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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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When commenting on the recent Chinese stockmarket meltdown, Glenn Reynolds wondered if a prediction posted on Samizdata some time ago could be coming to pass. Whilst exposure for Samizdata on Instapundit is nice, I think Mr Reynolds is wrong if he perceives this stockmarket wobble to be a potential opening salvo of the economic holocaust presaged on these pages early last year. Far from heralding the collapse, it will delay the inevitable.
In spite of a widespread belief in China’s embrace of free-market capitalism, enormous economic distortions characterise modern China’s economy. For example, why is it that, relative to China’s economic footprint, the Chinese stock market is rather pathetically stunted – especially in light of the vast savings pool the Chinese people have accumulated? As mentioned in the above article, the Chinese are great savers and they tend to deposit these savings into bank accounts because alternative investment opportunities are limited compared to those offered to a Western investor. Consider the following:
Why does the Chinese investor not sink his surplus funds into foreign commodities? Because he is restricted from doing so.
Why does he not invest in Chinese stocks? Because he (probably correctly) views the Chinese stock market as being distinctly ropey.
In light of these state-imposed distortive realities, what does one do with one’s savings? One puts them in the bank, of course. Predictably, the banks are awash with deposits. Under these circumstances, the principles of fractional reserve banking have been taken to the extreme in China, allowing the central government to durably zombify huge segments of the otherwise bankrupt state-owned industrial sector by forcing the “big four” state-owned banks to continuously loan depositors’ money to these failed state enterprises, in the full knowledge that these loans will never be repaid.
This fiscal expedience allows the central government to postpone the nasty (and potentially regime-threatening) hangover that inevitably follows a sustained attempt at central economic planning like that witnessed during the Mao era. Unfortunately, it cannot continue indefinitely. Firstly, it provides no market incentive – the only incentive that works – for the wayward state-owned enterprises to reform. If they do not reform into conventional free-market actors, they will always require such charity. Secondly, this charity can only continue if Chinese bank account holders continue to top up (or at the very least maintain) their balances.
Of course, the central government knows the above only too well. If China Inc. in its current incarnation is to survive, it is critically important that the Chinese do not withdraw too much of their savings from the state-owned banks to invest in other pursuits, as this will cause the banking system – and “socialism with Chinese characteristics” – to collapse. The central government probably engineered the recent stockmarket fluctuation to buttress the perception of insecurity that shrouds potential investment targets like Chinese stocks, and are no doubt well pleased with the message that was subsequently delivered to the average Chinese investor. This does not mean that the current Chinese economic model is now secure – it will unravel at some point in the future. However, that point has been postponed with a ‘hair of the dog’-type solution, which will make the eventual hangover even more severe.
The central government has merely bought some time.
Garbage In, Gospel Out
– William S. Lind, discussing the operational philosophy underpinning US military intelligence.
Impartiality is a pompous name for indifference, which is an elegant name for ignorance
– G.K. Chesterton, The Speaker, 1925
There’s more to the world than politics. Politics is a way to have paved streets and cops and firefighters show up when we call 911. It’s nothing more than that.
– Commenter ‘Sunfish’
Most people have no idea how much damn maintenance and tender loving care a ballistic missile needs to remain operational. The frigging things are like a temperamental girlfriend (more likely to go off in your face than take you to the heavens). If I was forced to chose between standing 500 yards from the launch site of a Russian ICBM or within 500 yards of the intended target, I’d chose the target.
– A pseudonymous commenter
Back in my day, the toms weren’t much to look at, but you look at these Polish birds in London these days and yer think, blimey, I’d pay money for that!
– So said a London taxi cab driver the other day, starting off with what I had taken to be the preamble to an anti-immigration rant to a captive audience (me) but which turned out to be a hosanna to the value to the British gene-pool of the latest wave of mass immigration. He said because of the area he worked, he frequently picked up and delivered high class ‘courtesans’ to their place of gainful employ.
Spring onions are spring onions (or scallions). Aussies might have recently beat us at a pointless activity (it isn’t sport if you can do it in a chunky-knit tank-top) but they lag well beyond the Northern Hemisphere in the recognition of common-place veggies. And your water goes down the plug-hole the wrong way round… And that’s moral turpitude that is, not the Coriolis effect.
– Commenter Nick M
Most of my old mates from Country Durham probably know how to download porn off the web (that’s what its really for after all) but I’d be willing to bet that to a man they think MySpace is where you part your car.
– Commenter ‘Albion’
Democratic Undergrounder 1: “Dude, Bush is a god-damn fascist. I asked everyone I know and like no one voted for him! Patriot Act, wiretaps made easier, locking up people in Guantanamo Bay without a trial… he’s like some whacked out Christian dictator!”
Democratic Undergrounder 2: “Yeah man! It’s so good to see Chavez in Venezuela sticking it to Bush’s buddies in the oil business! He’s gonna make Venezuela totally free now!
Democratic Undergrounder 1: “That’s right! Did you hear? He’s been given powers to rule by decree and now he can close down opposition newspapers, silence non-socialist radio stations and throw his political enemy’s asses in jail if they don’t do whatever his decree says.”
Democratic Undergrounder 2: “Woah, cool! One day I hope we’re as free as that in the USA!”
Of course, I am just imagining that discussion. I am sure nothing like that ever happened.
If the best we get by having a choice between a “democratically” elected Statist behemoth and a dictatorially selected Statist behemoth then we’ve got a major problem. So “scale” is important when discussing democracy. Granted local authorities can be corrupt as well, but the whole notion is to “set aside” bad government, not elect in a new batch of the same. In the end, the bigger the government, no matter how it is contrived, the more self serving and unresponsive it will be. The anti-federalists knew this, but lost out for the most part
– Commenter ‘Brad‘
New Year’s Day – Now is the accepted time to make your regular annual good resolutions. Next week you can begin paving the road to hell with them as usual
– attributed to Mark Twain
All governments, all people even, should be held to the same moral standards. If you allow it for Saddam or Uday, then you must allow it for Bush or Rumsfeld. If you forbid it for Bush or Blair, then you must forbid it for Saddam or Ahmadinejad. Anything else smacks of “you can’t expect any better of Middle Easterners”-style of racism, or at least cultural arrogance. Did Saddam lie about WMD? Does Bush rape women or imprison and torture small children? First set out what your standards of behaviour are, and when particular actions in response are justified, and only then consider the example set by particular nations. For if you pay more attention to Iraq than Tibet, say, people might be able to accuse you of being on the side of the tyrants, and your moralising protests no more than enemy propaganda. And you wouldn’t want that, would you?
– Commenter ‘Pa Annoyed’
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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