Growth for growth's sake...

At the risk of sounding like I'm an NPR junkie (I am...), I offer the following -

http://www.npr.org/blogs/parallels/2013/08/12/211202243/too-much-too-fast-china-sees-backlash-from-massive-growth

(Quoted text follows)

Too Much, Too Fast: China Sees Backlash From Massive Growth
by JIM ZARROLI
August 12, 2013

At a time when much of the world is mired in economic torpor, China still enjoys enviable growth rates. Yet there's no question that its economy is growing more slowly these days.

Just ask Yan Liwei, a salesman for a construction materials company, who was visiting a park in Shanghai this weekend. "The number of new construction projects is declining somewhat. It's taking longer for many of our clients to pay us what they owe," Liwei says. "Many small and midsized developers are feeling a cash crunch."

This slowdown is partly due to the global economic downturn. But economist Michael Pettis of Peking University believes there's something more fundamental taking place. Pettis says China is at a stage in its economic growth that every fast-growing country eventually reaches.

Three decades ago, China was badly underdeveloped. To catch up with other countries it had to pour vast sums of money into roads, bridges, office buildings and factories, and this meant dizzying rates of growth. But eventually, Pettis says, all this building reaches a point of diminishing returns.

"When that happens the investment ends up becoming not so much wealth creating, but in many cases wealth destroying," he says. "In other words, the increased productivity generated by that investment is less than the cost of the investment."

At this point, Pettis says countries like China need to fundamentally change their growth strategy. They need to stop building all those roads and shopping malls.

"So if you want to rebalance the economy, you have to sort of kill the engine of all of that growth," he says

Pettis says that if China is to keep growing, its growth has to come from consumption. It needs to make a whole lot of policy steps that will make it easier for Chinese people to spend money — like raising wages — or eliminating residency laws that penalize people who move.

Pettis says this kind of fundamental change in economic direction is very difficult to pull off.

"The transition period for every country that's gone through [this] process has been politically very difficult," he says. "And quite frankly very few countries have gotten through this phase successfully."

The good news is that China knows it has a problem and is trying to do something about it, says economist Eswar Prasad of Cornell University and the Brookings Institution.

China has tightened credit to slow down the construction of all those office buildings and shopping malls. But Prasad says that with the global economy so vulnerable China can't afford to try anything too risky.

"The Chinese government is facing this very delicate balance," Prasad says. "They know that the way they're growing right now is creating some problems, but if they slow down the growth all of those problems come and hit them in the face right away."

Prasad says there's another problem. A lot of Chinese companies depend on the flow of easy credit to stay afloat, and he says they're likely to fight any effort to change the system. In fact, the reform efforts have led to vicious infighting among political and business interests.

"The system as it is structured right now works really well for the large state-owned enterprises, the large banks and for many provincial governments," he says. "These are all politically very powerful. So they have every incentive to maintain the status quo and not change anything."

In the face of this opposition, China seems to have backtracked a bit and recently eased credit conditions again. Economist Todd Lee of IHS Global Insight says he doesn't believe China's leaders have shown the resolve they need to tackle the big problems.

"What they really need to do is push through the next wave of significant structural reforms," Lee says, "and they haven't done that."

Still, China has navigated its way through the global economy with considerable success in recent years. Now it needs to find a way to change course and do so once again.

(Back to me)

The land speculation and meteoric rise of property values in China has been nothing short of miraculous. And yet, looking at the toll it has taken on both the environment and the culture of China, one begins to wonder if it is worth it.

There are, of course, myriad benefits of living in a western-style economy/society. Children are healthy. Access to health care, clean water and air, and other goods and services, means that the fear of lack and want has been reduced. Underdeveloped countries across the world could gain much through improved access to food, health care, quality shelter, clothing, and other beneficial aspects of living in a global market society.

But what are the costs? Chief among the benefits of living in a more western society is access to healthier lifestyles. These were born out of the industrial revolution, where people looked at the conditions they lived in and demanded better - not just clean water and air, but safer housing, better transportation options, and quality, healthy food. But what happens when you cannot keep supporting the changes that have taken place - when the very engines of progress end up becoming the very things you sought to eliminate? This is much more difficult to talk about.

In the west, we took successive generations to both create the lifestyle we enjoy, and then understand the impacts - economically, culturally, and environmentally. It took us over 100 years just to realize that clean water and air were priorities, and it took some very serious catastrophes to arrive at that understanding. China, which was really born as a nation only 60 years ago, is polluting itself at a prodigious rate, and it is consuming land and resources (all based on artificially cheap and easily accessible credit) at an even quicker pace.

Truly, the next 60 years in China are going to be interesting to watch.