or at least too big to understand. Although he is undoubtedly better informed than I, I disagree with Edward Luttwak’s claim that Xi Jinping has bankrupted China and China’s economy is on the very of collapse. He does provide some interesting examples:
How do wonderful infrastructures destroy wealth? One example is sufficient. In 2018, on a drive along the North Korea border, I encountered a vast and beautiful white six-lane highway suspension bridge across the Yalu river. It was built to connect the Chinese city of Dandong with North Korea, to service the trade boom Xi expected with the promised opening of the North’s economy. Naturally, it would require a customs house, duly built as a very impressive high-rise, warehouses and more than 10 blocks of commercial offices. Yet when I visited, the bridge ended in a North Korean potato field, traffic was exactly zero, the customs house was empty and so were the office blocks and warehouses, some paid for by private border merchants who were bankrupt when I met them in Dandong (they openly cursed Xi for going along with the US-sponsored Security Council Embargo).
Savings that could have enriched many Chinese citizens, including the 180 million officially counted as “very poor†and the further 300 million or so still trapped in poverty, were instead wasted on the Yalu bridge complex, with uncountably greater waste on infrastructure all across China.
I am quite confident that China is virtually littered with bridges to nowhere, highways that remain unused, and apartments that will collapse before they are occupied. Those are completely foreseeable consequences of the web of incentives that the central government has imposed on or provided to local governments and private companies in China.
Still, as Adam Smith observed 300 years ago, there is a great deal of ruin in a country and, as the world’s most populous (or second more populous) country, China has more than most.
My own suspicion is that contrary to what many experts are saying, China will survive its slowing economy. What will actually happen may be even worse than collapse. I think that China, like the Soviet Union before it, “grew its economy”, to use Bill Clinton’s infelicitous phrase by transferring relatively none productive labor resources from agriculture to manufacturing. The Chinese authorities were more skilled than the Soviet; China has managed the feat without reducing agricultural production. Still, that’s a strategy that can only go so far and in China it has now run its course.
The Chinese authorities have put a number of short-sighted policies in place whose full impact will be seen in due course. Not just the “One Child Policy”. An over-reliance on factory jobs for which the preferred workers are woman of childbearing age will have long-lasting effects as well. China also appears to be following a pattern seen in many developing countries in which most people with college educations are employed by the government. When the government does not need as many people with college educations as are being produced what will they do?
Don’t be too smug. Here we’re even crueler—we arrange things so many young people with college educations will never earn enough to escape their debts and lower entry-level wages by exporting jobs while importing a labor force.
