[Nick] emails me:I have greatly enjoyed the recent pieces on China as I currently live in REDACTED…Fwiw, my take is that yes, the 2009 Chinese stimulus was a great test of large-scale govt stimulus and that we are seeing the results of what this looks like *in practice* rather than *in theory*. In practice, large-scale government stimulus is an invitation for corruption and a diversion of resources that builds up knowledge and capital in unproductive areas. As Obama said after the US stimulus package: there’s “no such thing as shovel ready projects.” Even in China.
Matt Yglesias at Slate responds:
But look at the numbers. In 2007, China's PPP-adjusted GDP per capita was $5,562. In 2008 it was $6,201. In 2009 it was $6,810. In 2010 it was $7,571. In 2011 it was $8,407. The 2012 growth numbers look certain to show a drastic slowing down of growth. But let's get really pessimistic about China and assume 0% growth across 2012 followed by a five percent contraction in real GDP per capita in 2013. That would still leave China's per capita GDP level about 50 percent higher than it was when the world starting going into recession. That seems to me like an enormous success story.The big knock on the Chinese economy is that there's all this malinvestment and tons of white elephant projects. And perhaps there are. But there's no sector of the economy with lower productivity than the unemployment sector, and no public investment more wasteful than having a human being spend years scanning help wanted ads and feeling depressed. Does someone seriously want to argue that none of these projects have any value? It doesn't seem to me that anyone in China is debating whether or not the typical household is better off than it was four years ago. Here in the USA we've had about 2 to 3 percent of our workforce persistently engaged in doing nothing for the past several years, and the forecasts all show that trend continuing for a while. That, to me, looks like intolerable waste.
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