The cost/benefit equation for reducing U.S. carbon emissions should be compared to global emissions before we hobble our economy any more than we have with regulations.
[P]utting barcodes on chocolate bars and instant oatmeal did more than revolutionize the economy, or the size of grocery stores. Thanks to bar codes, stuff was no longer just stuff. After a thing gets a barcode, that thing is no longer just itself. That thing now comes wrapped in a layer of information hovering just beyond sight in the digital ether. The thing becomes itself plus its data points, not just a physical object unto itself but tagged as a node in a global network of things. Barcodes serve up the augmented reality of the everyday, where everything can be cross-referenced with everything else, and everything has a number….
In 1949, grad school dropout Joe Woodland drew Morse code dots and dashes on a Florida beach, then drew vertical lines down from each character to tease out the first prototype of the modern barcode. Less than a century later, the physical world teems with metadata just waiting for a smartphone to reveal its “presence.” Even today’s barcodes themselves aren’t limited to information about an object’s price, owner or location, but can convey instructions to a 3-D printer to create the object itself. That pack of Juicy Fruit that Haberman helped send past the cash register is now in the Smithsonian. Perhaps the next pack of gum to enter the museum’s collection will be the one the food fabricator on your counter made for you when you pulled its barcode from an iPhone app and waved it past the scanner in your kitchen.
Barcodes did not merely speed up economic processes but opened up new spaces of economic possibilities, entirely new configurations that indeed changed the world of business but also the cultural and physical landscapes we all share. This simple technology accelerated the pace of globalization, not just by increasing the speed at which trade could take place but also by enabling entire industries to take on new shapes, to inhabit new forms. The evolution of the bar code has expanded the global economy’s capacity to evolve.
For people who use the word “science” as a bludgeon and trumpet their strict commitment to fact and reason, the Obama administration and its supporters are strangely incapable of rational analysis of new climate-change regulations.
President Barack Obama’s Environmental Protection Agency released draft rules last week to create a vast new regulatory apparatus with no input from Congress — in other words, to govern in its accustomed highhanded, undemocratic manner. The goal is to reduce carbon emissions from existing power plants, in particular coal-fired plants, to 30 percent below 2005 levels by 2030.
The rhetoric around the rules has involved self-congratulation about how they are the inexorable result of taking climate science and the reality of dangerous global warming seriously. “Science is science,” President Obama said in an open-and-shut tautology about global warming during an interview with New York Times columnist Tom Friedman. By the same token, math is math, and the new regulations make no sense.
While the regulations are stringent enough to impose real economic costs — especially in states that produce coal or heavily use coal power, or whose economies have grown relatively robustly since 2005 — they have almost no upside in fighting global warming. That’s because the U.S. is only part of the global carbon-emissions picture, and a diminishing one at that.
We account for roughly a sixth of global emissions, and our emissions have fallen the past few years more than those of any other major country. In fact, we’ve already achieved about half of the administration’s 30 percent goal, in part through the boom in natural gas, which produces half the carbon emissions of coal….
The regulatory fight against global warming runs up against this reality: Anything we do on our own short of returning to a subsistence economy is largely meaningless, while we can’t force other countries to kneecap their economies based on a fashionable cause with no immediate bearing on the well-being of their often desperately impoverished citizens.
In an attempt to square this circle, supporters of the new EPA rules say they are an exercise of American leadership that will encourage other countries to crimp their economies, especially the world’s biggest emitter, China.
How has the power of example worked so far? We are a liberal democracy. We allow a robustly free press. We don’t imprison dissenters. We don’t steal the industrial secrets of other countries and give them to companies owned by government insiders. In all these things, we provide a model for Beijing, and have done so for a long time. Yet the Chinese Politburo stubbornly pursues what it believes is in its best interest.
Why will China be shamed by our pointlessly self-flagellating new policy on power plants into adopting economically harmful regulations of its own based on speculative models showing a far-off threat of higher temperatures?
The best policy for the U.S. is not command-and-control regulation, as economics writer Jim Manzi points out, but maintaining an environment favorable to technological innovation. No one would have predicted the fracking revolution of the past few years that has both displaced coal and benefited the broader economy. But the self-declared adherents of “science” prefer the satisfaction of pointlessly self-defeating gestures.
1) Government cannot create wealth, jobs, or income. Because government has to take money from somebody before it can spend it, there is no economic gain from anything the government does.
2) Income inequality does not affect the economy.
3) Low wages are not corporate exploitation. In a free country, people voluntarily accept employment, so all workers believe their current job to be the best choice from among their opportunity set.
4) Environmental over-regulation is a regressive tax that falls hardest on the poor.
5) Education is not a public good.
6) High CEO pay is no worse than high pay to athletes or movie stars.
7) Consumer spending is not what drives the economy.
8) When government provides things for free, they will end up being low quality, cost more than they should, and may disappear when most needed
9) Government cannot correct cosmic injustice.
10) There is no such thing as a free lunch.
Bottom Line: Liberals love to talk about their compassion. Compassion is great, but no amount of caring can repeal the simple facts of economics. It is fine to support raising the minimum wage, but understand that jobs will be lost and prices will rise. Protecting the environment is a wonderful thing, but it is also expensive and hurts the poor in particular. Politicians love to claim the government spending which they direct creates jobs, but it only moves jobs from one place to another. Greedy businesses cannot exploit workers because another greedy business would be happy to exploit them a little less until greed removed all the exploitation.
So Secretary Eric Shinseki is now ex-secretary Shinseki, and cleaning up the Department of Veterans Affairs’ health care mess will now be someone else’s job. But there’s a good chance that no matter who is in charge, the cleanup will be, basically, impossible. That’s because the VA is government health care….
Now that the VA has erupted in scandals involving phony wait lists, and people dying because of treatment delays, an audit reveals a “systemic lack of integrity" in the system. According to the auditors, "Information indicates that in some cases, pressures were placed on schedulers to utilize inappropriate practices in order to make waiting times appear more favorable."
In other words, they cooked the books. And what’s more, they did it to ensure bigger “performance bonuses.” The performance may have been fake, but the bonuses were real. (One whistle-blower compared the operation to a “crime syndicate.”)
And that captures an important point. People sometimes think that government or “nonprofit” operations will be run more honestly than for-profit businesses because the businesses operate on the basis of “greed.” But, in fact, greed is a human characteristic that is present in any organization made up of humans. It’s all about incentives.
And, ironically, a for-profit medical system might actually offer employees less room for greed than a government system. That’s because VA patients were stuck with the VA. If wait times were long, they just had to wait, or do without care. In a free-market system, a provider whose wait times were too long would lose business, and even if the employees faked up the wait-time numbers, that loss of business would show up on the bottom line. That would lead top managers to act, or lose their jobs.
In the VA system, however, the losses didn’t show up on the bottom line because, well, there isn’t one. Instead, the losses were diffused among the many patients who went without care — visible to them, but not to the people who ran the agency, who relied on the cooked-books numbers from their bonus-seeking underlings.
And, contrary to what Klein suggests, that’s the problem with socialism. The absence of a bottom line doesn’t reduce greed and self-dealing — it removes a constraint on greed and self-dealing. And when that happens, ordinary people pay the price. Keep that in mind, when people suggest that free-market systems are somehow morally inferior to socialism.
The Chilean sea bass is not the type of fish you find on the menu at Red Lobster or Long John Silver’s. Instead, you’re more likely to choose it out of a lineup that includes filet mignon and lobster risotto — and to pay top dollar for its buttery, melt in your mouth flavor.
Given its name, which conjures up exotic notions of South American fisherman carefully acquiring this prized fish off the coast of Chile, the price may seem appropriate. But only a minority of Chilean sea bass come from the coast of Chile. Many fish sold under the name hail from arctic regions. Moreover, the fish isn’t even a type of bass; it’s a cod. Until 1977, the name Chilean sea bass didn’t exist and few people ate the fish before the 1990s. Prior to that, scientists knew the fish by the less mouth-watering name of Patagonian or Antarctic toothfish.
In short, the Chilean sea bass is a pure marketing invention — and a wildly successful one. Far from unique, the story of the Chilean sea bass represents something of a formula in today’s climate of overfishing: choose a previously ignored fish, give it a more appealing name, and market it. With a little luck, a fish once tossed back as bycatch will become part of trendy $50 dinners.
Right now, our economic prospects look grim. To classical liberals like myself, future growth is unsustainable in an age dominated by progressive politics. There are two reasons for this: an extensive system of regulation of all key sectors of economy—including labor, real estate, health care, and financial markets—and a combination of progressive income taxes, specialized levies (like the medical device tax), and a heavy estate tax, whose proceeds are used to fund an ever-expanding system of transfer payments.
Today’s unending cycle of regulation, taxation, and transfer payments induces non-stop political competition, which lets strong voting coalitions take from their adversaries in order to enrich their friends. This dynamic leads to crony capitalism that reduces the return to both capital and labor. States like Texas that work hard to resist these various trends do well in comparison to those states like Illinois that yield to political temptation. The solution requires systematic deregulation coupled with flat taxes to induce higher levels of competition that will in turn produce greater economic growth and human satisfaction….
One of the most striking defects of the Piketty analysis is its flawed understanding of the relationship between social wealth and income inequality. The initial point goes to the question of how ordinary people ought to regard the accumulation of vast stores of wealth by the few, much of which gets passed on by inheritance to other people. For Piketty, their greater wealth leaves (all else being equal) poorer people worse off because of their apparent loss of political influence to the great and mighty.
Not so fast. First, as an economic matter, the increase of the wealth of some without a decline of wealth in others counts as a Pareto improvement, which is in general to be welcomed, even if it increases overall levels of inequality. But to egalitarians like Piketty, the increased wealth inequality is bad in itself, as their objective is to minimize differences in wealth and income, rather than to increase their overall totals. Piketty’s assumptions lead to the conclusion that a world in which the rich average 1,000 and the poor average 10 is less desirable than a world in which the rich average 300 and the poor average 5, given that the absolute and relative differences in wealth are lower in the second state of the world than the first….
2007 and 1981 recessions: Jobs recovery, recovery of GDP, and labor force participation rate (via Powerline)
It’s hard to think of another book on economics published in the past several decades that’s been praised as lavishly as Thomas Piketty’s “Capital in the Twenty-First Century.” The adulation tells you something, though not mainly about the book’s qualities. Its defects, in my view, are greater than its strengths — but the rapturous reception proves that the book, one way or another, meets a need…..
When it comes to exploring historical data on incomes and wealth, Piketty is second to none in industry and ingenuity. It’s how he made his name as a scholar, and the book, as you would expect, is packed with new information. (A companion website puts all the numbers and sources online.) In addition to intellectual ambition and tireless excavation of the historical record, Piketty brings a zeal for accessibility: He writes in non-technical language, with almost no mathematical apparatus to confound the interested non-specialist.
All of which is grand. So what’s the problem?
Quite a few things, but this to start with: There’s a persistent tension between the limits of the data he presents and the grandiosity of the conclusions he draws. At times this borders on schizophrenia. In introducing each set of data, he’s all caution and modesty, as he should be, because measurement problems arise at every stage. Almost in the next paragraph, he states a conclusion that goes beyond what the data would support even if it were unimpeachable.
This tendency is apparent all through the book, but most marked at the end, when he sums up his findings about “the central contradiction of capitalism”:
The inequality r>g [the rate of return on capital is greater than the rate of economic growth] implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental logical contradiction. The entrepreneur inevitably tends to become a rentier, more and more dominant over those who own nothing but their labor. Once constituted, capital reproduces itself faster than output increases. The past devours the future. The consequences for the long-term dynamics of the wealth distribution are potentially terrifying …
Every claim in that dramatic summing up is either unsupported or contradicted by Piketty’s own data and analysis. (I’m not counting the unintelligible. The past devours the future?)….
As I worked through the book, I became preoccupied with another gap: the one between the findings Piketty explains cautiously and statements such as, “The consequences for the long-term dynamics of the wealth distribution are potentially terrifying.”
Piketty’s terror at rising inequality is an important data point for the reader. It has perhaps influenced his judgment and his tendentious reading of his own evidence. It could also explain why the book has been greeted with such erotic intensity: It meets the need for a work of deep research and scholarly respectability which affirms that inequality, as Cassidy remarked, is “a defining issue of our era.”
Maybe. But nobody should think it’s the only issue. For Piketty, it is. Aside from its other flaws, “Capital in the 21st Century” invites readers to believe not just that inequality is important but that nothing else matters.
Word Problem No. 1: It’s lunchtime for Mrs. Piketty’s second-grade class. Bobby has 20 Gummi Worms, and Jenny has 20 SweeTarts. Bobby and Jenny both like Gummi Worms and SweeTarts, but both like SweeTarts a little bit more, so Jenny trades three of her SweeTarts for four of Bobby’s Gummi Worms. Both are happy with this trade, so they do it again. Question: How many pieces of candy do the two students end up with for dessert?
Word Problem No. 2: Mrs. Piketty is unhappy with the inequality in her second-grade classroom. Jenny’s 20 SweeTarts are valued much more highly than are Bobby’s 20 Gummi Worms, trading at a rate of 3:4. To even things out, Mrs. Piketty gives Bobby a voucher for seven SweeTarts. Question: How many pieces of candy do the two students end up with for dessert?
Word Problem No. 3: Mrs. Piketty’s attempt to solve the problem of inequality in her classroom has yielded unsatisfactory results. Bobby has his 20 Gummi Worms, and Jenny has her 20 SweeTarts, and SweeTarts still trade for Gummi Worms at a rate of 3:4. So Mrs. Piketty enacts some new policies. First, she hires Bobby as a hall monitor and decrees that hall monitors receive a minimum income of at least ten SweeTarts or the equivalent value in Gummi Worms. Also, she decrees that the high price of SweeTarts — three of them cost four Gummi Worms — is oppressive, but she’s not an all-the-way-to-the-wall outright red, either, more of a social-democrat type with a subscription to The Nation, so she simply enacts some counteracting price supports for Gummi Worms, decreeing that they cannot be traded at a price less than 13/15th of a SweeTart. She enlists Mrs. Yellen from the next classroom over to provide zero-interest financing for the purchase of up to five SweeTarts per lunch period, increases Bobby’s voucher allowance to nine SweeTarts per lunch period, and offsets that on her budget with a “fairness” tax of two SweeTarts per lunch period on Jenny, who is the sole member of her tax bracket. Question: How many pieces of candy do the two students end up with for dessert?
Answers: (1.) 40; (2.) 40; (3.) 40. There are only 40 pieces of candy, and rules, vouchers, taxes, zero-interest loans, redistribution, and mandates do not magic more pieces of candy into existence. If Jenny does not like the trading price imposed by Mrs. Piketty, she can keep all of her SweeTarts, while Bobby gets none. If Mrs. Piketty sends out her second-grade tactical SWAT unit to seize Jenny’s SweeTarts and put some serious asset-forfeiture and social-by-God-justice up in her smug little 1-percenter face, Jenny can still leave her SweeTarts at home, eating them before or after school, and maybe even save them up in the hopes that her third-grade teacher next year will not be a howling moonbat. Faced with that inconvenient reality, Mrs. Piketty may demand the repatriation of these SweeTart assets and denounce Jenny as an “economic traitor,” but she does not have any real power outside her classroom. Plus, Jenny and her SweeTarts are sort of popular, and she’s a pretty good student to boot, and so there are other classrooms that would just love to have her, with Mr. Lee’s nicely air-conditioned classroom across the hall offering some very attractive laissez-faire policies vis-à-vis SweeTarts and confectionery gains in general.
Forty is forty is forty, 10 times 4, 8 times 5, 6.32455532034 squared, 23 plus 17. You can set the trading ratio of apples to oranges however you like, but if you have 20 of each, you have 40 pieces of fruit at any price — and the only way to bring more of it into the world is to plant trees, cultivate them, and pick the fruit.
Which is to say: Reality is not optional…..
The physical economy — the world of actual goods and services — looks radically different from the symbolic economy. Measured by practically any physical metric, from the quality of the food we eat to the health care we receive to the cars we drive and the houses we live in, Americans are not only wildly rich, but radically richer than we were 30 years ago, to say nothing of 50 or 75 years ago. And so is much of the rest of the world. That such progress is largely invisible to us is part of the genius of capitalism — and it is intricately bound up with why, under the system based on selfishness, avarice, and greed, we do such a remarkably good job taking care of one another, while systems based on sharing and common property turn into miserable, hungry prison camps.
We treat the physical results of capitalism as though they were an inevitability. In 1955, no captain of industry, prince, or potentate could buy a car as good as a Toyota Camry, to say nothing of a 2014 Mustang, the quintessential American Everyman’s car. But who notices the marvel that is a Toyota Camry? In the 1980s, no chairman of the board, president, or prime minister could buy a computer as good as the cheapest one for sale today at Best Buy. In the 1950s, American millionaires did not have access to the quality and variety of food consumed by Americans of relatively modest means today, and the average middle-class household spent a much larger share of its income buying far inferior groceries. Between 1973 and 2008, the average size of an American house increased by more than 50 percent, even as the average number of people living in it declined. Things like swimming pools and air conditioning went from being extravagances for tycoons and movie stars to being common or near-universal. In his heyday, Howard Hughes didn’t have as good a television as you do, and the children of millionaires for generations died from diseases that for your children are at most an inconvenience. As the first 199,746 or so years of human history show, there is no force of nature ensuring that radical material progress happens as it has for the past 250 years. Technological progress does not drive capitalism; capitalism drives technological progress — and most other kinds of progress, too.
None of this should be taken as minimizing the problems faced by the poor, in this or any other country. But let’s stay in the realm of the real for a little while: What is it, in terms of physical goods and services, that we wish to provide for the poor that they do not already have?….
None of those problems facing the poor — and they are the key problems — is an economic problem. All of them are political problems. For progressives, the obvious solution to that is less economics and more politics. The possibilities of economic division will always be limited by what there is to divide — so many houses, so many cars, so many apples and oranges, so many SweeTarts. Progressives don’t care what’s in the bag, so long as they get to be in charge of it. It is no accident that they talk about the “distribution” of wealth and income as though those things were literally distributed, like candy out of an Easter basket, by the distribution fairy.
# # #
For the conservative, people are an asset — in the coldest economic terms, a potentially productive unit of labor. For the progressive, people are a liability — a mouth to be fed, a problem in need of a solution. Understanding that difference of perspective renders understandable the sometimes wildly different views that conservatives and progressives have about things like employment policy. For the conservative, the value of a job is what the worker produces; for the progressive, the value of a job is what the worker is paid. Politicians on both sides frequently talk about jobs as though they were economic products rather than contributors to economic output, as though they were ends rather than means. The phrase “there aren’t enough jobs” is almost completely meaningless, but it is a common refrain…..
Though there are many exceptions, the closer a man’s occupation takes him to the physical economy, the more skeptical he is of progressive central-planning ambitions. You do not meet a great many left-wing corn farmers, copper-mine operators, oil drillers, or house builders. You do meet a fair number of progressives on Wall Street and Silicon Valley and on the campus of Harvard utterly failing to teach the likes of Mr. Carrillo the fundamentals of economics, prose composition, or anything else. Follow that road to its terminus and you end up at the place in which the secret to national prosperity appears, self-evidently, to be stimulating demand, as though the nation could grow wealthier by wanting more rather than by making more, as though we could consume that which has not been produced.
As though Bobby and Jenny could shuffle around their 40 pieces of candy until they became 50 pieces of candy.
Politics is parasitic. Even at its best, it produces no goods of its own; it has only that which it takes from what others produce. For about 200,000 years, human beings produced almost nothing — the per capita economic-output curve is nearly flat from the appearance of the first homo sap. until the appearance of Jethro Tull and Eli Whitney. We’ve had politicians since before Hammurabi, but we didn’t escape the shadow of famine until a few thousand years later when somebody discovered that the wars fought over dividing up the harvest could be prevented by making that harvest bigger — and then figuring out how to get that done. Politics is a footnote — the inventory in your local Walmart is the headline.
Income inequality has long been one of the liberals’ favorite issues. So there is nothing surprising about its being pushed hard this election year.
If nothing else, it is a much-needed distraction from the disasters of Obamacare and the various IRS, Benghazi, and other Obama-administration scandals.
Like so many other favorite liberal issues, income inequality is seldom discussed in terms of the actual consequences of liberal policies. When you turn from eloquent rhetoric to hard facts, the hardest of those facts is that income inequality has actually increased during five years of Barack Obama’s leftist policies.
This is not as surprising as some might think. When you make it unnecessary for many people to work, fewer people work. Unprecedented numbers of Americans are on the food-stamp program. Unprecedented numbers are also living off government “disability” payments.
There is a sweeping array of other government subsidies, whether in money or in kind, that together allow many people to receive greater benefits than they could earn by working at low-skilled jobs. Is it surprising that the labor-force participation rate is lower than it has been in decades?
In short, when people don’t have to earn incomes, they are less likely to earn incomes — or, at least, to earn incomes in legal and visible ways that could threaten their government benefits….
Most Americans living in “poverty” have air conditioning, a motor vehicle, and other amenities, including more living space than the average person in Europe — not the average poor person in Europe, the average person.
“Poverty” is in the eye of the statisticians — more specifically, the government statisticians who define what constitutes “poverty,” and who are unlikely to define it in ways that might jeopardize the massive welfare state that they are part of.
In terms of income statistics that produce liberal outcries about “disparities” and “inequities,” millions of people who don’t have to earn incomes typically don’t.
The more people who are in a non-income-earning mode, the greater the disparities with the incomes of those of us who have to work for a living, and who have to earn more to offset high tax rates. Yet liberals often act as if this is an injustice to those who don’t work rather than an injustice to those who do work, and whose taxes support those who don’t.
Actually, the liberal welfare state is an injustice to both, though in different ways.
In 1969, Playboy published a long, freewheeling interview with Marshall McLuhan in which the media theorist and sixties icon sketched a portrait of the future that was at once seductive and repellent. Noting the ability of digital computers to analyze data and communicate messages, he predicted that the machines eventually would be deployed to fine-tune society’s workings. “The computer can be used to direct a network of global thermostats to pattern life in ways that will optimize human awareness,” he said. “Already, it’s technologically feasible to employ the computer to program societies in beneficial ways.” He acknowledged that such centralized control raised the specter of “brainwashing, or far worse,” but he stressed that “the programming of societies could actually be conducted quite constructively and humanistically.”
The interview appeared when computers were used mainly for arcane scientific and industrial number-crunching. To most readers at the time, McLuhan’s words must have sounded far-fetched, if not nutty. Now they seem prophetic. With smartphones ubiquitous, Facebook inescapable, and wearable computers like Google Glass emerging, society is gaining a digital sensing system. People’s location and behavior are being tracked as they go through their days, and the resulting information is being transmitted instantaneously to vast server farms. Once we write the algorithms needed to parse all that “big data,” many sociologists and statisticians believe, we’ll be rewarded with a much deeper understanding of what makes society tick….
Deciphering people’s behavior is only the first step. What really excites Pentland is the prospect of using digital media and related tools to change people’s behavior, to motivate groups and individuals to act in more productive and responsible ways. If people react predictably to social influences, then governments and businesses can use computers to develop and deliver carefully tailored incentives, such as messages of praise or small cash payments, to “tune” the flows of influence in a group and thereby modify the habits of its members. Beyond improving the efficiency of transit and health-care systems, Pentland suggests, group-based incentive programs can make communities more harmonious and creative. “Our main insight,” he reports, “is that by targeting [an] individual’s peers, peer pressure can amplify the desired effect of a reward on the target individual.” Computers become, as McLuhan envisioned, civic thermostats. They not only register society’s state but bring it into line with some prescribed ideal. Both the tracking and the maintenance of the social order are automated….
Even if we assume that the privacy issues can be resolved, the idea of what Pentland calls a “data-driven society” remains problematic. Social physics is a variation on the theory of behavioralism that found favor in McLuhan’s day, and it suffers from the same limitations that doomed its predecessor. Defining social relations as a pattern of stimulus and response makes the math easier, but it ignores the deep, structural sources of social ills. Pentland may be right that our behavior is determined largely by social norms and the influences of our peers, but what he fails to see is that those norms and influences are themselves shaped by history, politics, and economics, not to mention power and prejudice…. Politics is messy because society is messy, not the other way around…. What big data can’t account for is what’s most unpredictable, and most interesting, about us.
Thanks to the world’s largest retailer, another large block of space in Hangzhou, the capital of Zhejiang province, will go on the market at a time when there is generally too much supply. The problem is especially pronounced in the city’s premium office market. Hangzhou’s Grade A office buildings at the end of 2013 had, according to Jones Lang LaSalle, an average occupancy rate of 30%.
The real weakness, however, is Hangzhou’s residential sector. The cause is simple: massive overbuilding. Sara Hsu of the State University of New York at New Paltz writes that Hangzhou faces burgeoning swaths of empty apartment units.
Hangzhou’s market has not yet collapsed. There are still secondary sales, for instance. [Yet] the city has become the symbol of a market in distress. China Central Television on the first of this month devoted a segment to the problems of the unstoppable price decrease” in Hangzhou property in its Economic 30 Minutes show, and discounts in that city, the Wall Street Journal notes, could be a signal of broader market weakness ahead.
The real estate market in Hangzhou looks like it has just passed an inflection point. It is not so much that fundamentals have deteriorated—they have been weak for some time—as that people’s mentality has changed… .
China is at the point where problems are feeding on themselves. Pessimism about property, which accounts for about 15% of China’s gross domestic product, is beginning to affect the broader economy. Declining property values look scary, despite cheery statements from government officials who assure us the property bubble is not big” or analysts who say that the problems are not systemic. ”But the Chinese don’t look like they are buying either of those views. If this continues, it will have immense impact on the whole Chinese economy,” says an unidentified Hangzhou real estate salesman on Economic 30 Minutes. Without question, everyone thinks there is a bubble. ”
The People’s Republic in the reform era” has not suffered a nationwide property crash. Analysts say the problems in Hangzhou are regional,” but now fundamentals and market sentiment either are or will be pushing markets down across the People’s Republic… . . Premier Li Keqiang has a few tools at his disposal, but they look insufficient to stop a general collapse of property prices across the country. The problems, deferred from late 2008 with massive state spending, have simply become too large. And we must remember that he works inside a complex, collective political system that is generally unable to meet challenges swiftly.