Tyler Cowen: belief

Transcript context

…I would first point out that China is ruled by the Communist Party that has studied extensively the Soviet Union. In my view, China has studied three institutions in depth. The first institution is the Catholic Church. How do you organize doctrine, claim to be thousands of years old, and have a figurehead that everyone is expected to worship? China is not simply the Communist Party. The Communist Party is not simply the Catholic Church with a major figurehead. It is inflected with something like the Sicilian mafia, which enforces its omerta throughout the entire organization. The second organization that China has pretty extensively studied is Japan and how to avoid the economic malaise that plagued it after the 1980s. It doesn’t mean that it can avoid these problems, but it has extensively studied the experience of Japan. Third and most importantly, China has studied the example of the Soviet Union. They think that Deng Xiaoping famously called Gorbachev an idiot. Gorbachev, until he realized what he was doing, it became too late for him to really rescue the Communist Party. They really want to avoid the fate of Gorbachev. Now, if Gorbachev didn’t exist, maybe they would have Gorbachev’d themselves. They have this example of knowing what not to do. Every day in Beijing, I feel like the Politburo and the rest of the Central Committee, and Xi Jinping in particular, feel like it is a life-and-death struggle to avoid the fate of political dissolution. They are really, really thinking in terms of apocalypse, much as Silicon Valley does today, to avoid being dissolved. I think having that very intense Leninist focus on not being dissolved, like the historical predecessor, is going to be a pretty important fact of not liberalizing and not democratizing. Now, there’s a chart, I think from Andrew Batson, and you know this guy, measuring China’s capital productivity. It shows that capital productivity to be in steady decline. I know these things are hard to measure, but do you agree with that? If so, why is that happening, if China is so successful with all these manufacturing ventures? Yes, I think it is a very well-established fact that TFP growth in China has been falling. We don’t have to get into how valid TFP measures are, but I agree with it, and I think that one can see it in society. Now, my view of China is that 50% of China’s economy is pretty dysfunctional, but 5% is going splendidly well. When I became a technology analyst working for Andrew Batson, as well as Arthur Kroeber at Gavekal Dragonomics, my remit was to take a look at the top 5% of China’s economy, and that is the area that I’ve always spent most of my time thinking about that goes from strength to strength. Now, I would say that 50% of America’s economy is also pretty dysfunctional. 50% of every economy is pretty dysfunctional. In America, I would just call that health care, as well as the subways. I’m sorry to tease you, Tyler, but I know you can take it.…

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