Hitting the Information Wall

In “Hitting China’s Wall.” Paul Krugman opines that “All the signs coming from the economic data show that China is in big trouble.”

He does not do a very deep job at explaining what he means. The latest China GDP growth number was an annualized 7.5%, down from a torrid, sustained, 10% (Brazil, recently a growth star, is hovering around zero growth, barely better than France). 

There is a French saying: “Quand le batiment va, tout va” (“when construction is doing great, everything is great”). And it’s true that the run-up in real estate prices in the West is directly related to a dearth of construction. Basically, the West is not building enough comfortable, modern housing where work is to be found. A failure of Biblical proportions.

By contrast, China is still building at a frantic pace, smbolized by super tall towers all over. This is a pretty typically Chinese scene in Shanghai, May 2013 (the slab poking over the palm trees on the right of the “Shanghai Tower” is the “World Financial Center“, a super tall skyscrapper, finished several years ago, adorned with the highest public observation deck in the world):

Is China Collapsing?

Is China Collapsing?

Krugman’s  explanation, for this alleged economic trouble, is that China is running out of peasants… A fine train of thoughts, except that there are 600 millions of them, Chinese peasants, out there (so, if the rate of peasantry approached that in the West, more than 500 millions should get urbanized in the next generation!).

Anyway, instead of sweating out the details, I wanted to deepen the debate, so, I sent him the following, and, kindly, the New York Times published it immediately:

Economy and politics are entangled. China’s economic problems are nothing relative to its political problems. 

The number one consumption in the developed world, most powerful, and most craved for, is information. That’s what Chinese consumers will really want in the end. That sort of consumption, the Chinese dictatorship cannot afford to let the People of China enjoy. Thus, it is anxious to avoid such a dismal situation.

Hence the leadership is reluctant to allow ever more base material consumption: once that has proven unsatisfying, as it is certain would happen, the lust for meaning, would lead to ever more questions, of a deep emotional, rational, and then philosophical, thus political, nature. This is basically the psychological mechanism that led the children of the elite to turn against their parents at the time of Tiananmen.

On the other side of the mountains, India has opted for democracy. Democracy depends upon openness and information. As time enfolds, India will be able to become increasingly the master of both, and that’s what people want. Worldwide. 

Thus the present Chinese political system blocks the long term production of the most advanced service, information. That’s what really hobbles the Chinese economy: getting ten dollars making a 600 dollar i-phone gets you only that far.

The Chinese surveillance apparatus, with its 50,000 Internet censoring goons, is only dwarfed by the American one, with its 1.2 million watchdogs. It’s an economy killer, be it there, or here.

And when it has too many goons in power, a state, any state, will collapse like the Soviet Union. Now the USSR is the so called Russian federation (Rossiyskaya Federatsiya). (Notice that “Russia” does not claim to be either a republic, or a democracy, this is important, just as it was important in Weimar!)

Having brutes, and brutish ideas, in power, a state cannot shake the habit of tyranny, or even plutocracy (Russia’s most prominent opposition leader Aleksei A. Navalny was sentenced to five years in prison on Thursday, July 18, 2013, for daring to call Putin’s machine, United Russia, the “party of swindlers and thieves” ).

Ultimately, such states, states devoted to the sinister arts of the Dark Side, spend so much energy fighting those who have ideas, that they end up with none. Or at least  not enough ideas to support their society, let alone their economy.

***

Patrice Ayme

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18 Responses to “Hitting the Information Wall”

  1. Mike Borgman Says:

    I think I’ve finally hit the point where running around with my hair on fire is really becoming a case of highly diminishing returns.

    • Patrice Ayme Says:

      Dear Mike: Funny that you say this. Krugman basically said the same a few days ago, and added he would stop blogging, because the news out there were so discouraging. On my twitter flow I put some interestig news: Nenaderthal epigenome was sequenced, and a blue extrasolar planet found… I still have to write that “what’s money?” opinion…

      On the positive side, if more Romans had got worried in right way, soon enough, Rome would have kept on improving the world. And what precisely happened is that Roman law was not respected to start with, just like several parts of the USA Constitution are not respected (4th amendment, for example).
      PA

      • Mike Borgman Says:

        Everything ends, everything. Our precise point was when Robert Byrd was quoted saying this””The original Patriot Act is a case study in the perils of speed, herd instinct and lack of vigilance when it comes to legislating in times of crisis,” the West Virginia Democrat said Monday on the eve of the Senate’s final votes on its renewal. “The Congress was stampeded, and the values of freedom, justice and equality received a trampling in the headlong rush.”

        What we valued the most which was supposed to be a part of our constitution, was summarily removed. Now we know that during Obama’s tenure, these laws have been strengthened giving us less and less freedom. The NSA knows almost everything or in all reality everything!
        We have a Supreme Court that blessed us with Citizens United.

        I’m afraid our Roman moment may be long gone, truly I hope not because there’s so much potential if we’d just take our country back from the Oligarchy.
        I’m sure we have a litany of those moments or everyone has their own special one, but things have changed and not for the better at least not in this country.
        Put the wealth and power back into the hands of “we the citizens” and I believe we can fix it. Leave it as is and you might a well kiss it all goodbye.

        So if I can’t get excited about P.K. and China’s 7.5% GDP today, I have other things on my mind.

        • Patrice Ayme Says:

          dear Mike: I did not realize senator Byrd was stil around. Excellent quote too. The point about Krugman’s China panic (ohmygod1 only 7%!) is that it diverts, as usual, away from the biggest issues. It’s striking to see the USA adopting Soviet methods…

          As far as the Roman moment, the situation is different, as there are many other democratic republics. the first thing the roman plutocracy did, was to swallow allother independent democratic republics. (Carthage was the first swallowed, and most followed in short order; Marseilles was the last swallowed, about a century after all the others.)

          The USA is in no way dominant as Rome was. Even then, Germans, with 2-3% of its population at most, pierced the empire all over, to death. Right now a republic such as France is capable of defending herself against the entire planet, if need be. Not that there is a need. The EU is more than half a billion people, and it has a leadership: namely France and Germany, which do what they want. Together, France, Germany and their immediate satellites are about the power of the USA. In all ways.

          France just put Switzerland on its knees. The ex-president had to wait in the anti-chamber of the french finance minster for half an hour, before being admitted to sign her reddition. When French and German warplanes needed to go to Mali, Switzerland duly opened her airspace.

          Now the USA and Germany are going to require from Switzerland the concessions given to France (which involve taxing about 4% of the Swiss population as if they were French, nota bene!!!!!!!!!!!!!!). Next, when Europe has put the tax havens into submission, the natural question will be to force the USA to do the same.

          USA based plutocracy has not won the war. My bet: it will lose it.
          PA

  2. EugenR Says:

    I just wrote in Krugmans blog the following;

    Chinese economic development has speed up if compared to the US and the European economy since 2008. The major drive of this economic growth was investment. A temporary slow down of this process is necessary, if there should be a shift of the economy from investment to consumption. And in consumption still a lot can be expected. Do not forget most of the Chinese population is about to purchase their first TV set, and never owned a private car.

    http://rodeneugen.wordpress.com/2011/12/22/china-and-the-world-economy/
    http://rodeneugen.wordpress.com/2011/06/15/httprodeneugen-wordpress-com-4/

  3. EugenR Says:

    I like very much your quotation; ….to the sinister arts of the Dark Side, spend so much energy fighting those who have ideas, that they end up with none…..

  4. Patrice Ayme Says:

    Restarting thread because I was told it’s unreadable on smart phones:
    In answer to Mike:
    The USSR broke the hearts of billions, and contributed to the destruction of the bodies of maybe 100 millions (let’s not forget that it was allied to Hitler, and not just in 1939-1940-1941, but thoughout the 1920s, 1930s: that enabled Hitler). It was a bit like Obama written large: promise something, and then switch to the Dark Side. (Although Obama is still growing up, as witness his completley contradictory statements about the kid killed in Florida, in the last few days alone; I really believe that Obama, to a great extent, has been played like a fiddle by his hyper rich “friends”; and he did not invent the NSA or CIA’s moods).

    A telling sign about the situation with American democracy (or lack thereof), is that prominent citizens of the USA are in the habit of saying terrible things about the USA outside of the USA, and then their declarations get censored inside the USA.
    This works very well. so far.

    “America does not at the moment have a functioning democracy,” Jimmy Carter said at an event in Atlanta on Tuesday sponsored by the Atlantik Bruecke, a private nonprofit association working to further the German-U.S. relationship. The association’s name is German for “Atlantic bridge.”
    Carter’s remarks didn’t appear in the American mainstream press but were reported from Atlanta by the German newsmagazine Der Spiegel, whose Washington correspondent Gregor Peter Schmitz said on Twitter he was present at the event. The story doesn’t appear in the English-language section of the Spiegel website and is only available in German.

    Ironical as the Carter administration admitted overseas that it secretly started the war in Afghanistan…
    https://patriceayme.wordpress.com/2013/01/21/usa-attack-against-afghanistan/

    In the last few days, scientists who worked for the NSA declared on foreign TVs that they were threatened at gun point by the… FBI.
    PA

  5. Mike Borgman Says:

    Submitted on 2013/07/19 at 8:08 pm | In reply to Patrice Ayme.
    Hi Patrice,

    I think I’m just having one of my worried days. Sen Byrd passed away in 2010, but it’s almost like yesterday when he explained how dangerous the path we were on and how dangerous some of the language in the Bill was. Anyway, we will survive in some form which occupies our land mass.

    I have noticed that people are becoming less tolerant of Derps which is really good, so it’s not all bad out there.
    I’m still convinced we’ll prevail but I don’t expect it to be easy.

    The most important point you’ve made is the noise to signal ratio.
    The more nonsense drawing our attention, the less attention we have for the signal(those subjects that are really important). So yes deja vu USSR.

    Great propaganda can work well, when the same thing is said 10 different ways and if nothing else, the opposition have become proficient propagandists.

    Mike

  6. Lovell Says:

    Banana republics in Latin America and Asia have demonstrated that it is possible to maintain the appearance of a state even if there is widespread suffering of the masses.

    US plutocrats are salivating for exactly the same state of affairs. They will have in their hands full control of the levers of power and enjoying god-like status reminiscent of the pharaohs of Egypt as well as those being currently enjoyed by communist politburo bosses in China.

    • Mike Borgman Says:

      US plutocrats are salivating for exactly the same state of affairs. They will have in their hands full control of the levers of power and enjoying god-like status reminiscent of the pharaohs of Egypt as well as those being currently enjoyed by communist politburo bosses in China.

      So, so very well said. My compliments.

    • Patrice Ayme Says:

      Exactly. But my bet is that it’s not going to happen, because people are going to resist. I was at a high power reception in Stanford today, and I was surprised how well received my ideas were by some wealthy and mighty people. Suddenly we were like comrades, and they laughed when I told them some inside track stuff.
      Similarly I found the 180 degrees of Obama about the killing of that kid in Florida encouraging. I guess he realized his previous declarations about “justice being done” were grotesque, not to say indecent.
      PA

    • Lovell Says:

      @Mike/Patrice,

      If the normal political process to bring about economic justice doesn’t work, the other alternative would be to revive the spirit of Bastille.

      Either that or we’ll just coast along just like one of those dysfunctional banana republics while the masses are kept entertained by reality shows to mitigate their hungry stomach.

  7. Patrice Ayme Says:

    When Obana Sorry, not Obanana, but Obama, ran for the presidency, I thought that was a totally unexpected chance. All the more as my spouse had known him since they were very very old friends.

    However, things did not turn out as expected. Obama became Bushama (see my essays from late 2008/2009…Then he did the embarrassing Obamascare…. all this because he became president to the establishment, instead of president of the revolution.

    Louis XVI had exactly the same problem, for 20 years, oscillating between one and the other (witness his contradictory orders to Lafayette).

    There is a huge amount to say about the French revolution. In a way the United Nation charter is it’s direct consequence…
    PA

  8. Lovell Says:

    Dear Patrice,
    Why not a closer Euro-American alliance as Rosecrance proposes here:

    http://www.nytimes.com/2013/07/28/opinion/sunday/want-world-domination-size-matters.html?hp

    No more top dog maneuvering and competition. Hostility and animosity, gone. Cooperation is better. Europe and America re-connecting through trade and democratic tradition as a peaceful leverage to draw in the Chinese and the Russians in what could very well be a triumph of cosmopolitan urge.

    • Patrice Ayme Says:

      Dear Lovell: I am 100% for it. For years I have said that all the trade ought to be free (US and EU are implementing talks on this finally), and the USA ought to be admitted to the visa free travel of the Schengen accord (UK refuses to be in it, never mind).

      I have said the USA should build the Rafale-Meteor system under licence (forget the F35). The French defense ministry, exasperated by slow going Franco-British drones decided to purchase American ones, etc…. So there is a step in the right direction.

      Frankly I was exposed to lousy, thick anti-French jokes in the Silicon Valley over the weekend, I find this sort of behavior grotesque (one cannot even have an informed conversation!). It also prevents synergies, especially civilizational synergies…

      Speaking of lousy jokes, may I attract your attention on my latest title…
      PA

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