew at 1 percent a year, as it has recently, it would more than double by 2100, reducing the enormous population gap between the two countries. Are these projections likely to be realized? Who knows?
What is clear is that China is unlikely to surpass the United States in GDP in absolute or relative terms anytime soon.
There may be a Chinese century, but it will be the 22nd century - not the 21st.
Lester Thurow is a professor of management and economics at the Massachusetts Institute of Technology. He is also on the board of Taiwan Semiconductor, which does business in mainland China.
2007-8-21 10:21 AM
#1
stellarray
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QUOTE:
Originally posted by
chinadaily
at 2007-8-21 10:21
Despite the government's hype, China has a long way to go to reach prosperity
By Lester Thurow
Published: August 20, 2007
China claims that its economy is growing at a rate of 10 percen ...
I don't believe any analysis of the future. Because future itself is very difficult to forecast.
What our Chinese goverment said is just a anticipate, not really said we must attain this target.
Some western author just too nervous about it.
What I believe is time.
Time will told us everything.
2007-8-21 11:01 AM
#2
stellarray
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QUOTE:
But if China's official numbers are to be believed, there are provinces in China where the GDP has been growing faster than energy use. That is unlikely, since the government's statistics also say that energy use per unit of gross domestic product is going up - not down, as claimed in provincial GDP statistics.
GDP is not everything!. Infact,some of our province in China have cancel GDP as the achievement of goverment. Insteadly,They take enviroment and long time developing as their achievement.
QUOTE:
Now, about 150 years after Japan started to modernize during the Meiji restoration, Japanese per capita GDP is still only 80 percent of that of the United States in terms of purchasing power parity - although, in nominal terms, it has caught up.
Per capita GDP is also not everything. Luxemburg is the world's highest Per capita GDP. But did he is themost powerful one?
2007-8-21 11:12 AM
#3
raymondusa
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Lester Thurow seems to imply that a bigger GDP is better. While he didn¡¯t outright state that in his article, I wonder if that is how he feels? I don¡¯t have a problem with him questioning China¡¯s calculations, but his method to refute it, using electrical usage, is rather weak. Coming from an MIT Economics professor, that¡¯s was under whelming.
His article would have been stronger if he acknowledged known problems with GDP calculations. There are many that I¡¯ve mentioned before, but the main ones are:
1. Currency differences (which PPP tries to address)
2. Size of GDP, is not the same as the health or strength of an economy. The way US grew GDP, by spending more borrowed monies, and incurring more debts, just weakens its financial statement. Central Bankers around the world don¡¯t care about the size of your GDP. They do care about your ability and security to repay your debts, as that shows up on your financial statements. It¡¯s interesting that Thurow spends all this time on GDP, but neglects to mention financial statements, which makes me wonder if he is just an economic theorist from academia. Economic health and strength is about the countries¡¯ financial statements, not the size of GDP.
3. GDP doesn¡¯t factor in savings. China saved almost 50% of GDP, instead of consumed it like the US. If China were to consume, it would have a PPP greater than US, but without the massive debts. China already has a stronger balance sheet and income statement now.
4. He brings up the per capita argument, yet be consistent. If you are using per capita, then also disclose per capita debt, unfunded liabilities, and per capita every line item on a balance sheet and income statement. I¡¯ve seen many financial statements in my life, yet I¡¯ve never seen one with a line item called per capita GDP. Perhaps finance people understand how things work in the real world, and some economists understand things just in theory.
2007-8-21 12:04 PM
#4
caringhk
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QUOTE:
Originally posted by
chinadaily
at 2007-8-21 10:21
Despite the government's hype, China has a long way to go to reach prosperity
By Lester Thurow
Published: August 20, 2007
China claims that its economy is growing at a rate of 10 percen ...
this guy is extra-polating the US numbers...............he does not include negatives that will happens in the US the like of present sub-prime, Katrina, + whatever havoc that may come post 911...............
2007-8-21 01:03 PM
#5
stark77
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. . . . .just like China is not forecasting what will happen when the butcher's bill on the environment comes due, or when marriage-age males outnumber females 120 / 100, or when a rapidly aging population has to be cared for by a generation of single children, or when China is no longer the cheapest place to manufacture in the world and MC's move to India or Cambodia or Vietnam, or when the coming groundwater crisis hits the hundreds of million people still living in the western provinces in abject poverty, or when . . . . . I could go on.
Both America and China have huge challenges ahead of them . . . . and honestly, China's problems are bigger. But their people are mentally stronger, and conditioned to suffer, so maybe they will weather the coming storms better. In the end, if you want to know the future you might as well cast the oracle bones. Hey, let's ask the online I Ching some questions:
1. Will China surivive the coming crises and become a great power?
Answer (from
http://www.facade.com/iching/):
The present is embodied in Hexagram 56 - Lu (The Wanderer): There may be some little attainment and progress. If the stranger or traveler be firm and correct as he ought to be, there will be good fortune. (I'd say this means that things will keep getting a little better, and if the government stays smart good times are ahead)
The fifth line, divided, shows its subject shooting a pheasant. He will lose his arrow, but in the end he will obtain praise and a high charge.
The situation is evolving slowly, and Yang (the active masculine force) is gaining ground. (oooo, I'd say that the 'arrow' is the Chinese economy, and that despite the slight gains mentioned above the incredible growth rates will slow HOWEVER, this will be coupled with better policies toward the environment, worker rights, etc, so other countries will respect China more)
The future is embodied in Hexagram 33 - Tun (Retreat): Successful progress is indicated, but to a small extent it will still be advantageous to be firm and correct. (ah, so progress for the nation, and although China's policies will be better the government must still be 'firm')
The things most apparent, those above and in front, are embodied by the upper trigram Li (Fire), which is tansforming into Chi'en (Heaven). As part of this process, brightness and warmth are giving way to strength and creativity. (oooo, the best news yet. China's brightness and warmth (her sizzling economy) will move away from the high export unsustainible model to one of strength and creativity, i.e., solid fundamentals and innovation)
The things least apparent, those below and behind, are embodied by the lower trigram Ken (Mountain), which represents stillness and obstruction. (Hmm, not sure how to interpret this one. Any takers?)
All in all an excellent reading for China, and a best-case outcome I think. Of course the I Ching would favor China. Hah!
2007-8-21 09:34 PM
#6
raymondusa
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stark77:
That was a weak retort. Just because you say China¡¯s problems are bigger, doesn¡¯t make it so.
The environmental issues are a problem, but it can also be an opportunity. Necessity is the mother of invention. Tough problems may actually foster greater urgency to invest in R&D and find better ways to solve this environmental problem. Solving this problem, or at least mitigating the environmental damage takes money, so I much rather face that problem with savings and reserves, rather than with massive debts and unfunded liabilities.
In the US, it is very common to see old folks in a senior home, or convalescent home, because US culture generally do not value or revere the elderly as much as Asian culture. It¡¯s almost like it¡¯s a crime to get old, because when you look at US pop culture, it is youth dominated, youth oriented, and youth preferred, as the old is marginalized, and functionally discarded. An entire industry, called the ¡°Anti-Aging¡± industry is built on the conditioning that young is beautiful and great, and aging is something you avoid or delay for as long as you can. In Asian culture, the elderly is revered, and embraced into the family fabric. It¡¯s a cultural norm for the child (ren) to take care of their parents or grandparents. This responsibility is an honor, not a burden, like how some US Americans treat their parents by getting rid of them and placing them in an old folk home. It¡¯s not surprising to read stats about how US elderly die sooner, and live shorter lives, because what do they have to look forward to, in a culture that for the most part, don¡¯t value the elderly? Contrast that with my god grandmother. Her experiences are very typical of Chinese families. 5 generations of family, loved, adored, respected and revered her. Her family argued about who would have the honor to take care of her. That¡¯s a culture to grow old in.
The aging issue will affect both US and China. The growing unfunded liabilities for US Americans are a reflection of this aging of America. But since I understand and experience both cultures, I much rather age as a elderly Chinese, revered by my family, than as an elderly US American, given the US cultural biases towards youth, and the almost contemptuous neglect of some US elderly by their own families. Here is a sad and sobering statistic for you. One of the fastest growing real estate segments in USA, are senior care facilities. That¡¯s not something to celebrate as it highlights how some US Americans feel about its elderly, and what is their solution.
China is already not the cheapest place to manufacture in the world, as even China outsource work elsewhere. I hope you are not trying to repeat the frequently wrong assertion that MNCs are in China only for the cheap labor. Otherwise, I will have another entry in the ¡°Frequently Wrong Assertions¡± thread, to correct you factually.
I will agree that Chinese people are usually mentally stronger, and culturally conditioned to withstand more hardship. US Americans are comparatively soft. My grandfather¡¯s favorite story to me as a young boy was when he recounted how it was the Chinese that built the US transcontinental railroad. US tried many different laborers, and still couldn¡¯t complete it. Chinese coolies did the hard work, the dangerous work over the Sierra Nevada, and finished the unfinished work that other laborers were to soft to finish. Yet, the final picture at Promontory Point, didn¡¯t even have a Chinese face. You need to worry more about the soft US American¡¯s ability to deal with the coming hardship, and not the Chinese, since its history already forged enough strength both culturally and from experience, to deal with any hardship.
2007-8-22 02:50 PM
#7
stark77
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MIT economics professor vs. RaymondUSA - yes, you're right Raymond, he's full of it. Merely being tenured on one of the most prestigious economic faculties in the world doesn't hold a candle to being China Daily's resident sage.
My initial response WAS a bit flippant, but merely to turn around an equally unsubstantiated post about the USA's weaknesses. Both countries have weaknesses, Raymond, you cannot deny that. And the future is impossible to accurately predict. As I've said before, if you were to turn the clock back ten years, when the American economy was absolutely rocking, and forecasted the kinds of declines that are bandied about here you'd have been laughed off. Actually, you'd be laughed off more everywhere else except here even now, but that's beside the point.
Since you decided to harp on these two topics, I suppose they deserve a response.
1. China's enviornment is in big trouble. This isn't debatable, Raymond, even the CCP aknowledges it. You cannot compare the American and Chinese environment. It is a mess in China. I'm talking about standard pollution - fertilizer runoff (check the story on that today in CD), air pollution (kills 400k a year), hundreds and hundreds of millions without access to clean water, desertification encroaching on arable land that China desperately needs, major river systems biologically dead (or on the verge of being delcared so - bye-bye dolphin, we hardly knew ye). Now, if your're talking about the future effects of global warming, that's different. Who knows what the final outcome of that will be, but most everything I've read implies that China would be in for a rougher time than the US - because while the US has massive reserves of water, China is relatively dry and has a LOT more people's thirsts to quench. You say, as many delusional hopers have implied elsewhere (such as the Republican party in the States) that magical cures for environmental problems will manifest themselves and our woes will disappear. Huh. Strong argument. So you're saying a country that is far inferior technologically to the US, with much direr environmental problems, will somehow stumble across cold fusion (remember when the Chinese scientists faked finding this - hah!) or another magical pill technology to save their environment - until then, pollute away brothers, don't worry, the Red Guard scientists will magically solve all our problems! Yippee! Sounds like North Korean propoganda.
The US's enviornment is in much better shape than China's. That is not debatable. And the projected effects of global warming are less severe (though still severe). And the US debt crisis would in no way effect American ability to intervene in a crisis situation. You're telling me the debate would go something like this: 'Well congressman, we'd really like the build that floodwall around Manhatten, but we have too much unfunded liabilities to do so. Granny really needs her Medicare, and frankly, she votes'. No. In times of real crisis issues like 'unfunded liabilities' get thrown out the window.
Aging population - yes, the Chinese take better care of their elderly. No doubt. My post was not comparing cultural practices, it was mentioning that it is going to be a terrific burden for one worker to support a family and four grandparents. All aging countries are concerned about this (Japan, Europe, China) - America is too. It's something all countries will have to face - China's problem is exacerbated by the one child policy, though somewhat mitigated by the cultural reverence for the elderly and the fact that the elderly in China have lived through some awful periods and probably will demand less than Americans.
Because that, fundamentally, is why Chinese are mentally stronger. They have suffered. It's not a genetic advantage - Chinese history just has been far crueler and poverty stricken than the West. Compare Depression era mentalities in the West to the current baby boomers, who have never lacked. Huge difference. Right now the people in their 50-70's (the ones running the country) suffered through some of the worst periods in all of human history. HOWEVER, living in Shanghai I can vouch that the spoiled generation of little emperors that is just now entering their 20's and 30's is COMPLETELY different than their parents. The same laziness and sense of entitlement as Americans, coupled with a culturally inbred sense of superiority over the laboring peasant class they have grown up around. There is a reason why foreigners and ABC's are being tapped to head up Chinese company and MC branches in Shanghai - - the locals are simply not up to snuff. Now, the peasants laboring 12 hours a day in toy factories and on construction sites and in coal mines in abominable conditions, dying by the tens (hundreds?) of thousands every year due to exploitative managers and unsafe conditions - they are mentally strong. But the new generation of elites being raised in the rich coastal cities - - they are not cut of the same cloth as the Long March generation.
And GDP is an overvalued number, I agree with you. However, the economist was pointing out what he saw as flaws in China's calculations - -perhaps you'd like to refute those arguments, since you didn't even touch the main premises for this thread. Obviously, the way, if China has been inflating growth numbers, this does affect things like PPP because PPP itself is based on GDP per capita figures.
For the record, you've never answered my postings from before that state that the Chinese lending crises is far worse than America's - but still hidden. Actually, you keep harping post after post about balance sheets, etc, without answering any of the substantive arguments I've made. To highlight some of the ones that have been ignored:
1. Chinese banks lend to everyone. The crisis is much worse in China that the states, but still hidden. Most economists believe a trillion dollars of debt is non-performing, others say more. Right now enough capital is flowing in to hide the problems, but eventually it will come out. A Chinese economist was recently quoted in the South China paper that the Chinee debt problem is much greater.
2. America has more debt because it cares for its citizens. Can China truly be proud of holding on to all these reserves when it doesn't provide free education, cheap health care, subsidized drugs etc to its citizens? The purpose of states is not to hoard money and let party members get rich - it is to take care of its citizens. 65% of the American federal budget goes to 4 social programs.
3. How do you answer the economist's charges (and my own in other threads) that numbers in China are not very meaningful because of the culture of corruption, faked books, cronyism, etc. How will China overcome this terrific problem?
Or the lack of innovation due to a culture of piracy and risk-aversion . . . . . or the fact that Chinese companies, unlike Korean and Japan, have had tiny, tiny success establishing themselves overseas . . . . . or that the Chinese stock market is in a massive bubble that could destroy millions of investors at any moment (as the Economist stated, it will be 'the least surprising bubble popping in the history of world finance') . . . . I grant America has problems, but it's funny how no-one here can recognize the elephants sitting right in front of the inevitable Chinese march to world-domination . . .
2007-8-23 08:56 PM
#8
changabula
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QUOTE:
Originally posted by
stark77
at 2007-8-23 20:56
MIT economics professor vs. RaymondUSA - yes, you're right Raymond, he's full of it. Merely being tenured on one of the most prestigious economic faculties in the world doesn't hold a candle to being China Daily's resident sage.
I would take raymond's words much more seriously than a professor who lives in an ivory tower.
How many economics professors are there in the US? Possibly in the thousands?
Then why the hell is the US in such debt?
Why is its people in debt and so dumb at their personal finances?
These professors are obviously poor at educating the nation.
2007-8-24 01:24 PM
#9
fromoverseas
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First, let's deal with the implausibility of the official Chinese statistics. Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas was not growing, as stated by the Chinese government, the economy in Chinese cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace.
Lester Thurow is talking nonsense.
The Chinese government did not state that 70% of the economy that is based in rural areas is not growing at all, with 0% growth rate.
The Chinese government stated that the rural areas have had a lower growth rate than the big urban areas growth rate, but the rural areas are still growing at more than 0% growth rate.
Lester Thurow is being dishonest, because he is lying on purpose about what the Chinese government actually stated about the poor rural areas.
2007-8-24 04:01 PM
#10
markwu
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Isn't Thurow author of Head-to-Head where he staked his career that Germany would be the best bet? He gave such a sumptious analysis it, and him, disappeared after that.
2007-8-24 04:06 PM
#11
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Economic growth rates can be inferred from electricity consumption.
In every country in the world, electricity use has generally grown faster than the gross domestic product. Electricity is necessary for nearly all productive activities, and because of inefficiencies, the consumption of electricity has generally outstripped economic growth. Rising energy costs have resulted in more efficient use of electricity, but especially in the developing world, economic growth has still generally lagged behind growth in electricity.
But if China's official numbers are to be believed, there are provinces in China where the GDP has been growing faster than energy use. That is unlikely, since the government's statistics also say that energy use per unit of gross domestic product is going up - not down, as claimed in provincial GDP statistics.
Among the world's 12 most rapidly growing economies during the past 10 years, the gross domestic product has grown only 45 percent as fast as electricity consumption. In the early 1970s, Japan was shutting down its electricity-guzzling aluminum industry. During this period, the gross domestic product grew 60 percent as fast as electricity consumption, the highest recorded level among industrialized countries.
Using those numbers as a guide, if we consider China's actual electricity use, which is relatively easy to measure, and do a little math, we come up with this estimate: The GDP in China has been growing somewhere between 4.5 percent, using the average for a rapidly growing country, to 6 percent a year, using the highest rate for Japan, not at the 10 percent rate claimed in official statistics.
Once again, Lester Thurow is talking nonsense.
Every country is different in terms of electricity consumption.
France produces nearly two times more electricity than England, yet France does not have two times the GDP of England. Instead, it is England which has a higher GDP than France. (because of the preponderance of the huge financial services sectors in England, which hardly use any electricity. )
It is not possible to calculate the GDP growth rate only by looking at the electricity growth rate.
2007-8-24 04:38 PM
#12
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China also claims that it will catch up with the United States and become the world's largest economy well before the turn of the next century.
There is an equally simple reason that neither of these predictions is likely to be realized. It simply takes more than 100 years for a large, less economically developed country to catch up with the world leader in per capita income.
One need look only at the history of the United States, which had a much higher growth rate than Britain in the 19th century, yet did not catch up until World War I.
Still another lie from Lester Thurow.
World War I only started in 1914.
Whereas, by 1901, the United States already had caught up with Britain, the United States already had the world's largest economy, the United States already had a bigger GDP than Britain, and the United States already had a bigger GDP per capita than England.
Furthermore, Lester Thurow is being dishonest here, he is trying to confuse us by mixing comparisons of GDP and comparisons of GDP per capita.
2007-8-24 04:53 PM
#13
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Or consider Japan and the United States.
Now, about 150 years after Japan started to modernize during the Meiji restoration, Japanese per capita GDP is still only 80 percent of that of the United States in terms of purchasing power parity - although, in nominal terms, it has caught up.
Lester Thurow is misleading us here again.
The Japanese GDP per capita actually caught up with the GDP per capita of the United States in the 1980s. In the 1980s the GDP per capita of Japan was already much higher than the GDP per capita of the United States.
It is just that Japan went into recession after the 1980s, and the Japanese GDP per capita did not grow much after the 1980s.
The Japanese caught up, and then the Japanese went down.
2007-8-24 05:26 PM
#14
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The United States is not standing still. In fact, its per capita income grew faster than nearly all other big countries from 1990 to 2007. Europe's per capita income fell from 85 percent of that of the United States in 1990 to 66 percent in 2007, according to International Monetary Fund statistics.
Once again, ( I am getting sick of pointing out all the lies and misleading assumptions ) Lester Thurow is misleading us.
Lester Thurow is using Europe's per capita income for two different groups of European countries, in 1990 he is using Europe's per capita income for European countries which did not include all the poor Eastern European countries, and in 2007, he is using a different set of figures using Europe's per capita income for European countries which include all the poor Eastern European countries such as Bulgaria.
2007-8-24 05:36 PM
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So let's say that the inflation-adjusted growth rate for China is 4 percent a year. This is optimistic, because China will certainly have some bad years in the next century. Every country does - remember the Great Depression in the United States. A 4 percent rate is faster than any big country has ever grown for 100 years. But assume that China can do it. Assume, too, that the United States grows at the 3 percent rate it has averaged for the past 15 years.
This is just total nonsense.
The average inflation-adjusted growth rate for China is 10 per cent a year, not 4 per cent a year.
Lester thurow is just lying here, and he knows he is lying, how can he be so dishonest for a professor at MIT.
Lester Thurow should be sacked!
2007-8-24 05:46 PM
#16
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For those of you who are less mathematically inclined, here is some explanation.
Lester Thurow said:
First, let's deal with the implausibility of the official Chinese statistics. Mathematically, if the overall economy were to grow 10 percent annually, and the 70 percent of the economy that is based in rural areas was not growing, as stated by the Chinese government, the economy in Chinese cities would have to be growing by 33 percent a year. The urban economy is growing rapidly, but not at a 33 percent pace.
In other words, if 70% of the economy based in rural areas was not growing ( 0% growth rate ) we would have:
0% * .70 + 33% * .30 = 10% overall growth rate
Lester Thurow is lying. The Chinese government did not state that 70% of the economy based in rural areas was not growing ( 0% growth rate ), the Chinese government stated that the economy based in rural areas was not growing as fast as the economy based in Chinese cities.
For instance, the economy in rural areas may be growing at 7% or 8%, while the economy in Chinese cities may be growing at 15% or 16%, such as:
7% * .70 + 16% * .3 = 10% overall growth rate
Lester Thurow is blatantly lying.
2007-8-25 09:33 AM
#17
raymondusa
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stark77:
I don¡¯t think you read carefully. I didn¡¯t write the Professor was full of it. That¡¯s your statement. Reread what I wrote. In the future, don¡¯t try to rewrite me or attribute things to me that I didn¡¯t write. Sarcasm doesn¡¯t improve your writing.
I wrote, ¡°His article would have been stronger if he acknowledged known problems with GDP calculations. I don¡¯t have a problem with him questioning China¡¯s calculations, but his method to refute it, using electrical usage, is rather weak. Coming from an MIT Economics professor, that¡¯s was under whelming¡±.
It¡¯s because I¡¯m giving him some respect that I was more disappointed in his chosen methodology to refute China¡¯s calculations. I expected more from an MIT Professor. That methodology is so weak, that it is too easy to refute. If a country was depending on nuclear power, or solar power, or wind turbine power, or some other form of power beside electrical, all of which would mitigate traditional electrical usage, can we infer this country has a smaller GDP based on lower electrical usage? Now do you see the problem with Thurow¡¯s chosen methodology? I have no problems with Thurow questioning China¡¯s calculations, just his methodology to refute. Perhaps the Professor needs to step out of his office once in a while and see the real world.
He may be a tenured Economics Professor, but his credentials do not refute the 4 points I presented, as I¡¯m very comfortable allowing those facts to stand without a need to buttress it with credentials. GDP doesn¡¯t take into account currency differences, how US grew GDP, how it impact the financial statements, doesn¡¯t take into account people choosing to save, rather than consume, and doesn¡¯t show up on financial statements.
I was not comparing the environmental issue, nor did I write it was debatable. That¡¯s what you wrote. Try to have a cool head and read carefully, before you debate. Here is what I wrote verbatim.
¡°The environmental issues are a problem, but it can also be an opportunity. Necessity is the mother of invention. Tough problems may actually foster greater urgency to invest in R&D and find better ways to solve this environmental problem. Solving this problem, or at least mitigating the environmental damage takes money, so I much rather face that problem with savings and reserves, rather than with massive debts and unfunded liabilities¡±.
I don¡¯t know where the new technology will come, or if existing technologies will help. I do know China is investing more in R&D. If I had to guess, I would predict it will come from Europe simply because they are taking this global warming issue much more seriously and investing in R&D more aggressively than US, so it would not surprise me if they come up with more ideas like Samsoe Island, Denmark, that can help China. I also didn¡¯t say the US debt crisis would affect Americans¡¯ ability to intervene to cope with its environmental problems. I simply acknowledged a very common sense reality ¨C fixing or mitigating this environmental problem requires money, so I much rather face it with savings and reserves, than massive debts and unfunded liabilities.
Cultural differences are very important, with regard to aging. Given the cultural biases, you really don¡¯t want to grow old in American culture, since there is a good chance your will be discarded to an old folks home, as you are too much of a burden to your family. All things being equal, I much rather be old and revered, than culturally marginalized and functionally discarded. If you are honest with yourself, I think you would want the same too.
The little emperor and empress mindset is similar to some second generation US Americans. They become soft, because they forgot the struggles of their immigrant parents and grandparents. However, despite some of these anomalies, the vast majority of Chinese are hard working, disciplined, and achievers. Once again, I think you should worry more about some soft US Americans, than the relative small numbers of little emperors and empresses.
As far as tapping foreigners and ABCs to head Chinese Companies and MC branches, that is just forward thinking, and not so much a knock on the local talents. Many of these companies are international companies, or want to go international if they are not already. Hiring the people that already know the international marketplace, speak the language, understand the culture and customs of where these companies want to go, and not so much where they are now, is proactive thinking.
I¡¯ve answered those four questions before, but I will briefly answer them again. You may check my archive.
1. Chinese lending practices are too relaxed. The NPLs are a concern (not to be confused with debts). China is mitigating this problem in two ways ¨C 1) Foreign financial services firms who want to enter the China market, must absorb some of the NPLs. 2) China is joint venturing with other foreign financial firms to gain the expertise, to help transform these state owned entities, to private or corporate run entities. As this transition continues, I expect those NPLs to continue decreasing. You might say it¡¯s unfair for foreign firms to absorb the NPLs, but that is the price of entering the Chinese marketplace. You should be more concerned about the US Derivatives market, since the estimated losses are exponentially higher than any NPLs that Chinese banks have. Review my thread on Derivatives.
2. Do the math. Social overhead cost doesn¡¯t completely explain the debt and unfunded liability problems. We as taxpayers, pay into Social Security and Medicare, so it was supposes to be self-funding, but became a fungible asset used by our government for more wasteful spending and military buildup, which damages the US economy. Don¡¯t blame the self-funding social programs. Blame the people taking those funds and using it elsewhere.
3. How China calculates the numbers is not the issue. I already said that GDP don¡¯t mean what some people try to imply. I¡¯ve never seen a financial statement with a line item called GDP. I focus on financial statements because that is real world. It¡¯s very simple really. US financial statements are very weak, just like the dollar. While some people may find false solace in growing GDP, despite how US grew GDP, weakening it financially, real world people focus on the financial bottom line, and not the size of GDP. Thurow should get out of his office more, and spend more time in the real world.
4. Lack of innovation is an issue. But innovation is overrated. US invented the car. But it cannot even capitalize on that invention. Toyota makes money per car sold, while GM losses money per car sold. The SC bubble is a reflection of massive savings searching for investment options. This week, more options came as Chinese citizens can invest in the Hong Kong market. More options are coming to alleviate the SC market. Massive savings created this heated market, but help is on the way to relieve the pressure. Be honest. Which problem would you rather have, a problem created by massive debts, or massive savings?
2007-8-25 10:48 AM
#18
fromoverseas
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More explanations.
Lester Thurow wrote:
China also claims that it will catch up with the United States and become the world's largest economy well before the turn of the next century.
There is an equally simple reason that neither of these predictions is likely to be realized. It simply takes more than 100 years for a large, less economically developed country to catch up with the world leader in per capita income.
One need look only at the history of the United States, which had a much higher growth rate than Britain in the 19th century, yet did not catch up until World War I.
This is a lie.
The United States caught up with Britain long before World War I.
Britain industrialized in the 1840s and the United States industrialized in the 1870, in the aftermath of the American Civil War.
By the 1880s, the United States had already caught up with Britain, long before World War I, which did not start until 1914, many, many decades after the United States caught up with Britain.
By the turn of the century, in 1901, the United States was by far the largest economy in the world.
By 1901, the United States already had a much bigger economy, a much bigger GDP, and a much bigger GDP per capita than Britain, a long time before World War I.
Lester Thurow lied.
2007-8-25 11:06 AM
#19
arthur
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very interesting debate.
I am more worried about where the United States is going than China.
2007-8-25 11:17 AM
#20
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