Comments (9)

• jl

  A couple of problems with the state "privatizing" assets as described in the article:

  The state captures the income streams from the leases to spend on more social welfare programs. Real privatization would mean selling the assets outright and returning the money to the people.
  

  
  The leases just turn over the state monopoly to a private monopoly. Prices and service are still closely regulated by the state, or worked out between the state and the new "owners". There is little or no provision for real competition. The state still controls the rights-of-way, preventing any new entry into the markets.

  This is the kind of thing that gives privatization a bad name. The same story with "deregulation."

  Published: May 2, 2007 2:38 PM

• Stranger

  In French we have a word to differentiate this from a legitimate private enterprise: a concession.

  Published: May 2, 2007 3:09 PM

• Captain

  Many say that public roads are necessary because privatizing them would lead to "market failure". And then of course, they'd show other examples of how this has happened in the past. But as I noted earlier today, they have yet to come up with a single example of "market failure" and put it on Wikipedia. None. Nothing. Nada. Zilch.

  Published: May 2, 2007 3:26 PM

• Brent

  This is sure to give real markets a bad name.

  Published: May 2, 2007 4:07 PM

• James

  I am for privatization, but in this instance the state is doing no more than selling out it's residents.

  Published: May 2, 2007 5:00 PM

• Jon Isaac

  Fox News is denying Ron Paul access to the South Carolina Republican debates. Please help send a strong message to both Republican Party and the Fox News Channel denouncing this action. Contact details...

  http://www.digg.com/2008_us_elections/Fox_News_Denies_Ron_Paul_Access_to_Debate_Action

  Published: May 2, 2007 5:00 PM

• Jean Paul

  Does anyone know of a study or analysis that gives per-taxpayer cost for roads? Something where you could challenge people with "is $4000 a year worth the amount of driving you do?"

  Published: May 3, 2007 9:59 AM

• Björn Lundahl

  If you do not want to learn economics and also want to get confused regarding economics, subscribe on BusinessWeek. I can tell you that every economic fallacy in the world you will be able to find in that magazine.

  I download that magazine (through Zinio Reader) to keep me updated regarding economic fallacies prevailing in the world and if there has been any change regarding this.

  Articles regarding different companies and enterprises are, though, a different matter. They can be interesting and useful.

  Zinio Reader:

  http://www.zinio.com/nu01

  Björn Lundahl

  Published: May 5, 2007 1:34 PM

• Björn Lundahl

  BusinessWeek

  APRIL 30, 2007

  
  Here is an article in BusinessWeek revealing some typical examples of logical fallacies in economics, (this is also representatively true for other “serious” business magazines):

  “Cautious Consumers
  
  The Chinese are on a spending spree, right? Not really. In fact, they're so tightfisted, Beijing is worried

  But look beyond the headlines and you'll find that China's 1.3 billion people are actually buying relatively little. Although the mainland's population is four times that of the U.S., Chinese consumers last year spent just 12% of what Americans did, figures investment bank UBS. And private consumption as a share of gross domestic product in China is falling, to less than 40% today from about 48% in 2000.”

  Well, surely it is a fact of life that consumer spending should be 48% of GDP and not 40%. Now I “know” that. Thanks for the information.

  BW “Although the economy is still expanding at 10%-plus annually, China's economic mandarins are concerned that the country's growth depends too much on its soaring exports and investment in ever more factories and luxury high-rises.”

  Yes true, a 10% growth rate is really a great problem. By the way who is depreciating the value of the Yuan? Foreigners? It must be, as the Chinese are so worried about soaring exports, I mean really worried.

  Soaring exports are, of course, also a very great problem. High ratios of investments are really something they too should be worried about. It is much better to consume. It is consumption that makes the world go around. Production must be kept down. Those new, for example, Chrysler cars made in the U.S. are really nice or should I say Volvos from Sweden as I am a Swede? You never know as logics are not the topic here, really. I must say, that those cars are much nicer than those awful factories. No, it is better that cars are made abroad and not in China. In the west they can afford such luxuries as producing. They consume much too much anyway.

  And those luxury high-rises sound to be something capitalistic that are not needed. Yes, down with capitalism.

  BW “Exports leave the Middle Kingdom vulnerable to potential downturns in the U.S. and Europe while causing trade tensions with Washington. And too much investment threatens overcapacity in industries from steel to autos. So Beijing has cut taxes and boosted some social outlays to spur Chinese to spend more at the mall. "We need to adjust the balance between investment and consumption," Premier Wen Jiabao warned at the annual meeting of the National People's Congress on Mar. 5”

  It is true that it is better that the downturn starts in China instead of in the U.S. and Europe, and Washington doesn’t like cheap products from China even, though, American consumers does. But the government knows best, of course.

  True, very true, I mean every investment is adding to overcapacity. Marx wrote something like that and he was very clever. Well, I really should call my bank and tell, what was her name again? Yes, Linda Sandin to sell my “entire collection of index-linked bonds” that are related to the Shanghai Stock Exchange. It is really very destructive of me to invest in those bonds. I am really ashamed of myself! I promise that I will never do it again. Thanks for enlighten me and for giving me insight about real economics.

  Yea, they should adjust the balance between consumption and investments. How do they know the true balance? Please enlighten me about that too. A missing part, I wonder why? They are probably so clever that they think it is something which is axiomatic, so silly of me! Good that I am alone so nobody can see that I am blushing right now for asking such silly questions. Oh, God I am red all over the face!

  Those social outlays are really needed. In the old good days when Mao Tsetung ruled China, social outlays had a high priority and the economy soared.

  BW “When might the Chinese consumer help really drive the global economy? Analysts at Credit Suisse Group (CS ) have conjured a rosy scenario in which China becomes the world's second-largest consumer nation (after the U.S.) by 2020, up from No. 5 today. UBS is less upbeat, estimating that the middle class includes only about 25 million people—just 2% of China's population—hardly big enough to have much impact globally. And even Credit Suisse acknowledges that personal incomes, while climbing, aren't keeping pace with rising GDP. "If you think the purpose of rapid economic growth is to increase consumption and the general welfare, then China isn't doing a very good job," says Nicholas R. Lardy, senior fellow at the Peterson Institute for International Economics in Washington.”

  Number 5 is really bad. Probably the worst number in the world. It has certainly never been so low, for in the old days China was the largest consumer nation. Everyone knows this and this is probably why no one, then, complained. And all those savings and investments done by the Chinese instead of consuming are only making China and the world poorer.

  By the way, generally it is said that rich people are saving relatively more proportionally of their incomes than consuming, how come that they are still rich? It is consumption that makes us richer and not savings and investments. Now I am blushing again, sorry!

  Naturally this, also, proves that the Chinese are consuming less than ever. All those photos I saw on China during the 70s are really illusive. Chinese people riding on all those bicycles dressed in green dresses consumed an awful lot. And this is also confirmed by another article written by BusinessWeek:

  “Last year China overtook Japan as the world's number two market for automobiles, with total vehicle sales rising 25% in 2005 to 7.2 million. The number of cars in Shanghai reached the previous 2020 estimate by the beginning of 2005. Beijing had over 22,000 new car registrations in the first 18 days of 2007, total hit almost 2.9 million. All of these vehicles are clogging the roads and polluting the air, and yet only a tiny fraction of the population is on the road.”

  http://www.businessweek.com/globalbiz/content/apr2007/gb20070412_189990.htm?link_position=link7

  BW “Ultimately, if Beijing wants to unlock consumer spending, it must do more to make ordinary Chinese feel secure about the future. With the market reforms of the past three decades, the safety net of lifetime housing, free education, subsidized health care, and a pension—all courtesy of the state—has been largely dismantled. As a result, Chinese "want to save every penny," says Chen Zhiwu, a professor of finance at the Yale School of Management. "In case of sickness, job loss, an auto accident, or old age, they will have some way to support themselves."”

  Yes, yes, yes, that is the root of the problem. They feel insecure and “only” save, save and save. People’s preferences should not be respected at all. Americans believing in that professor who thinks that the Chinese should be more socialistic is a good thing too. He is a professor for God sake! Well said!

  BW “The Xus would agree. "Our money is limited," says father Xu Zhibao. These days he pays $270 a month for his mortgage, something he didn't have to worry about when the family lived in an apartment provided free of charge by his father's employer, a printing factory. And throughout much of the past decade, falling food prices meant that city dwellers such as the Xus could easily afford eggs, meat, and other staples. Now they face rising food prices, which increased by 2.3% last year. This year, inflation for the first quarter alone probably jumped an additional 3%, largely because of a surge in the cost of food, estimates Merrill Lynch & Co.”

  Yes, money is limited but the People’s Bank of China is really handling this problem very well as they print a lot of them. Inflation in China, can’t be? Aggregate demand is too low in China, isn’t it? That is why more consumption is needed? Lower prices and deflation is also a good thing? It can’t be! I am getting confused! It is good that I am just now lying in my bed with my wireless laptop. Otherwise I would need to sit down for a while and rest. How to figure this one out? I wonder??

  BW “Economists have generally welcomed these steps. Yet many argue that China's leadership must move more aggressively to shift the economy toward higher- paying service industries and away from manufacturing. Services make up less than 40% of China's GDP, compared with 54% in India, with its thriving outsourcing sector.”

  Yes, why did we in the west bother to industrialize in the beginning of the “industrial revolution” in the first place? The governments should have forced the people and the economies to aggressively move to higher paying service industries.

  Oh, blimey does the service sector in China account for less than 40% of China’s GDP compared to 54% in India! This is awesome! Something must be done and this immediately! Every country should invest exactly in the same pattern as every other country. This is an economic truth. There is no such thing as comparative advantage. David Ricardo got it all wrong. The people of Greenland should also grow bananas. Bananas are green and the word “Green” land match with that as bananas are green before they mature. I know this as I so often make banana milkshakes. If we could import them from Greenland they should really be very cheap too. Milk, sugar, a little low fat cream and one or two bananas and you have the ingredients. Oh, I am gliding away from the “subject” really, sorry. Those things are really not important compared to the giant thoughts written in this article.

  BW “salaries have declined from 53% of GDP in 1998 to only 41.4% in 2005, compared with 57% in the U.S. "If consumption is to go up, then the share of wages in economic growth will have to rise," says Bert Hofman, the World Bank's chief economist in Beijing.”

  Here we go again; another error in the Chinese economy is spotted. A silly spontaneous thought of mine, could it be that wages are kept lower relatively of GDP in China because of the great influx of labour from the countryside? Is the same phenomenon happening in the U.S.? No, no! China does not have any unemployment and they should really increase wages as this is true. Those figures of Chinese unemployment ratios are all wrong. Even If they are right they should increase wages anyway, as aggregate demand will be increased and reduce unemployment. They should increase wages to western standards and consumption, investments and employment will, really, nearly reach zero, no, now I am getting confused again. It is the other way around, I think, or is it…?

  http://www.businessweek.com/magazine/content/07_18/b4032044.htm

  Björn Lundahl
  

  Published: May 6, 2007 12:28 PM