The fiscal consequences of a unitary state
Andrew Batson » Economics
by Andrew
7M ago
The reason fiscal policy is interesting is that it is the concrete expression of a country’s political priorities: how governments spend money tells you how they work and what their priorities are. By the same token, it is impossible to really interpret fiscal policy without some understanding of the political structure in which the government operates. There are a lot of major differences in political structure–to put it mildly–between the country I grew up in, the US, and the country I have spent my professional life in, China. One of the ones whose importance took me a while to figure out i ..read more
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Stimulus is never just temporary
Andrew Batson » Economics
by Andrew
10M ago
As China’s data continue to disappoint, there is a persistent theme in much of the outside commentary on its economic woes: that China is for some reason failing to take the “obvious” step of sending stimulus checks to households. The implicit argument is that the US handed out massive subsidies directly to households, got a great post-pandemic recovery and everything turned out fine. China did not deliver subsidies to households, and that’s why everything is very much not fine. Why is China, still, not taking this course in spite of the positive example of the US? Of course, an obvious answer ..read more
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The persistence of markets under Mao
Andrew Batson » Economics
by Andrew
10M ago
What accounts for the extraordinary rise of China’s private sector after the economic reforms that followed Mao’s death? The 1980s were a pivotal decade for China in many ways, as the rapid growth of the private sector transformed the structure of a still officially socialist economy. In 1987, Deng Xiaoping famously said that the explosion of private-sector activity in the countryside in particular came as a surprise to him: In the rural reform our greatest success — and it is one we had by no means anticipated — has been the emergence of a large number of enterprises run by villages and town ..read more
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Breaking down China’s manufacturing
Andrew Batson » Economics
by Andrew
1y ago
I got involved in a Twitter discussion with Brad Setser and others over the nature and causes of China’s high share of global manufacturing . This prompted me to go through some tedious statistical work to establish some basic facts for my own satisfaction. The results are now more or less final, so I am going to outline them here. We know that China has a high share of manufacturing in its GDP, with the sector’s value-added accounting for about 28% of total value-added at last count. This is higher even than other manufacturing champions like South Korea (25%), Germany (21%) and Japan (20 ..read more
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The polarization of global R&D spending
Andrew Batson » Economics
by Andrew
1y ago
How has China’s rise as a science, research and technology powerhouse reshaped how research gets done across the world? One admittedly simplistic way to track this is to look at a single widely available statistic: R&D spending. (It’s worth keeping in mind that R&D spending is not precisely “science”–it does include spending on research projects by academic institutions, but most of it is actually corporate expenditures.) The story those numbers tell is less alarming for the US than you might assume from a lot of reporting, but the shift in the global distribution of research does crea ..read more
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China’s fiscal policy and the new rhetoric of inequality
Andrew Batson » Economics
by Andrew
1y ago
The Chinese Communist Party is now ideologically committed to reducing income inequality. That the previous sentence is not in fact a meaningless circular statement says a lot about the peculiar evolution of socialism in China since 1978. But after dodging around that part of its socialist ideological heritage for the last few decades, China’s leadership is now grappling with the issue of inequality more directly, at least in its rhetoric. The 14th Five-Year Plan adopted in March includes a section that calls for “proactively narrowing regional, urban-rural and income gaps.” And Xi Jinping him ..read more
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China’s housing crisis is an institutional crisis
Andrew Batson » Economics
by Andrew
1y ago
There’s a tendency among economic and financial analysts to treat all housing crises as essentially the same. Housing is a long-lived asset purchased with leverage, therefore it’s not surprising to see a common pattern of a buildup of leverage leading to higher prices leading to excess construction, which at some gets out of hand and then is followed by collapsing prices, construction and leverage. Yet the details of housing markets do matter, and vary quite a lot between countries. As with Tolstoy’s line about unhappy families, every housing crisis is a bit different and exposes a different s ..read more
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State capacity and the income tax
Andrew Batson » Economics
by Andrew
1y ago
State capacity is a difficult concept to make concrete: a government’s ability to do stuff is obviously important, but how to tell if it is high or low? As a useful overview over at the Broadstreet blog shows, the most common way to measure state capacity in general is to measure fiscal capacity: the government’s ability to extract revenue from the economy. This makes sense historically, as the growth over the last few centuries of governments’ ability to do things like wage wars and provide social benefits went hand-in-hand with the development of tax systems and debt markets. For the 20th ce ..read more
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The strange case of China’s self-employment statistics
Andrew Batson » Economics
by Andrew
1y ago
It is a well-known habit of Chinese government officials to pepper their public remarks with statistics. Very occasionally, this habit leads to the disclosure of some new information. At a press conference early this year, a deputy director of the State Administration for Market Regulation (SAMR), which among other responsibilities handles the legal registration of businesses, waxed enthusiastic about the rapid growth in small businesses–specifically getihu, meaning individual businesses or sole proprietorships. In the process, he dropped some big numbers: The Party Central Committee and the ..read more
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The consensus on centralization
Andrew Batson » Economics
by Andrew
1y ago
Dylan Levi King has a nice essay out in Palladium on the history of decentralization in China, opening with the assertion that “the most significant reform carried out in China after 1978 was one of systematic decentralization.” It is difficult to disagree with this. As the best China scholarship of the last few decades has made clear, local initiative played a central role in the country’s growth miracle–see for instance Jean Oi’s book on local state corporatism, or Xu Chenggang’s classic article on “regionally decentralized authoritarianism”. Decentralization was one of Deng Xiaoping’s most ..read more
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