Hi Ryan, it's a little unclear to me the reason why you assert with some confidence that another round of massive infrastructure investment cannot work. It would seem to me that one of the few "features" of an authoritarian-totalitarian government is that it can direct expenses and investments as it pleases, creating new projects at will. The party seems so have the competence, the vision, and nowadays, most certainly the power and control to do it. Where am I wrong?
So I think there are two problems: that the bigger the economy is, the larger the stimulus you need to provide a boost worth a given percentage of GDP, and that having relied so heavily on infrastructure spending for so long, they've built out a lot of the projects that are likely to provide a reasonable return. So mechanically, they can spend the money; when you have a demand shortage, you can pay people to dig holes and fill them back up again. And maybe they'll do that. But that doesn't add anything to the productive capacity of the economy, so maybe they stimulate just enough to replace the demand they're losing as a consequence of the property market collapse and accept that real growth rates might be substantially lower than in the past, or maybe they spend too much and end up with a major inflation problem. Either way, you're not getting to real rates of growth like you had before just by firing the infrastructure cannon.
Hi Ryan, it's a little unclear to me the reason why you assert with some confidence that another round of massive infrastructure investment cannot work. It would seem to me that one of the few "features" of an authoritarian-totalitarian government is that it can direct expenses and investments as it pleases, creating new projects at will. The party seems so have the competence, the vision, and nowadays, most certainly the power and control to do it. Where am I wrong?
So I think there are two problems: that the bigger the economy is, the larger the stimulus you need to provide a boost worth a given percentage of GDP, and that having relied so heavily on infrastructure spending for so long, they've built out a lot of the projects that are likely to provide a reasonable return. So mechanically, they can spend the money; when you have a demand shortage, you can pay people to dig holes and fill them back up again. And maybe they'll do that. But that doesn't add anything to the productive capacity of the economy, so maybe they stimulate just enough to replace the demand they're losing as a consequence of the property market collapse and accept that real growth rates might be substantially lower than in the past, or maybe they spend too much and end up with a major inflation problem. Either way, you're not getting to real rates of growth like you had before just by firing the infrastructure cannon.