segunda-feira, setembro 13, 2004
Is Keynes a Good Substitute for Marx?
Artigo na Tech Central Station.
China has overcome some of the economic disasters of an obsession of its leaders with Marxist-Leninist communism. Despite abandoning ideology for pragmatism, Beijing has adopted a new but equally discredited set of economic theories and policies. Class struggle and central planning have been traded for tools designed to manage aggregate demand following the ideology of Keynesian economics. Central planning kept China's economy on the brink of collapse, but Keynesian policies may take China's economy over the edge.
After buying into Keynesian economics, Beijing has become addicted to fiscal spending aimed to boost current economic growth. Despite the appearance of promoting growth, it has also brought growing fiscal deficits and ballooning public-sector debt that weaken China's long-term economic prospects.
Economic growth arising from increased government spending is unsustainable and also introduces imbalances in production structures. And corrupt cadres have overseen low-quality growth arising from inefficiency and graft.
Beijing has spent wildly on fixed assets to sustain high economic growth. However, much of these capital expenditures went to state-owned enterprises. Of this total "investment", two-thirds of the spending was directed to the central government or its supplicants and it grew faster than GDP by a factor of three.
How effective is deficit spending in reviving economic growth? A recent test case of applying Keynesian-style cyclical cures to resolve structural problems can be seen in Japan. Since the end of its "bubble economy", most of Japan's additional public-sector expenditures were financed by deficits. Tokyo's spending during the 1990s exceeding 800 trillion yen, five times greater than fiscal expenditures in the US during its restructuring in the 1980s. Despite such massive expenditures that were combined with expansionary credit policies, Japan's average economic growth in the 1990s was about 1.1 percent.
And Tokyo's outstanding debt rose from 56 percent of GDP at the beginning of the 1990s to more than 140 percent. Many credit-rating agencies put the figure at higher levels.
All this bad news in Japan is the outcome of a government too stubborn or afraid to implement the necessary policies to force radical restructuring of the economy. By following this same path, Chinese leaders are likely to cause further deterioration in their economy.
posted by Miguel Noronha 4:36 da tarde
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