Saturday, January 21, 2012

The Secret Document That Transformed China's Economy With Private Property and Competition

For this great NPR story I thank John Chilton, who writes by email that it's "Just like the story of the Pilgrims whose economy was transformed when they gave up collectivism and the communal approach to farming."  It's a great story with economic lessons in private property rights, competition, entrepreneurship, and the triumph of the individual over the state, here are some excerpts:

"In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China's economy in ways that are still reverberating today.

The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village's collective farm; there was no personal property. "Back then, even one straw belonged to the group," says Yen Jingchang (pictured above), who was a farmer in Xiaogang in 1978. "No one owned anything."

In theory, the government would take what the collective grew, and would also distribute food to each family. There was no incentive to work hard — to go out to the fields early, to put in extra effort, Yen Jingchang says. "Work hard, don't work hard — everyone gets the same," he says. "So people don't want to work."

In Xiaogang there was never enough food, and the farmers often had to go to other villages to beg. Their children were going hungry. They were desperate. So, in the winter of 1978, after another terrible harvest, they came up with an idea: Rather than farm as a collective, each family would get to farm its own plot of land. If a family grew a lot of food, that family could keep some of the harvest.

This is an old idea, of course. But in communist China of 1978, it was so dangerous that the farmers had to gather in secret to discuss it. Despite the risks, they decided they had to try this experiment — and to write it down as a formal contract, so everyone would be bound to it. By the light of an oil lamp, Yen Hongchang wrote out the contract.

The farmers agreed to divide up the land among the families. Each family agreed to turn over some of what they grew to the government, and to the collective. And, crucially, the farmers agreed that families that grew enough food would get to keep some for themselves. The contract also recognized the risks the farmers were taking. If any of the farmers were sent to prison or executed, it said, the others in the group would care for their children until age 18.

The farmers tried to keep the contract secret — Yen Hongchang hid it inside a piece of bamboo in the roof of his house — but when they returned to the fields, everything was different.  Before the contract, the farmers would drag themselves out into the field only when the village whistle blew, marking the start of the work day. After the contract, the families went out before dawn. "We all secretly competed," says Yen Jingchang. "Everyone wanted to produce more than the next person."

It was the same land, the same tools and the same people. Yet just by changing the economic rules — by saying, you get to keep some of what you grow — everything changed. At the end of the season, they had an enormous harvest: more, Yen Hongchang says, than in the previous five years combined."

MP: Sounds like this would be the perfect inspiration for a Chinese version of our "Thanksgiving" holiday.  

59 Comments:

At 1/21/2012 6:31 PM, Blogger Tom said...

Great story. It could be edited here to take out duplication.

 
At 1/21/2012 6:38 PM, Blogger Jon Murphy said...

Amazing isn't it?

 
At 1/21/2012 6:49 PM, Blogger liberal_slayer said...

This is another example of when you allow people to freely compete in selfish fashion (keep what they earn - liberals would call this Greed) then the end result is a much more prosperous society. So free market capitalism works every time its tried.

Unfortunately, we have a major political party in this country (the Democrats) that do not believe in such a system anymore and actually claim it has led to poor economic conditions and great inequality in this country.

Years ago I used to believe that these people could be educated of there ignorant ways but after 20 years of trying to convince then it saddens me to say that many of them are hopelessly lost souls. I figure there is too much power and money behind their philosophy of victimhood and helplessness that they will try to suppress and demonize anyone who pushes for the truth of how a healthy economy works.

 
At 1/21/2012 9:35 PM, Blogger PeakTrader said...

This weak recovery was caused by disincentives and uncertainties.

The output gap:

http://voices.washingtonpost.com/ezra-klein/outputgap.jpg

Perhaps, Obama believes a poorer U.S. will make it easier to "spread the wealth."

 
At 1/21/2012 9:52 PM, Blogger Benjamin said...

Free enterprise!

The private sector produces more for less every year. Federal agencies produce less for more every year.

We need to shrink the federal government. Cut its employment in half.

Below is a list of federal employees by department.

Take a chain saw, take a chain saw. And start with the big stuff.


Defense 3,200,000
Veterans Affairs 240,000 

Homeland Security 200,000
Treasury 162,119 

Justice 124,870 

USDA 100,000 

DOT 100,000
Health and Human Services 62,999 

Interior 57,232 

Commerce 41,711 

NASA 19,198 

EPA 18,879
State 18,000 

Labor 16,818 

Energy 14,000 

GSA 14,000

 
At 1/21/2012 10:42 PM, Blogger OBloodyHell said...

WTF? NPR promoting a story that shines a bad light on collectivism?

Benny posting (in another blog) two comments in a row that don't even mention Iraq or Afghanistan?


And both in the same day?

Did I fall down a rabbit hole?

 
At 1/21/2012 10:47 PM, Blogger OBloodyHell said...

>> great inequality in this country.

One of the blogs I frequent posted some clips of Margaret Thatcher debating in Parliament on one of the regular PM-Q&A sessions with Parliament.

She nailed some libtard idiot whining about this, 20 years ago, with the simple exhortation that he would "rather the poor be poorer as long as the rich were less rich."

I frankly, don't give a rodent's patootie if I'm not as wealthy as someone else, as long as I'm wealthy enough. So arguments which don't grant me the chance to become wealthy, or even restrict that possibility, are ludicrous.

As so many have noted, this is The Politics of Greed And Envy, and, quite frankly, it is and should be a massive FAIL on any level.

 
At 1/21/2012 11:58 PM, Blogger OBloodyHell said...

...And as usual, benny bloviates about employment as though that were the sole problem, and not
a) time and money-consuming diktat from various departments being as pernicious as spending itself -- said diktat having force of Law,
b) government union activity driving spending and entitlement even higher (last I checked, most DoD workers were not unionized, and, unlike most unions, WERE, for the most part, vastly underpaid for the job they perform for society)

 
At 1/22/2012 12:00 AM, Blogger Hydra said...

Rich people are leaving China and coming to the us on investment visas. One reason is that they cannot own land in China. You can build and own a house, but the land is leased. You want to own something, they say, you want to own it forever.

 
At 1/22/2012 1:38 AM, Blogger PeakTrader said...

According to "Government Spending -Wikipedia:"

U.S. Federal, State, and Local Government spending was 40.0% of GDP in 2010, or $5.79 trillion.

Major categories of government spending 2010 in billions of dollars:

Pensions $939.2
Health Care $1028.8
Education $887.3
Defense $848.1
Welfare $727.3
Interest $296.3

 
At 1/22/2012 2:09 AM, Blogger PeakTrader said...

According to "usgovernmentspending.com:"

U.S. Federal, State, and Local Government Spending - 1800 (in billions of dollars):

Pensions $0
Health Care $0
Education $0
Defense $0.0061
Welfare $0
Interest $0.0034

Total Spending: $11.0 million

GDP: $480.0 million

 
At 1/22/2012 8:03 AM, Blogger sethstorm said...

Yet at the same time it enabled the country to make slavery out of it. While they could present this to multinationals as a way to show "reform", it is only a whitewash over CPC-driven slavery that still is in the forefront.

OBH said...
...Margaret Thatcher...

The person that took people out of work because she didnt like the regular people having too much power. For a piece of silver, she opened the floodgates to bankers looting the UK and others to remove its British identity.


Hydra said...

Where they can equally be nailed with taxes, especially if the locality wants to keep them out for national security concerns.

 
At 1/22/2012 9:01 AM, Blogger PeakTrader said...

And how accurate is the economic data?:

Beijing releases pollution data; US figures higher
Associated Press – 11 hrs ago

Steven Andrews, an environmental consultant who has studied Beijing's pollution data since 2006, said he was "already a bit suspicious" of Beijing's PM2.5 data.

"In all of 2010 and 2011, the U.S. Embassy reported values at or below that level only 18 times out of over 15,000 hourly values or about 0.1 percent of the time," said Andrews.

 
At 1/22/2012 9:13 AM, Blogger PeakTrader said...

It could be a few cities booming, while the rest of the country is worse off.

 
At 1/22/2012 10:49 AM, Blogger PeakTrader said...

Both living and labor standards are low in China, unless you're a communist elite:

Apple’s Sweatshop Problem: 16 Hour Days, ~70 Cents An Hour
Jan 20, 2012

The Chinese city of Shenzhen...30 years ago, Shenzhen was a little village on a river. Now it's a city of 13 million people — bigger than New York.

Foxconn...has a factory in Shenzhen that employs 430,000 people.

There are 20 cafeterias at the Foxconn Shenzhen plant. They each serve 10,000 people.

Most of the factory floors are vast rooms filled with 20,000-30,000 workers apiece. The rooms are quiet: There's no machinery, and there's no talking allowed. When labor costs so little, there's no reason to build anything other than by hand.

Assembly lines can only move as fast as their slowest worker, so all the workers are watched (with cameras).

The workers stay in dormitories. In a 12-by-12 cement cube of a room...Normal-sized Americans would not fit in them.

Unions are illegal in China. Anyone found trying to unionize is sent to prison.

Some workers can no longer work because their hands have been destroyed by doing the same thing hundreds of thousands of times over many years (mega-carpal-tunnel).

One former worker had asked her company to pay her overtime, and when her company refused, she went to the labor board. The labor board put her on a black list that was circulated to every company in the area. The workers on the black list are branded "troublemakers" and companies won't hire them.

One man got his hand crushed in a metal press at Foxconn. Foxconn did not give him medical attention. When the man's hand healed, it no longer worked. So they fired him. (Fortunately, the man was able to get a new job, at a wood-working plant. The hours are much better there, he says — only 70 hours a week).

A Foxconn worker dies after working a 34-hour shift.

Without Foxconn and other assembly plants, Chinese workers might still be working in rice paddies, making $50 a month instead of $250 a month.

 
At 1/22/2012 11:44 AM, Blogger sethstorm said...


PeakTrader said...

Then who hires the blacklisted and accused troublemakers? What happens to companies that flout the blacklist and hire them anyway?

Either way, rewarding them with business is not the path the US should take.

 
At 1/22/2012 11:46 AM, Blogger sethstorm said...


Unions are illegal in China. Anyone found trying to unionize is sent to prison.

Much like how some in the US want it to be, for that is how it was once in the United States.


Without Foxconn and other assembly plants, Chinese workers might still be working in rice paddies, making $50 a month instead of $250 a month.

Unprovable statement.

 
At 1/22/2012 11:55 AM, Blogger PeakTrader said...

Seth, according to China’s National Bureau of Statistics - 2009, the urban per capita annual income at US $2,525 was approximately three times that of the rural per capita annual income.

So, that's roughly $850 a year or about $75 a month.

 
At 1/22/2012 11:58 AM, Blogger VangelV said...

Apple’s Sweatshop Problem: 16 Hour Days, ~70 Cents An Hour
Jan 20, 2012 ...


As usual, you cite something that tells the wrong story. Apple does not assemble iPhones in China because of low labour costs. It is assembled in China because the Chinese can do what the Americans can't.

Apple needed a vendor who could hire around 10,000 engineers to look after a vast production process that employed nearly a quarter million people. Just to find the qualified engineers the company would need a year. The huge uptick in demand would drive up costs as salaries would increase because other companies would pay more to retain their own qualified employees. But in China a contract manufacturer could go out and hire 10,000 engineers in a month or two without impacting the salary structure greatly.

And, as usual, you miss the total compensation to employees. If you work in a Chinese contract manufacturer your accommodations, food, and transportation costs are looked after. Since the company pays for overtime many people work as much as they can whenever the opportunity arises. The money earned goes into savings and investments that give individuals the opportunity to substantially improve their lives in a short period of time.

The point is that the US can't do what China can because it does not have the qualified people and the flexibility to meet the demands of a very competitive environment in which rapid changes have to be be made to stay in business.

In China, it took 15 days.

 
At 1/22/2012 12:00 PM, Blogger PeakTrader said...

Urban-rural income gap widest since reform
2010-03-02

BEIJING: China recorded its widest rural-urban income gap last year since the country launched its reform and opening-up policy in 1978.

The urban per capita net income stood at 17,175 yuan ($2,525) last year, in contrast to 5,153 yuan in the countryside, with the urban-to-rural income ratio being 3.33:1, according to the latest figures from the National Bureau of Statistics.

 
At 1/22/2012 12:14 PM, Blogger David said...

"Apple needed a vendor who could hire around 10,000 engineers to look after a vast production process that employed nearly a quarter million people."

I wonder about the term "engineers" in this contxt. Would one really need 10,000 actual engineers...mechanical engineers, industrial engineers, chemical engineers, etc...to manage an assembly process like this one? I suspect that a considerable number of these people are actually shift supervisors, setup men, and the like.

 
At 1/22/2012 12:20 PM, Blogger PeakTrader said...

VangelV says: "As usual, you miss the total compensation to employees. If you work in a Chinese contract manufacturer your accommodations, food, and transportation costs are looked after."

New Balance Goes to China - A Rare Glimpse Inside the Emerging New Corporate World Order
February 28, 2006

"Mandatory monthly deductions of 120 RMB for room and board lower the actual take-home wage to just 32 cents an hour and $2.55 a day.

July 2005 pay stubs reviewed by our researchers showed that many workers were earning just 454 RMB for the month."

 
At 1/22/2012 12:46 PM, Blogger sethstorm said...


PeakTrader said...

What is unprovable is that slave labor was the only way they would benefit.


VangelV said...

When you don't have pesky things like personal freedoms or defenses against overzealous employers, you can whip thousands of people to make many shoddy trinkets.

 
At 1/22/2012 1:01 PM, Blogger PeakTrader said...

China is heading into a demographic disaster, because of child labor and its one-child policy.

Eventually, there will be a huge old and disabled population with a relatively small young population.

 
At 1/22/2012 1:02 PM, Blogger VangelV said...

The urban per capita net income stood at 17,175 yuan ($2,525) last year, in contrast to 5,153 yuan in the countryside, with the urban-to-rural income ratio being 3.33:1, according to the latest figures from the National Bureau of Statistics.

Not surprising. Ever take a drive out in the Chinese countryside and see what is going on? You have poor farmers spreading the wheat on the road so that the weight of the cars can get the seeds out of the hull. They are up at dawn working tiny plots of land with primitive tools. And when you look at the fields you notice the huge number of farmers working them. Their productivity is very low because they have little capital to help them be more productive. This is why so many farmers are leaving the rural setting for a better life in the city. As they should.

 
At 1/22/2012 1:10 PM, Blogger juandos said...

"Perhaps, Obama believes a poorer U.S. will make it easier to "spread the wealth.""...

Yes pt, Obama is either taking another page from the philosophy of Robert Reich (or is Reich attempting to cover for Obama?): We are all going to hell in a shopping basket

January 16, 2012 7:14 pm

It is far too easy to blame the crisis of capitalism on global finance and sky-high executive salaries. At a deeper level the crisis marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles, the real crisis centres on the increasing efficiency by which we as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.

Modern technologies allow us to shop in real time, often worldwide, for the lowest prices, highest quality, and best returns. Through the internet we can now get relevant information instantaneously, compare deals and move our money at the speed of electronic impulses. Consumers and investors have never been so empowered.

(remember Obama blamed ATMs in part for high unemployment)

 
At 1/22/2012 1:22 PM, Blogger VangelV said...

I wonder about the term "engineers" in this contxt. Would one really need 10,000 actual engineers...mechanical engineers, industrial engineers, chemical engineers, etc...to manage an assembly process like this one? I suspect that a considerable number of these people are actually shift supervisors, setup men, and the like.

The number is valid. But if you are trying to suggest that they use engineers to do the shop planning function, process control monitoring, supply chain management, etc., you are correct. There are many functions that require engineers to do them.

I just used Google and did a search on the terms, "apple engineers china foxconn".

The following articles that explain just why China is doing the work showed up.

The New York Times has a long and detailed piece on Chinese manufacturing, as seen through the lens of Apple's decision to manufacture the iPhone there. The key issue may surprise many, as the NYT says that it's not simply the low cost of labor that drives companies' decisions. Instead, it's a combination of extreme speed and flexibility in ramping up new production lines, economies of scale, availability of mid-level engineers, and centralization of different plants that makes it radically cheaper and often more efficient to product gadgets overseas. The interlocking issues of supply chains, labor costs, and infrastructure likely means that these types of manufacturing jobs won't easily be moved to the US or other locations anytime soon.

I did some digging and found the NYT article

In the article we read:

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

In China, it took 15 days.


That is not too different from what I wrote in the posting above. And if you do some more digging you are likely to find comments that support both these views from a number of other sources. The problem for the US is not just cost. It is the skill set market and the ability to be flexible. Given the regulations inside the US few major manufacturers are likely to risk investment in facilities that do not have the capability of making rapid changes as required.

 
At 1/22/2012 1:33 PM, Blogger PeakTrader said...

Juandos, and Reich concludes:

"As a result, consumers and investors are doing increasingly well but job insecurity is on the rise, inequality is widening, communities are becoming less stable and climate change is worsening."

My comment: Of course, he fails to mention the rise in living standards and the creation of capital, which benefit the masses enormously and even provide the means to improve the environment.

Or he just doesn't know.

 
At 1/22/2012 1:39 PM, Blogger sethstorm said...


...At a deeper level the crisis marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles, the real crisis centres on the increasing efficiency by which we as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.

So you want to devalue the people that provide you the product down to the level of a prostitute, then cheer at doing so?


Modern technologies allow us to shop in real time, often worldwide, for the lowest prices, highest quality, and best returns.
...
Consumers and investors have never been so empowered.

"Consumers" and "investors" are just wedges that are used to divide an indivisible group of citizens against themselves. If you're either of those, you're beatified. If you're not, you're treated as if you were evil incarnate.

 
At 1/22/2012 1:46 PM, Blogger juandos said...

"My comment: Of course, he fails to mention the rise in living standards and the creation of capital, which benefit the masses enormously and even provide the means to improve the environment"....

Exactly right pt...

I stumbled across this Reich bit while reading the following on the American Spectator: The High Price Economy

by IAIN MURRAY & DAVID BIER

They put in the following in their commentary:

It is enough to make on wonder whether Reich has ever read Schumpeter, who in 1942 pointed out: "The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort." (Capitalism, Socialism, and Democracy, p. 67 - online version)

 
At 1/22/2012 1:46 PM, Blogger VangelV said...

VangelV says: "As usual, you miss the total compensation to employees. If you work in a Chinese contract manufacturer your accommodations, food, and transportation costs are looked after."

PeakTrader: New Balance Goes to China - A Rare Glimpse Inside the Emerging New Corporate World Order
February 28, 2006


Ahh, the The Institute for Global Labour and Human Rights strikes again with its propaganda. Let us look at what it writes and see if we can figure out the logical problems.

The major complaint in the Li Kai Factory Number 5, which produces for New Balance, is the very low wages, which are well below subsistence levels.

A red flag pops up immediately. This story is not about the state of sweat shop labour in a country. It talks about one factory and one data point, even if valid, does not a trend make. But let us go on.

The base wage at Factory Number 5 is just 40 cents an hour and $3.22 a day. After mandatory deductions are taken out for dorm and food expenses, the workers' wages actually drop to 32 cents an hour, $ 2.55 a day, and only $12.92 a week.

If this is true and conditions are really lousy why would people choose to work in the factory? Why don't they go out and work for other factories or go out on their own? Could it be that the crappy jobs are the best that these workers could hope for at this time?

Let me go on and pick out a few more statements.

In order to survive in such conditions, the workers have no choice but to take a deep breath, swallow their pride, and force themselves to return to work. But they are definitely not the happy campers New Balance claims they are.

Again, why not just leave? Go out and look for a better job at the highest wage that the worker is qualified for. What is not said that this factory seems to be a former state owned outfit that was going to close down because it could not make a profit. It got the contract because without more capital investment the only way to compete was to have low wages. While the workers may not be happy with their work they are always free to look for better opportunities, something that many workers have probably already done.

There is another story about sweat shop work in China. A good example of it is told in the Oregonian story, Chinese factory workers cash in sweat for prosperity. In this story we read, "It turns out that factory workers -- not the activists labeled "preachy" by one expert, and not the Nike executives so wounded by criticism -- get the last laugh. Villagers who "went out," as Chinese say, for what critics described as dead-end manufacturing jobs are sending money back and returning with savings, building houses and starting businesses."

Got that? The union organizers, labour activists, and critics attacked these low-paying dead end jobs but the workers who fought to get those jobs wound up doing very well and lived better than ever could have without the opportunity given to them by those jobs. The workers got the last laugh and the labour activists were exposed for what they were.

 
At 1/22/2012 1:48 PM, Blogger sethstorm said...


"As a result, consumers and investors are doing increasingly well but job insecurity is on the rise, inequality is widening, communities are becoming less stable and climate change is worsening."

Aside from the environmentalist one, he's right.



My comment: Of course, he fails to mention the rise in living standards and the creation of capital, which benefit the masses enormously and even provide the means to improve the environment.

None of which have really happened in the last 30 years, unless you want to count the diversion of capital from the First World to the Third. Any improvements come at the cost of existing nations, as evidenced by the gutting of First World nations for the benefit of Third World ones. This is justified through the continual sweeping of the displaced under the rug - instead of including them in the transition.

 
At 1/22/2012 1:51 PM, Blogger sethstorm said...


VangelV said...

It is quite easy to have a few Chinese become shills for a few pieces of Mao's silver.

Those labor activists were smeared.

 
At 1/22/2012 1:54 PM, Blogger VangelV said...

VangelV said...

When you don't have pesky things like personal freedoms or defenses against overzealous employers, you can whip thousands of people to make many shoddy trinkets.


I never said that. Note that these people are not the slaves you make them out to be. They compete to get these jobs even though the jobs require hard work and sacrifice. The simple fact is that they had a choice and chose to do what they do. Now you and your idiot progressive friends can try to argue that the people are too stupid to know what is good for them and that there must be a group of elite individuals to rule over them so that they can have fewer choices and more freedom but even you morons have to understand that such a statement would be ridiculous.

 
At 1/22/2012 1:56 PM, Blogger VangelV said...

China is heading into a demographic disaster, because of child labor and its one-child policy.

Eventually, there will be a huge old and disabled population with a relatively small young population.


Perhaps. But the US is having its demographic problem now. It has more than $100 trillion in unfunded liabilities and millions of boomers thinking that they are entitled to free money and benefits from current workers.

 
At 1/22/2012 1:59 PM, Blogger juandos said...

"So you want to devalue the people that provide you the product down to the level of a prostitute, then cheer at doing so?"....

Why yes sethstorm I do...

'use them, abuse them, then lose them'...:-)

""Consumers" and "investors" are just wedges that are used to divide an indivisible group of citizens against themselves"...

Ahhh sethstorm, you've missed the major point amigo...

Consumers ARE investors...

Everytime you go out to purchase a good or service you're betting a bit of your personal wealth on the quality and usefulness of it...

If you're happy with what you've purchased you'll repeat the process sometime in the future...

Its a personal choice you're making...

 
At 1/22/2012 2:00 PM, Blogger VangelV said...

So you want to devalue the people that provide you the product down to the level of a prostitute, then cheer at doing so?

I think that you are confused. The people who trade it their labour for money are free to do so. They do it willingly. A prostitute is not free to work her/her trade and is persecuted by the government for doing so.

"Consumers" and "investors" are just wedges that are used to divide an indivisible group of citizens against themselves. If you're either of those, you're beatified. If you're not, you're treated as if you were evil incarnate.

We are all consumers. We all make choices and it is the sum of all those choices that helps determine which producer will succeed and which one will fail. What is wrong with that?

 
At 1/22/2012 2:04 PM, Blogger VangelV said...

None of which have really happened in the last 30 years, unless you want to count the diversion of capital from the First World to the Third.

I don't know about this claim. I would see that there have been huge improvements in the standard of living over the past 30 years. Take a look at China and India and compare what you see with the past.

Any improvements come at the cost of existing nations, as evidenced by the gutting of First World nations for the benefit of Third World ones.

That is not true. You are still under the illusion that we play a zero sum game and that when I can buy a bigger TV for less that means that someone has to lose. But anyone with even a bit of knowledge of economics know that your position is not true.

This is justified through the continual sweeping of the displaced under the rug - instead of including them in the transition.

Empty talk that is worthless. I suggest you get an education and learn about basic economics.

 
At 1/22/2012 2:12 PM, Blogger VangelV said...

It is quite easy to have a few Chinese become shills for a few pieces of Mao's silver.

Those labor activists were smeared.


They were wrong. They said that the workers were slaves trapped in dead end jobs making shoes and athletic clothing. But in the end the workers who chose to work in those jobs wound up much richer than the average Chinese citizen. Instead of being simple farmers with few prospects they took jobs that allowed them to sen money home to start up small businesses, buy property, and build their own homes.

The average employee at Ever Rich Knitting Garment Co.'s plant near Guangzhou, China, makes $220 a month, which can double during busy seasons.

The pay is minuscule by Western measures. But Mon Xijian, a 31-year-old who has worked at Ever Rich since 1996, has saved enough with his wife, who also works there, to buy a six-unit apartment building back home.

The couple don't recommend the lifestyle. They see their two children -- who live at home with Mon's in-laws 1,200 miles away -- every year or two. Yet Mon far prefers factory work to farming. He's saving to send his son and daughter to college so they can escape both.

"I want them to get as much higher education as possible," said Mon, who irons Columbia garments.


I don't know about you, but I think that being able to ensure steady cash flow by purchasing a small apartment building after ten years of saving and having enough to be able to get your kids a good education is a pretty decent outcome. Please note that there were two kids. Many people in the rural areas have more than one child and more and more people in urban areas are choosing to have more than one once they can afford it.

 
At 1/22/2012 2:30 PM, Blogger sethstorm said...


VangelV said...

I didnt say anything about regulatory issues regarding prostitutes.

 
At 1/22/2012 2:37 PM, Blogger sethstorm said...


I don't know about this claim. I would see that there have been huge improvements in the standard of living over the past 30 years. Take a look at China and India and compare what you see with the past.

Diversion of capital. When business thinks they are too free, they will in turn have capital diverted from them to the next unfree - and thus competive - place in the world.


Empty talk that is worthless.

Yet given the amount of displaced that are being swept under the rug by business are evidence to the contrary.


[dispute over zero sum]

Only if you forget about the displaced.

 
At 1/22/2012 4:50 PM, Blogger Ian Random said...

China actually lets people have leases on land for 70 years.

Isn't it interesting that people would work themselves to death, rather than do that wonderful subsistence farming that the left seems to want everyone for everyone in the third world. Also people do experience death by work in Japan too.


http://www.herald.co.zw/index.php?option=com_content&id=29235:china-hails-zims-99-year-leases-

http://www.washingtonpost.com/wp-dyn/content/article/2008/07/12/AR2008071201630.html

 
At 1/22/2012 6:45 PM, Blogger PeakTrader said...

Sorry, China, There Is No Short Cut To Economic Greatness
Jan. 26, 2010

China will do anything to grow its economy, as the alternatives will lead to political unrest.

Since China lacks the social safety net of the developed world, unemployed people are not just inconvenienced by the loss of their jobs, they starve...and hungry people don’t complain, they riot.

The Chinese government controls the banks, thus it can make them lend, and it can force state-owned enterprises (a third of the economy) to borrow and to spend.

Also, since the rule of law and human and property rights are nascent in its economic and political system, China can spend infrastructure project money very fast – if a school is in the way of a road the government wants to build, it becomes a casualty for the greater good.

China has spent a tremendous amount of money on infrastructure over last decade and there are definitely long-term benefits to having better highways, fast railroads, more hospitals, etc.

But government is horrible at allocating large amounts of capital, especially at the speed it was done in China.

Political decisions (driven by the goal of full employment) are often uneconomical, and corruption and cronyism result in projects that destroy value.

Infrastructure and real estate projects are where you get your biggest bang for the buck if your goal is to maintain employment, since they require a lot of unskilled labor; and this is where in the past a lot of Chinese money was spent.

This also explains why, in 2009, new floor space constructed was up 100% and residential real estate prices surged 25%.

And this explains why they keep building skyscrapers even though the adjacent ones are still vacant.

China built the largest shopping mall in the world, the South China Mall, that is 99% vacant, years after construction.

China also built a whole city, Ordos, in Inner Mongolia, on spec for a million residents who never appeared.

The inefficiencies are also evident in industrial overcapacity.

According to Pivot Capital, Chinese excess capacity in cement is greater than the combined consumption by the US, Japan, and India combined.

Also, Chinese idle production of steel is greater than the production capacity of Japan and South Korea combined.

Similarly disturbing statistics are true for many other industrial commodities.

China is a less shiny but more drastic version of Dubai.

 
At 1/22/2012 7:09 PM, Blogger PeakTrader said...

VangelV, the U.S. "demographic problem" will be small in comparison.

However, China will need to survive an overdue and massive creative-destruction process first with perhaps the overthrow of the communist regime.

 
At 1/23/2012 12:11 AM, Blogger Hydra said...

Pensions $939.2
Health Care $1028.8
Education $887.3
Defense $848.1
Welfare $727.3
Interest $296.3

=============================

Well, that's pretty easy.

Stop paying the interest.

 
At 1/23/2012 12:15 AM, Blogger Hydra said...

So, that's roughly $850 a year or about $75 a month.

++++++++++++++++++

Whoopee.

 
At 1/23/2012 12:17 AM, Blogger Hydra said...

This comment has been removed by the author.

 
At 1/23/2012 12:18 AM, Blogger Hydra said...

accommodations, food, and transportation costs are looked after."

==============================

Cool, a 12 x 12 cement room I can walk to, and a bowl of rice every day.

 
At 1/23/2012 12:21 AM, Blogger Hydra said...

This is why so many farmers are leaving the rural setting for a better life in the city, where the air is poisoning them and they still wind up with little or nothing.

 
At 1/23/2012 4:09 AM, Blogger ChinaShmina said...

Actually, at some point this contract became known to governmental officials of the province level.

They decided not to interfere for a while. And at that moment the fate of villagers was linked to the outcome of their experiment.

If they failed - all of them would be declared traitors and enemies of country.

But they succeeded, and so the whole "experiment" was announced as the Party's initiative, and expanded to a national level.

 
At 1/23/2012 8:03 AM, Blogger VangelV said...

VangelV said...

I didnt say anything about regulatory issues regarding prostitutes.


No. But you said that workers were the same as prostitutes. I pointed out your error. It is legal to sell your labour to a factory and you have a choice whether to work there or to look for employment elsewhere. It is not legal to work as a prostitute. Yet, people still choose to do it.

 
At 1/23/2012 8:13 AM, Blogger VangelV said...

Diversion of capital. When business thinks they are too free, they will in turn have capital diverted from them to the next unfree - and thus competive - place in the world.

So you object to the Chinese lifting themselves out of poverty because they started to respect private property rights and moved from Marxism because you feel that the owners of capital should have no choice about where to deploy it?

And it seems that you are still one of the zero sum Malthusians who has no clue about how an economy works. Try educating yourself.

Yet given the amount of displaced that are being swept under the rug by business are evidence to the contrary.

Businesses can't sweep anyone under the rug. They respond to the demands placed on them by consumers and make decisions that take into account a number of factors. The decision made is ultimately in response to pressures put on them by consumers, regulators, and suppliers. Nothing is swept under the rug.

 
At 1/23/2012 8:22 AM, Blogger VangelV said...

Isn't it interesting that people would work themselves to death, rather than do that wonderful subsistence farming that the left seems to want everyone for everyone in the third world. Also people do experience death by work in Japan too.

I found the stories about suicides at Foxconn ridiculous. The company had around 800,000 workers. The suicide rate worked out to be around 8 people per 100,000. That is around half the national suicide rate and lower than the suicide rate in the United States.

 
At 1/23/2012 11:57 AM, Blogger VangelV said...

Since China lacks the social safety net of the developed world, unemployed people are not just inconvenienced by the loss of their jobs, they starve...and hungry people don’t complain, they riot.

I guess the solution is to implement a pay as you go social safety net like the one in the US or Greece. There is nothing like robbing young workers and transfer wealth to the elderly and the poor to make a country great.

China has spent a tremendous amount of money on infrastructure over last decade and there are definitely long-term benefits to having better highways, fast railroads, more hospitals, etc.

But government is horrible at allocating large amounts of capital, especially at the speed it was done in China.


Very true. But China is simply following the same path taken by the West. After all, in the West you have the governments decide where the roads should be built and overwhelm the resource allocation decisions. It collects massive amounts of revenues in the form of gasoline taxes, license fees, vehicle registration charges, tire disposal charges, etc., etc., etc.

If anything I could argue that the Chinese government has less control of the economy than the Western governments do. After all, there are fewer regulators and fewer rules. Yes, idiots in the finance departments at the federal and provincial level are pushing easy money policies that will lead to malinvestment but the resultant waste will still be smaller than the waste created by our system. After all, our government finance departments and central banks are pursuing strategies that lead to far more personal consumption than to capital formation. When the Chinese bubble bursts there will still be roads, bridges, schools, water treatment plants, apartments, nuclear power plants, factories, railways, airports, etc., that can be used by the population. But when our bubble bursts we will find ourselves with crumbling infrastructure and no savings that can be the basis for capital formation.

 
At 1/23/2012 12:16 PM, Blogger VangelV said...

However, China will need to survive an overdue and massive creative-destruction process first with perhaps the overthrow of the communist regime.

There is little doubt that China's government will look a lot different in the future. But the current regime is hardly communist. Most private capital in China is in private hands and most decisions are made far from the regime in Beijing.

I would argue that Washington has far more control over economic activity in the US than Beijing does in China. After all, the Beijing government would not dare stop a pipeline that would create thousands of jobs in certain provinces and bring cheaper oil to its refineries for purely political purposes.

Elsewhere I have argued for a scenario that could have China split into five or six distinct regions that would have free trade arrangements or stand alone as individual nations. But even in such an extreme situation the Chinese people will do well because they work hard and value family and education even as they pursue individual gain.

If I lived in Europe or North America I would be more worried about my own country than to be concerned about China.

 
At 1/23/2012 12:18 PM, Blogger VangelV said...

Well, that's pretty easy.

Stop paying the interest.


Makes sense to me. Destroy the Treasury market and the currency to stiff those foreign lenders. That is the way to wealth and prosperity. Who knows, if you play your cards right you can be the next Iceland, Mexico, or Argentina.

 
At 1/23/2012 12:20 PM, Blogger VangelV said...

This is why so many farmers are leaving the rural setting for a better life in the city, where the air is poisoning them and they still wind up with little or nothing.

The reality is very different. If you want to understand China a bit more I suggest you take a trip there.

 
At 1/24/2012 10:55 PM, Blogger iAMcurious said...

I didn't quite get your point. Firstly, the 'collectivism' model still existed. That is, a contribution was made toward the community, and farmers could keep the excess if they worked harder. Isn't this how most of Europe operates? Those criticising the democrats for moving closer to this model (as opposed to 'you keep everything and if your neighbour is in a wheelchair and can't farm then too bad') need to re-read this (quite possibly) piece of fiction though rather idyllic story.

 
At 1/24/2012 11:36 PM, Blogger Ron H. said...

iAMcurious: "I didn't quite get your point. Firstly, the 'collectivism' model still existed. That is, a contribution was made toward the community, and farmers could keep the excess if they worked harder"

What part are you confused about, the "worked harder" or "got to keep" part?

Perhaps you missed the "each family would get to farm its own plot of land" part.

Incentives matter.

 

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