An article in The Economist (“The Lives of the Parties,” December 15, 2018) reminds us why China is not to be feared. If the domination of Chinese society by the state persists or grows, the country will crash as the Soviet Union did, and for basically the same reasons. Like the Soviet Union, China grew rapidly for a while, helped by its mimicking of Western ways in technology and management and by the displacement of poor workers from agriculture to manufacturing. And contrary to the citizens of the Soviet Union, the Chinese were allowed to participate in global trade, which benefited them (and us) a lot. As The Economist puts it, “world trade helped discipline Chinese firms.”
But according to The Economist, China is starting to look a bit more like the Soviet Union in its twilight. State firms account for nearly half of output, and are apparently growing again. Here is the picture conveyed by the newspaper:
China’s GD per person, at purchasing-power parity, remains below that in the Soviet Union on the eve of its collapse. And despite its capitalist trappings, the Communist Party is piloting China’s economy in a direction similar to that of the Soviet Union in its twilight.
Just like in the Soviet Union before the collapse, Chinese productivity is now apparently slowing down if not decreasing:
Indeed, productivity is actually declining, and at an increasing pace, according to recent work by Harry Wu and David Liang of Hitotsubashi University in Japan. Unpublished estimates by Mr Wu suggest that in 2016 total factor productivity, or the contribution to growth not accounted for by the addition of labour and capital, dropped back to levels last seen in the early 1990s. The problem is the same as that which plagued the Soviet Union: capital, directed by political interests, piling up in inefficient parts of the economy.
The problem is well-known: a state-dominated economy is not flexible enough to shift enough resources out of declining industries and into profitable sectors. Rent-seeking is endemic.
If the situation continues to evolve this way, Chinese companies will become as competitive as Soviet ones were—that is, they will be no match for lean capitalist businesses in the West and part of Asia. Capitalist businesses will soon have no reason to fear Chinese competition.
If, on the contrary, China is becoming a capitalist country, there is still no reason to fear trade between individuals there with individuals here—but for a different and more general reason. After all, competitive pease of businesses is not the criterion of efficiency nor should it be a political goal. “China” either refers to the Chinese government, and no capitalist has to fear its economic competence. Or else “China” means the collection of individuals and private ventures within the country’s borders, and it is in the interest of individuals in other countries to welcome the Chinese in their exchange networks. More exchange means more specialization, a more extended market, and more benefits from comparative advantage.
In a 2012 book (How China Became Capitalist, Palgrave Macmillan), Ronald Coase and Ning Wang argued that China had become or at least was becoming capitalist. My review of the book in the Winter 2012-2013 issue of Regulation suggested that China could also be seen as evolving towards a sort of crony capitalism, which is not actually capitalism. Is the glass becoming half full or half empty? One way or another, the Chinese economy is not to be feared.
The only reason to fear China would be political-military. The rulers of any state who wields military power at the world level are naturally tempted by imperialism and war. But the way to dampen the temptation is not to isolate China but, on the contrary, to promote free trade and Chinese participation in trade. Let’s teach them individualism by example. Chinese (and American) consumers and businessmen are more likely to resist the sirens of nationalism if they realize that the benefits of trade would be destroyed by war. As William Polachek wrote (“Conflict and Trade,” Journal of Conflict Resolution 24-2 [March 1980]—his emphasis),
Ceteris paribus, the greater the amount of trade, the higher the price of conflict, and the less the amount of conflict that is demanded.
READER COMMENTS
Jon Murphy
Dec 22 2018 at 7:16am
Really excellent article. China does appear to be at a crossroads. At first glance, it appears they’ve capitalized the gains they’ve been able to get from reallocating labor and capital. Their rate of growth has been generally slowing for years.
I hope, for our sake and theirs, they become more open and more free.
Benjamin Cole
Dec 22 2018 at 9:54am
1.If Communist China persists with aggressive state-sanctioned IP thrift, there could be a decrease in R&D in the West. Why bother? This is an economic risk. Innovation stagnation.
2. Interestingly, a risk is evolving rapidly, due to the growing surge of Communist Party of China domination of state-owned and private companies (and all other facets of life) in China, reports the Harvard Business Review.
US and Western companies have set up supply chains in China, and some money managers have invested heavily there (notably the $6.2 trillion AUM BlackRock).
“For every such company, especially those critically reliant on Chinese sub-contractors, their value chain is now actively at increased political risk. Local suppliers and their sub-contractors are susceptible to pressure to behave “patriotically” when authorities convey the message, however tacitly, that lack of cooperation with foreign multinationals is in the national interest. Something similar has occurred when Chinese consumers have on earlier occasions read the signals for when they were meant to boycott Japanese and South Korean products,” writes Paul Maidment, Oxford Analytica, for NBR. .
Maidment advocates multinationals diversify out of China. Read the article, it gets worse.
https://hbr.org/2018/12/how-western-multinationals-are-responding-to-the-escalating-u-s-china-trade-war
Richard Ip at Wllbrook echoes the sentiments, bluntly advises Westerners diversify out of China.
http://www.ejinsight.com/20181220-the-risk-of-more-communist-party-influence-in-chinese-firms/
As it is, Western multinationals pretty much must remain supine in relation to the CPC until they diversify, and even then appeasement in the East and abject PR in the West will be the name of the game.
“You can lay in bed with communists. but the results usually evolve from seduction to rape.” Libertarians used to talk this way. Maybe they were right.
China is not liberalizing; it is getting worse. These trends are decades long, going back to Tiananmen Square. The multinationals have bought the West into a risky situation,
Todd Kreider
Dec 22 2018 at 10:37am
China’s growth doesn’t resemble Soviet growth. Here is Angus Maddison’s data for Soviet GDP per capita growth:
1950 to 1973 = 3.6%
1974 to 1984 = 1.0%
1985 to 1991 = -1.3%
China:
1970s 4%
1980s 10%
1990s 9%
2000s 10%
2010s 7%
China’s rapid growth has lasted 40 years and has been almost three times as high as the 23 year period of Soviet “rapid growth”.
Russia’s GDP per capita was higher in 1990 than China’s is today but not by much:
Russia: $20,500
China: $18,000
“And despite its capitalist trappings, the Communist Party is piloting China’s economy in a direction similar to that of the Soviet Union in its twilight.”
No.
Jon Murphy
Dec 22 2018 at 11:11am
Todd-
We need to be a little careful with the GDP figures you’re using here. It’s dangerous to use just decade averages as a lot of the details get swept away.
This is a chart of China GDP per capita using World Bank data.
You’ll notice that the data is somewhat spiky for China. Their GDP per capita growth peaked in 1984 (yes, I am suppressing the 60’s and 70’s data as I feel it is unreliable given the Maoist policies). We see a few other spikes, all relating to increased openness from China and their capitalizations of those gains (eg, the growth in the 2000s from joining the WTO). But, for the past decade, China’s growth has slowed considerably. It does indicate China has internalized all their gains from trade and without institutional changes, their growth rate will likely slow further.
One of the big mistakes people make is straight-line analysis. They see one-time gains (such as the USSR recovering from Tsarist policies that focused on agriculture or Chinese gains from opening up to trade) as perpetual trends and simply project. That mistake was made in the USSR, it was made with Japan and Brazil and India and Korea, and it is being made now with China.
Jon Murphy
Dec 22 2018 at 11:20am
One other point to make (sorry, I wish I could add this into my other post, but I forgot to mention it):
All this assumes Chinese GDP figures are accurate. Remember, with the USSR, even as recently as the late 80’s, Paul Samuelson was proclaiming loudly that the Soviets were proof central planning could work. Only a few, like W. H. Hutt, were saying the Soviet numbers were bunk, that it was all a paper dragon. There was an economist (I think also Samuelson, but not 100% sure) in the 60’s proclaiming that the Soviets showed the superiority of central planning and that the only thing Western economists could do was find a way to make central planning work without the need of communism if we were to survive. Such statements seem silly now.
Todd Kreider
Dec 22 2018 at 1:44pm
Jon,
You aren’t using a PPP adjusted measurement for China’s per capita growth, which is needed when reporting in dollars as your graph does. (GDP per capita grow didn’t peak in 1984 since there were two more times at essentially the same increase in 1992 and exactly the same increase in 2007.)
The graph doesn’t show this. The 1998 to 2000 Chinese growth dip prior to joining the WTO was almost certainly caused by the East Asian financial crisis that began in 1997 and where Japan was in a recession. Once that was over, the graph show that growth again climbed back to where it was in the early 90s.
If slowing down from 10% to 7% a year is considerable, then I agree. Also, I’m not one who has made straight line projections nor disagree that growth will slow down further but unlikely to much until China’s GDP per capita is higher. That is, the slow sown is likely to be gradual in the 2020s, not a dramatic drop.
Chinese growth numbers have likely been fudged by the government at times, for example around 2000 when there was a SARS problem in 2003, but then get smoothed out. For the Soviet Union, I used Maddison, not government figures, and I’m not sure how accurate those are.
China growth has been much closer to Japan’s post 1950 growth with not much in common with Soviet growth.
Jon Murphy
Dec 22 2018 at 2:04pm
Yes, I should use PPP, but the trends aren’t going to change much.
It is. That’s a rather significant decline. Three percentage points on growth is massive.
Indeed, but I do not agree with you that the 2000s was just returning to a trend, especially given the evidence since the Great Recession.
Todd Kreider
Dec 22 2018 at 4:45pm
The growth rate was clearly returning to trend whereas joining the WTO wouldn’t add that much growth, just as Japan and Korea did during that period. That isn’t to say that longer term growth was going to stay in the 9% to 10% range, and that is a long term issue.
While China’s growth rate has decreased (kind of) “considerably” over the past decade, I think many might interpret that to be more of a decline than the 10% to 7% decline that occurred.
Pierre Lemieux
Dec 22 2018 at 3:44pm
Thanks, Todd and Jon, for your contributions. Like Todd, I was a bit surprised by some of the Economist‘s data interpretations as I remembered they did not seem to fit with Maddison’s data. However, it doesn’t seem to me that we need to use PPP when we are not comparing two countries. Moreover, we would want to be careful to use the one of the two Maddison GDP series that is consistent with national-account data. If we add that data from China are not necessarily reliable, we do have a data problem. To the extent that we can rely on the Economist‘s interpretation of data, the slowdown in China would be real and consistent with what we know of economically efficient institutions–so I would broadly agree with Jon.
And I think we don’t have data that contradict the dyadic reason why we don’t need to fear Chinese competition.
Todd Kreider
Dec 22 2018 at 8:48pm
You want to use PPP since using dollar changes for GDP per capita growth instead of the yuan, and you want to control for exchange rate fluctuations.
I don’t think there is much of a data problem if economic historians and current analysts are able to make rough corrections.
In 2020, China will reach the GDP per capita of where Russia was in 1990 before its 30% GDP collapse with a growth rate of over 6%, whereas Russia had been growing slowly at 1% for over two decades with the final years of perestroika in a serious recession. Worlds apart.
Pierre Lemieux
Dec 23 2018 at 8:43pm
Yes, you are right on PPPs. As I and The Economist mentioned, the more rapid rate of growth of China compared to the USSR was its participation in international trade. As we may soon see in America, trade is important.
Benjamin Cole
Dec 22 2018 at 8:13pm
If you trust the Communist Party of China, and believe communism results in a stable society, then the placement of Western manufacturing supply chains in China many not pose an economic risk.
One might note that since Tiananmen Square China has become an increasingly repressive state, especially so in recent years and especially so as pertains to commercial enterprises.
So the US has critical supply chains in the most repressive regimes on earth? What could go wrong?
CZ
Dec 23 2018 at 12:22am
Yet, one observes that China has not cut off any of these critical supply chains. By contrast, the United States nearly dealt a death blow to ZTE, a major Chinese company, by cutting off its US supply chain earlier this year, and may do the same to Huawei. And to the extent American supply chains in China are under threat, it is because of US tariffs, not because of any Chinese policy. Concerns about the security of our supply chains in China is merely projection. In reality, the American government is the biggest threat to the supply chains of both Chinese and American companies.
Benjamin Cole
Dec 23 2018 at 1:05am
The foreign-policy of the US is pretty much determined by multinationals.
They prefer appeasement and cooperation with the Communist Party in China.
How long will this situation last? How long will China remaining stable society? When do we erect a statue to Neville Chamberlain?
The Harvard Business Review is already recommending that multinationals diversify out of China.
CZ
Dec 23 2018 at 9:03am
The political risk of doing business in China is caused primarily by United States actions like sanctions and tariffs. China’s domestic situation is stable and will remain so as long as economic growth continues. Their government now pays lower interest rates than ours for the first time in history. The largest cause of instability in the world economy is the US monopoly in critical finance and technology, and our government’s frequent use of sanctions to cut disfavored individuals, companies, and countries off this critical economic infrastructure. It is truly ironic that we worry about China cutting off our supply chains when they have never done so but we do so to others all the time. It is projection, and the world economy will actually be far more stable when China’s economy is big enough to provide an alternative to the US monopoly in those areas.
As for “appeasement,” what exactly are we appeasing? Chamberlain is rightly known as an appeaser because he allowed Hitler to invade and take over Czechoslovakia. China has not invaded and taken over anybody. They do not insist that any other country adopt their system (quite unlike the US). We seem to have an issue with their domestic industrial policy. If Chamberlain has invaded Germany in the early 30s and started World War II over Hitler’s industrial policies, he would be remembered as the Hitler today.
Robert EV
Dec 23 2018 at 5:57pm
CZ:
Tibet, the international seas around China. And, yes, it’s nice that they were given Hong Kong and Macao despite not being the governments from which those territories were rented.
They don’t have to: https://en.wikipedia.org/wiki/China%E2%80%93Vietnam_relations#Rekindled_tensions_over_maritime_territory
CZ:
Again: Tibet, Hong Kong and Macao. And they sure as heck insist that a certain neighboring country not adopt *our* system (e.g. North Korea).
Robert EV
Dec 23 2018 at 6:03pm
My previous reply to these points that included a wikipedia link will eventually make it out of the spam filter, so until then: Tibet, International seas around China, Hong Kong and Macao (which legally probably should have been given back to Puren, then Head of the House of Aisin-Gioro, and legitimate heir to the Chinese Imperial throne), Vietnam (issues are currently touchy, and Vietnam has recently yielded to Chinese demands), and probably others I can’t be bothered to look up.
Pierre Lemieux
Dec 23 2018 at 8:47pm
You’re right, CZ. Moreover, foreign and even domestic exporting companies are now realizing that there is a political risk in the US too.
Phil H
Dec 23 2018 at 12:58am
The idea that China has become more repressive since 1989 is laughable. Growth has increased freedom enormously; and many of the state’s most intrusive policies have been scaled back tremendously. In terms of social behaviour (fashion, entertainment, marriage, child bearing); economic behaviour (entrepreneurship, consumption, employment); and even political behaviour (expression on social media, travel to other countries, education from non-state sources), Chinese citizens enjoy vastly more freedom than they had in the 1980s.
There’s a long way to go, of course. The Chinese state is still repressive. But the basic direction of travel has to be recognised.
Benjamin Cole
Dec 23 2018 at 7:47am
Phil H—
You are alone in your opinions. The large-scale decrease in human, civil, religious, free speech and legal rights in the last 20 years in China has been well-documented, and is accelerating. The nation is also militarizing, and claims the South China Sea as a lake.
But sticking to just business:
The risk of more Communist Party influence in Chinese firms
By Richard Ip EJI Insight.
If I put the link in, my comments seems to disappear, I assume due to spam filter
Then from Harvard Business Review
How Western Multinationals Are Responding to the Escalating U.S.-China Trade War
by Paul Maidment.
Both authors describe increasing Communist Party of China domination of state-owned and private companies.
Smartly enough, some multi-nationals are migrating out of China.
It is an economic risk to have any critical supply chains in China.
Side question: Why do US libertarians, so acutely sensitive to government excesses, even even minor trespasses, go mute on the Communist Party of China? Which is, after all, a communist party that operates a dirigiste authoritarian economy and nation.
Philip Hand
Dec 23 2018 at 12:28pm
Nope, just asserting it don’t make it so. I’ve lived here for most of the last 20 years, and China was not free in any way when I arrived. It’s slightly more so now. Rather than reading the highly selective press, take a look at people who actually measure this stuff. China’s Freedom House rating hasn’t changed since their measures began. The Heritage Foundation’s economic Freedom report has China trending gently upward. The Frasier economic freedom report shows the same.
I don’t really know where the press claims about China getting worse come from. Perhaps its simply very young reporters who don’t know what the 20th century was like, because they’re certainly not based in any rational reflection on what life was like in the 1990s versus now. Just the simplest things like visas, registering a company, moving to a different town, and having a child are incomparably easier now for ordinary people. Most of these changes are the results of growth rather than meaningful political reform, but that doesn’t alter the fact that life is easier.
As for China’s military expansion, well, duh! Who exactly thought that China was going to become an economic superpower without becoming a military superpower? China’s military rise is going to be a tricky process, no doubt, but it’s hardly unexpected. And as of yet, no blood has been spilt. Long may that last.
Robert EV
Dec 24 2018 at 8:37pm
20 years ago were Chinese Muslims being sent to reeducation camps?
CZ
Dec 23 2018 at 12:42am
One big difference between the Chinese and the Soviets is that the Chinese do not seem to actually believe in Communist ideology; if they believe in anything, it is money. Most of the Chinese students and businesspeople I have met have been singlemindedly focused on getting rich; the people they admire most are not politicians or celebrities, but businessmen like Jack Ma. Though this makes them appear crass and materialistic to some Western sensibilities, ultimately I find this reassuring and believe this means that they will liberalize further as that is the route to making more money (though our trade war will likely damage the cause of liberalization as it inflames nationalist sentiment in China and gives the Communist Party a very easy and plausible target to redirect blame for any economic slowdowns).
I also do not think China is or ever will be a political-military threat. In his speech which otherwise unfortunately glorified the state, Xi was very clear that China does not seek hegemony over other nations. Unlike the Soviet Union (or the USA for that matter), China has never said that other countries should adopt its system. While China unfortunately has a very authoritarian domestic policy, its foreign policy is actually more libertarian than the USA’s–it does business with everyone and does not militarily intervene anywhere. The only way China could reduce freedom in America is indirectly, by giving our government an excuse to pass policies limiting our freedom, but the blame for these policies should be placed on the direct cause, which would be our own government.
Phil H
Dec 23 2018 at 12:50am
This seems very misguided… I’m not sure what Lemieux means by “fear” of China. If you’re a libertarian – or almost any stripe of economist, to be honest – you think that trade and increasing production are a good thing. Fear is only a factor when politics comes into it.
And politics clearly does come into it. I understand that Lemieux tried to defang the comparison by putting the word “economic” into the title of the post, but can anyone seriously defend a thesis that says: “China seems to be quite similar to the USSR, so there’s no reason to fear it”? If China is like the USSR, that’s very, very scary indeed. It suggests that the USA and Europe could enter into a state of military and economic enmity with China, which could easily end in hot war, as the cold war so nearly did. And that the great game which may have contributed to the South’s ongoing poverty (particularly Africa) may continue. This would be one of the worst of all possible worlds. Any suggestion otherwise is, IMO spectacularly ill-judged.
A couple of other obvious problems: China doesn’t need the rest of the world for trade. It needed to import technologies; that project is nearly complete. It still needs oil. But China is so big that if it develops as an effective free trade area, its economy can easily grow under its own weight with little or no external trade for periods to be measured in terms of decades.
In the long run, I’m sure everything will be fine, but that’s the wrong question.
Warren Platts
Dec 25 2018 at 3:06pm
There is an analogy here, but it is backwards. China is more like the USA and the USA is more like the old USSR. The reason the Soviet Union imploded is because the percentage of their GDP they spent on their military simply became unsustainable: they could not keep up with the US/NATO arms race. Why? Because we grew faster than them, we could keep our military spending at an easily sustainable 3% or so of GDP. But for the USSR to keep up, they had to continually ratchet up spending until it was like 20% GDP iirc.
The USA is now in the same boat. On a PPP basis, China has had a larger economy than the U.S. since at least 2014. Currently, they spend about 2% GDP on their military. In round, very rough figures, we spend $600 billion; they spend about $400 billion (PPP). It would take an easy stroke of a pen for China to ramp up to 3%, at which point their spending would equal or exceed ours.
Then what happens? They continue to grow at a rate faster than ours. Thus they can keep their spending at 2 or 3% forever, but for us to match their navy, air force, missile wings, and space forces, we will have to continually ratchet up our own defense spending until we just cannot do it anymore. And then it is game over.
We might as well split up the United States now, while we are still relatively wealthy…
Shane L
Dec 23 2018 at 6:19am
Surely the concern is simply that the Chinese government’s capacity to wage war against the United States has grown enormously with its economy. Aside from any analysis of their will to wage war, their ability to do so has surely increased a staggering amount since the 1970s.
To my knowledge, in the past governments tended to be concerned when they observed population and economic growth in neighbours, as Imperial Germany was in the face of swift Russian growth of the 1910s.
Thus if China’s growth continues we can celebrate the liberation of hundreds of millions of Chinese people from poverty, but also wonder about the consequences of an authoritarian government developing massive warmaking abilities.
B
Dec 24 2018 at 6:12am
The more I think about this…
China is becoming an increasingly repressive authoritarian state. It is getting spooky—Christian churches being shut down, NGOs and think tanks getting shut down. Incredible surveillance state (1984 on steroids). A President for life (Xi). A million West Chinese in “education camps.” Increasing Chinese Communist Party monitoring and control of state-owned and private enterprises. A militarizing South China Sea. But no free press at all—only state media. Thus the public’s view of China, however dark, is probably not dark enough.
A critical supply-chains inside this communist black hole.
That is not an economic risk? How stable is China? Are you sure?
Warren Platts
Dec 25 2018 at 2:44pm
I am sorry, but the level of naivete demonstrated here blows my mind. What counts is not what Chairman Xi says China’s intentions are in a public speech. What counts is their capability and their actions in real life. China’s invasion of the South China Sea demonstrates they are intent on expanding their empire. And it is not secret that they fully intend to invade Taiwan, peacefully if possible, by force if necessary. Why? Because it is historic Chinese territory? Nope. It is for military projection purposes. Taiwan is the central link in the first island ring–an unsinkable aircraft carrier. If they can control Taiwan and the South China Sea, they can get their submarines and surface fleets out into the open ocean without getting blown out of the water first. And those submarines are nuclear tipped, and, if they get close enough, and strike any location in the United States or Canada.
As for their actual intentions, if you want to know what those are, just look at their own open source military literature. You can start with the “Unrestricted Warfare” white paper. It lays out perfectly clearly the Chinese warfighting doctrine: in particular, the Chinese do not view “war” as merely two sides shooting at each other. It encompasses every other aspect you can imagine, including economics and even drugs.
After reading that paper, you will realize that China considers itself in a very real, literal, if undeclared war with the West–as they define war in their own literature. Thus, when the Chinese Communist government sanctions rampant IP theft from the USA, it is not just because they are dishonest, money-grubbing thieves–although they are that–it is because by doing so, they slow the economic growth rate of the United States by anywhere from 1 to 3 percentage points, according to President Trump’s office. That is, the IP theft is a literal act of war, as they define it in their own literature.
As for drugs, the ramp up in fentanyl exports to North America is taken straight out of the “Unrestricted Warfare” playbook: to reap profits while sowing chaos in the target country. It is no coincidence that the ramp up occurred when Trump and his policy of revamping the U.S. manufacturing base started to gain traction: by sending drugs to the American regions already devastated by the stupidly self-imposed “China Shock”, they seek to ruin the U.S. working class as an effective, productive work force, and thus further slow down U.S. economic growth and industrial capacity.
That the drug exports are state-sanctioned is obvious: nothing happens in that country that CCP does not know about. Chairman Xi gave the game away in Argentina when he promised to end the fentanyl exports: if Xi can end the exports tomorrow, they why couldn’t he end them two years ago?? After all, drug dealers who sell heroin to Chinese citizens swiftly get an extrajudicial death penalty. The answer is that the exports are literally recommended by their own warfighting doctrine.
And so the Chinese Communist government is literally killing more Americans every year than it managed to kill during the entire Korean War. Now, why should we think that killing 30,000 or more American civilians per year through drugs is any less morally reprehensible than if they killed those Americans with hypersonic ballistic missiles? Apparently, the answer is that working class folks in flyover territory do not count for very much among the elitist “expert” class in this country.
Bottom line: regardless of what you all happen to think, the Chinese view the United States and the West in general as their mortal enemies. They literally consider themselves in a state of war with us. It is their own open source literature, and their actions and threats provide ample confirmation of that fact.
Therefore, unless one is Libertarian enough to recommend trading with Nazi Germany at the height of 1944, then one should not recommend trading with China. Ben Cole is right above: that so-called Libertarians are the loudest apologists for the Chinese Communist Police State is the Mount Everest of all hypocrisy.
Pierre Lemieux
Dec 25 2018 at 8:16pm
Three points, Warren:
“according to President Trump’s office”: I would strongly recommend not assuming that “President Trump’s office” knows anything about economics except for 17th-century protectionism.
Trading in times of war, assuming that the war is a just war, is different from trading with individuals who are the subjects of a state with which our own state is not at war.
As I have often suggested, one should think about these topics in individualist, not collectivist terms. After all, isn’t this supposed to be the difference between “us” and “them”?
Warren Platts
Dec 26 2018 at 2:36pm
Actually, that estimate of 1 to 3% of GDP lost to IP theft comes from The Commission on the Theft of American Intellectual Property and was published by The National Bureau of Asian Research originally during Obama administration.
http://ipcommission.org/report/IP_Commission_Report_Update_2017.pdf
Tom West
Dec 26 2018 at 7:30pm
Of course, on a bleak note, perhaps the Chinese have recognized that in a free society, with sufficient technology and cultural understanding, that freedom can be weaponized by external enemies or internal extremists to make that society self-destruct. Were that actually the case, some form of repression might be the only guarantee of a GDP > 0 in the long term.
I don’t believe it myself, but 15 years ago, I would have considered the chance that it’s true at 0.01%, and now, maybe 5-10%…
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