China's Economy Is Clearly Thriving; Economists Are the Issue
The Washington Post's editorial board's contempt for significant Chinese manufacturing aimed at the global market reflects a broader disregard for the division of labor, which underpins all productive progress.
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Editor's Note: John Tamny is President of the Parkview Institute, editor of RealClearMarkets, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors. This article originally appeared in Forbes and is republished here with permission. The views expressed are those of the author and do not necessarily reflect the opinions of CN.
"The world is being swamped with Chinese goods, and the United States, Europe and Japan are right to worry about it." This statement opens a recent editorial in the Washington Post focusing on Chinese production. The premise here is that the editorial team could be encouraged to reconsider their negative perspective. Production, by its very nature, is a positive force.
When the Post’s editorial board expresses concern over significant Chinese production for the global market, they are effectively dismissing the division of labor, which underpins all advances in productivity. This skepticism likewise overlooks the potential for automation, which promises to enhance human productivity significantly in the United States, Europe, Japan, and China, leading to economic conditions in the future that will dwarf the current state.
The location of producers, whether they are just down the street or halfway around the globe, is irrelevant. What truly matters is that production is occurring, and that it is increasing. As production rises, consumers enjoy lower costs for goods and services, while simultaneously having greater opportunities to engage in work that leverages their unique skills and intellect. This is because imports, much like the division of labor, enable individuals to specialize more effectively, resulting in increased productivity and higher compensation.
The editorial further notes that "China's exports overall grew about 13 percent last year," asserting this was done by central decree. The authors also contend that "China's economy remains in the doldrums," and that "In hopes of pulling the country out of this hold, Chinese leaders are stepping on the gas for exports." Here again, the editorialists could be persuaded to reconsider their pessimistic views on production and exports, including those of Post columnist Heather Long.
Long has recently echoed the editorial sentiment, confidently stating that the Chinese economy is struggling, and instead of encouraging domestic consumption, the country is once again trying to undercut other nations by increasing exports. However, it’s possible that she too could re-evaluate her perspective.
For starters, if China's central planners or producers were genuinely "trying to undercut other countries," they would not be doing so by "ramping up exports." In fact, a nation’s economic vitality is diminished when there is insufficient production domestically. The maxim that work divided is the primary engine for productivity gains is worth reiterating.
Additionally, it is crucial to recognize that to produce is inherently linked to importing. In practical terms, you cannot ramp up exports without also ramping up imports. While Long and her fellow editorialists might argue that, due to their historical struggles, the Chinese tend to save the rewards of their exports, it remains that no act of saving decreases demand. Money that is saved is quickly lent out by financial intermediaries to those with immediate consumption needs. What is not spent by producers inevitably goes to those who will spend it.
This leads us to the editorial’s claim that "China's economy remains in the doldrums," suggesting that "The Chinese economy is struggling." Such assertions stem from the belief that there is a mismatch between Chinese production and consumption. However, that notion is fundamentally flawed. Bullish production inherently equates to consumption across the board. The genuine obstacles facing China lie not within its economic framework, but within the misconceptions of economists and their models.
Ian Smith contributed to this report for TROIB News
"The world is being swamped with Chinese goods, and the United States, Europe and Japan are right to worry about it." This statement opens a recent editorial in the Washington Post focusing on Chinese production. The premise here is that the editorial team could be encouraged to reconsider their negative perspective. Production, by its very nature, is a positive force.
When the Post’s editorial board expresses concern over significant Chinese production for the global market, they are effectively dismissing the division of labor, which underpins all advances in productivity. This skepticism likewise overlooks the potential for automation, which promises to enhance human productivity significantly in the United States, Europe, Japan, and China, leading to economic conditions in the future that will dwarf the current state.
The location of producers, whether they are just down the street or halfway around the globe, is irrelevant. What truly matters is that production is occurring, and that it is increasing. As production rises, consumers enjoy lower costs for goods and services, while simultaneously having greater opportunities to engage in work that leverages their unique skills and intellect. This is because imports, much like the division of labor, enable individuals to specialize more effectively, resulting in increased productivity and higher compensation.
The editorial further notes that "China's exports overall grew about 13 percent last year," asserting this was done by central decree. The authors also contend that "China's economy remains in the doldrums," and that "In hopes of pulling the country out of this hold, Chinese leaders are stepping on the gas for exports." Here again, the editorialists could be persuaded to reconsider their pessimistic views on production and exports, including those of Post columnist Heather Long.
Long has recently echoed the editorial sentiment, confidently stating that the Chinese economy is struggling, and instead of encouraging domestic consumption, the country is once again trying to undercut other nations by increasing exports. However, it’s possible that she too could re-evaluate her perspective.
For starters, if China's central planners or producers were genuinely "trying to undercut other countries," they would not be doing so by "ramping up exports." In fact, a nation’s economic vitality is diminished when there is insufficient production domestically. The maxim that work divided is the primary engine for productivity gains is worth reiterating.
Additionally, it is crucial to recognize that to produce is inherently linked to importing. In practical terms, you cannot ramp up exports without also ramping up imports. While Long and her fellow editorialists might argue that, due to their historical struggles, the Chinese tend to save the rewards of their exports, it remains that no act of saving decreases demand. Money that is saved is quickly lent out by financial intermediaries to those with immediate consumption needs. What is not spent by producers inevitably goes to those who will spend it.
This leads us to the editorial’s claim that "China's economy remains in the doldrums," suggesting that "The Chinese economy is struggling." Such assertions stem from the belief that there is a mismatch between Chinese production and consumption. However, that notion is fundamentally flawed. Bullish production inherently equates to consumption across the board. The genuine obstacles facing China lie not within its economic framework, but within the misconceptions of economists and their models.
Ian Smith contributed to this report for TROIB News
