… note that this is broadly applicable to many countries, but not all countries. That being said, this should make you “sit up and take notice”.
Tag: john burn-murdoch
Scott Sumner on Zero Sum Death Spirals
It’s actually John Burn-Murdoch on zero sum thinking, but he writes for the FT, and I do not have access to it. Bu here’s the first bit of Scott Sumner’s post:
What causes societies to fail? One possibility is that they enter a zero sum death spiral. Here’s the basic problem:
https://www.econlib.org/the-zero-sum-death-spiral/
- Zero sum thinking causes bad economic policies.
- Bad economic policies cause a poor economic outcome.
- A poor economic outcome causes zero sum thinking.
Rinse and repeat.
Not to be all pedantic, but I’d much prefer the ordering to be 3, then 1 and then 2. That is, poor economic outcomes cause zero sum thinking, which gives birth to bad (personal and public) policies, and these, in turn, cause other (even poorer) economic outcomes.
There are excellent graphs in the blogpost as well (and these are from a paper that was shared here earlier, please do read it):
Long story short, the lower the GDP growth that you experience up to age 20, the more likely that you will have a zero-sum mindset.
What is a zero-sum mindset?
When faced with a problem, if your response is to figure out the best solution for yourself, by viewing everybody else associated with the game as competitors rather than collaborators…
Well, then, you have a zero-sum mindset.
We have a zero-sum mindset when we drive on our streets in India, for example. Other people on the road are competing with us in a race to get to each of our homes as quickly as possible. We “win” by defeating everybody else on the streets, not by cooperating with them.
We have a zero-sum mindset when it comes to examinations (I win by scoring more than others, we don’t win together by learning as much as possible). We have a zero-sum mindset when it comes to waiting in lines. If a colleague is promoted, our first response is “Whoa, that’s one spot less for me, then”. And so on and so forth.
Note that I am not suggesting that all of us have zero-sum mindsets in all situations, nor am I suggesting that this problem is uniquely Indian. But I am suggesting (very much so) that we do experience this problem every now and then.
And the hypothesis that is being discussed is that this is probably because we (people my age and older, at any rate), grew up in a low-growth environment. Do younger folks in India have more of a non-zero sum game mindset? Do younger and more affluent folks in India have more of a non-zero sum game mindset? Do younger folks who grew up abroad but are now studying in India have even more of a non-zero sum game mindset?
Somebody should research a topic like this, no?
Such a person may wish to begin by reading an excellent book called “The Moral Consequences of Economic Growth“, by Benjamin M. Friedman.
It’s Baaaack, But In China This Time
What does Japanification mean? From the same article that came up with my favorite chart from 2023 (shown above):
“It can be described simply as a protracted period of deflation, economic sluggishness, property market declines and financial stress as households/companies/governments unsuccessfully try to deleverage after a debt binge.”
And is that where China finds itself today? Well, it is difficult to say, because data is hard to come by:
The statistics bureau stopped publishing a consumer-confidence index after April numbers fell to levels last seen during the depths of the pandemic. With youth unemployment climbing remorselessly, the same bureau stopped reporting that statistic this week, saying it is reviewing how to count jobless young.
https://www.economist.com/china/2023/08/17/chinas-slowing-economy-seen-from-ground-level
Data has, of course, been hard to come by for a while:
Bu you can suppress bad news for only so long, and to even the most casual of China watchers, it has been clear for a while that China is slowing down. And China slowing down is, in a sense, both inevitable and predictable. If you know anything about China’s demographics, it’s emphasis on capital-led growth and the Great Decoupling, China had to slow down.
But ah, the debt. That is where the problems become truly worrisome:
According to the BIS, China’s total non-financial credit/GDP ratio approached 297% of GDP by end-2022, similar to Japan in the 1990’s. Also similarly, debt is mainly domestic, and the domestic saving rate is high in both countries.
China’s Japanification, by Robin Wigglesworth in FT
Plus:
- China is ageing more rapidly than Japan was in the 1990’s
- China’s debt, when properly accounted for, is even more than Japan’s was.
- China has less wriggle room when it comes to monetary policy.
- China also seems to be less willing to use monetary policy as a tool.
And above all, culture. I wish I knew more about China, and I wish I could travel to China. Lots of reasons for me to say this (food included, and it is one of the top three reasons) – but in this blog post, I say I wish I could travel to China to make sense of this from The Economist.
It is difficult to excerpt from it, but here are the concluding paragraphs:
Does Mr Xi understand this? His thoughts on how to achieve national greatness have evolved, along with his message to young people. A few months after coming to power in 2012 he met a group of young entrepreneurs, volunteers and students, telling them to “dare to dream, to bravely chase their dreams and to strive to fulfil them”. Their ambitions will make China great, he said. One beaming participant, who had recently climbed Mount Everest, said it was a good time to be young.
https://www.economist.com/briefing/2023/08/17/chinas-defeated-youth
Now, though, Mr Xi says the “Chinese Dream” of national rejuvenation is to be achieved by focusing on collective goals, rather than by encouraging individual aspirations. He admonishes the young to obey the party and toughen up—to “engrave the blood of their youth on the monuments of history, just as our fathers did.” That is a message that relatively few young people are taking to heart. Told to eat bitterness, they prefer to let it rot.
Keep a close eye on China in the coming months, it is a story that is likely to be interesting and of immense relevance to everybody who lives on this planet.
By the way, did you get why today’s blogpost is titled the way it is? If you are a student of macro, you should have. You might think there’s a typo on my part, but hey, China deserves an extra “a”.
At least.
EconForEverybody 