I don’t want to be seen as some kind of apologist for China, given its horrendous human rights record. I think the President meeting with the Dalai Lama despite Chinese warnings sends the right message and is eminently responsible.
But that doesn’t mean we can’t learn something from how China is reacting to the recession – with quick and massive stimulus that is succeeding in creating jobs and growth.
The world’s largest human migration — the annual crush of Chinese traveling home to celebrate the Lunar New Year, which is this Sunday — is going a little faster this time thanks to a new high-speed rail line.
The Chinese bullet train, which has the world’s fastest average speed, connects Guangzhou, the southern coastal manufacturing center, to Wuhan, deep in the interior. In a little more than three hours, it travels 664 miles, comparable to the distance from Boston to southern Virginia. That is less time than Amtrak’s fastest train, the Acela, takes to go from Boston just to New York.
Even more impressive, the Guangzhou to Wuhan train is just one of 42 high-speed lines recently opened or set to open by 2012 in China. By comparison, the United States hopes to build its first high-speed rail line by 2014, an 84-mile route linking Tampa and Orlando, Fla.
China spent $88 billion dollars on high-speed rail investment in 2009 alone, a substantial increase from previous years. It rivals the construction of the interstate highway system in America in the 1950s for its audaciousness and use of public monies to spur jobs and growth. And it’s working.
As China upgrades and expands its rail system, it creates the economies of large-scale production for another big export industry. “The sheer volume of equipment that they will require, and the technology that will have to be developed, will simply catapult them into a leadership position,“ said Stephen Gardner, Amtrak’s vice president for policy and development [...]
Officials drafted a plan to move much of the nation’s passenger traffic onto high-speed routes by 2020, freeing existing tracks for more freight. Then the global financial crisis hit in late 2008. Faced with mass layoffs at export factories, China ordered that the new rail system be completed by 2012 instead of 2020, throwing more than $100 billion in stimulus at the projects.
Administrators mobilized armies of laborers — 110,000 just for the 820-mile route from Beijing to Shanghai, which will cut travel time there to five hours, from 12, when it opens next year.
You can do this far more quickly in a command economy, of course. But it’s the priority order that is striking. China needed economic stimulus, and rapidly accelerated public investment. The US (which actually has added more in stimulus than most countries in Europe) took a balanced approach based more on tax cuts. Aside from the question of what approach works better in terms of economic activity, look at the end result – practically all of China will be served by high-speed rail within a matter of years.
It’s not perfect. Some Chinese have complained about the fare costs. And again, a single decision-maker rather than a phalanx of competing interests makes decision-making that much easier. But there’s something that can be learned here. If you want to create jobs, rather than the Rube Goldberg approach of tax breaks and nudges toward private investment, just go ahead and create the jobs. In the long run you’ll have higher growth and a better quality of life for the nation.



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O/T (apologies). Eeeeeek! David Reilly at bloomberg.com is making some pretty heady demands now.
One we can all love:
“– Clean house.
Treasury Secretary Timothy Geithner has to go. So too does White House economic adviser Lawrence Summers. And while he’s at it, the president should jettison Chief of Staff Rahm Emanuel.”
LINK.
our country needs the infrastructure, lessening our dependence on foreign oil, and green jobs for our people. i’d love to see our president and senate and house and supreme court notice that we’ve been going in the exact opposite direction from what we need to benefit our country and our people. then i’d like to see action. cleaning house would be a great start. thanks dd and fatster.
And it’s our ‘wars’ that is funding the Chinese; even with all the investment in foreign countries that the Chinese are doing, their ‘foreign reserves’ continue to rise.
David, here’s some more thoughts for you regarding “But it’s the priority order that is striking.”
Yeah,hmmm, ‘priorities’.
Its a dumb idea! Rail road construction projects are a good source of politically connected corporation to land over extended and over expensive contracts, thus enriching the politically connected rich at the expense of everyone else.
Yes some jobs will be created at the expense of small businesses who are already strained, don’t have high power lobbies to get them tax breaks or secure contracts and are already are serving folks with little money.
Bad economic theories + implementation = Rich politically connected folks + Impoverishment of everyone else.
The U.S. can’t do anything anymore. Hasn’t been able to for decades. Living off its past glories, working down all it’s built up capital. Trashing its labor.
I hate to say it, but this is kinda Mickey Mouse in comparison.
Pardon my stupidity, but can you spell out just how our wars are funding China? Thanks.
There are, IMHO, two parts to this: First and foremost, China’s national industrial policy, which is keeping everyone occupied, constantly to keep order and stability in the country. And second, China’s political system, which is also based on complete control and stability. I am fairly sure that there are people in Beijing who can tell you, within three zeros how many people with any sort of education and training they will need to bring on-line in any given year. Central planning and promoting tech degrees and work as ‘patriotic’ and ‘good for the group’ will do that for you. In the US, if we told kids in elementary school that being scientists, engineers and accountants is patriotic and that they should do it for the good of the country, the parents would string us up.
China has all our factories now,it’s no wonder to me that they’re economy is booming.
While our leaders are busy with their partisan politics , the rest of the world is blowing us away
Suggested edit.
One of the reasons for the collapse of the Soviet Union was the huge amount of money spent on military hardware. Money that would have been spent on infrastructure maintenance and improvements.
Republicans have worked with the Democrats in the past to advance legislation that would benefit the country.
Why is it that they refuse to work with Obama and the Democrats now ?
Because that’s the only way the Rs can get elected-making the Ds fail. Of course, they have a willing partner in this bargain.
I don’t want to be seen as some kind of apologist for China, given its horrendous human rights record.
Must be tough to live in the US, seems you’re not free to express your opinion without a disclaimer. Of course, looking at US history, any outsider would suggest the US has a lot more to apologise for then the Chinese.
But anyway, to the point I wanted to make.
To TobyWollin’s statement that it’s easier with central planning etc, actually, thats got nothing at all to do with it. The Chinese government takes a holistic approach to government policy. Thats why they can build infrastructure that doesn’t appear to make financial sense to a western mind.
Westerners tend to take a one dimensional approach to evaluate projects. The project has to make financial sense on its own. It’s about counting bums on seats and working out how much profit there is and how many years it takes to return the initial investment.
The Chinese approach is the above plus social factors to the project; how many people will it keep in employment for the build and running of the project?
I never understood the logic that says its better to keep people on unemployment benefit than to get them to build some useful infrastructure.
And as for the costs, it’s about time people realise that money can be printed. Just like they can print trillions for investment bankers at will.
One thing is for sure the dems and that cowardly mouse we call president is not going to do something as bold as this.
There’s no lack of knowledge among U.S. economists about externalities, i.e. bads (pollution) or goods, like transportation systems, that create loss or profit that the entity itself either does not pay for or does not benefit from. That is, every project does not have to pay for itself and generate a profit to boot, if there were sufficient positive externalities generated by it. But the USG is now so dysfunctional that it will not listen to such economists.
Harriman and Mellon are rolling over in their graves! They both knew that Chinese could build railroads, just not in China. Here.
Our milkshake is getting drunk. Whether you want high speed trains or not (and who doesn’t, watch this) Direct Jobs are what America needs. Not tax breaks that put more money in Capital’s pockets (and the Capitol’s as well).
Direct Federal Hiring is the only way out of this mess.
Thank you for this article. At least somebody’s making progress out there! Congress can’t run the country anymore–corporations run it–and they’re running it into the ground.
Read. Organize. Progress.
Great post, David.
Planning to walk across country?
Agree. The problem is quite severe, not only do we look like British old money that lost it, but still have the castles, we lie to ourselves that we are extreme rich. We try to build a pitiful fast train that wont have half the speed of the fast trains of France, Japan and China.
We say that we will build the best new energy generation in existence, but we hide the fact that Denmark is almost 20 years ahead in wind energy, Germany (cold and cloudy country) is a head in solar energy and Japan is a head in battery.
Both the administration and the Taliban (GOP is the more common name) are lying to us non stop while we are losing ground with no end insight.
You said it all with this:
Better than a continuing sequence of Bailouts evaporating into vaults.
Read Zero Hedge for the lowdown on China. They’ve BUILT all this, true, but they’re in a trap and have to keep over-investing. They’re building more than they can use, thus ensuring a deflationary collapse.
The Chinese example is not a good one, but you’re right about our having wasted all that bailout money.
And has been in many ways for a long time, while the US spends all it’s time telling itself it “leads the world” and has the “best health care in the world”, and all that false US hype and propaganda, while other nations have moved ahead of the US long ago, even decades ago, while the US has been too busy patting itself on the back.
This shows how regressive and backwards the thinking is by the general population is in the US.
I disagree. Compared to anything else our government might even consider, building rail is an absolute economic homerun.
Rail transport is just far more energy efficient than cars, trucks and airplanes. Cheaper AND greener… a double win.
And in the case of lightrail public transport, it can be totally electric, no oil. Thus it could be as green as we manage to make our electric grid.
This wouldn’t completely eliminate trucks, cars and airplanes. But it could greatly reduce thier usage.
China. First the Chinese have a foundation which to build from.What use to be the foundation of the USA.Production of goods that everyone use every day to make life better.High speed trains and rapid rail to move people is more for apperance than substance.For the comman man after it’s built jobs and targets will be created.Targets for any Terrorist not just the ones that want to kill more for the ones that want to controle and take your freedom by fear.Jobs for private contractors like black water security to keep The People safe.
Zerohedge(along with many others) don’t do a very good job of covering domestic economics in China.
Why? Because they forget that the vast majority of China is an entirely closed economy with it’s own set of rules which are very different than what you’d find almost anywhere else on the planet.
Sure, China has cronic overcapacity in some area’s but they handle it very well. And in a manner that would be practically impossible in the west. Hot money, currency speculators, bond vigilantes… these things do not exist in China.
If anything topples China it won’t be deflation or their economic system. The more likely possibilities for China’s demise would be:
1) Opening thier internal economy to the big Western banks.
2) Resource starvation, if China is blocked from importing oil and natural gas.
3) War. Personally I think the Chinese are smarter enough to avoid getting suckered into some kind of perpetual war with thier neighbors but if they did they’d find that thier system would not be able to cope with it.
It’s not perfect. Agreed, and far from it. Also, the US Gov’t can’t create jobs without adding to the deficit, i.e. businesses (small and large) are the creators of real jobs. The US economy is in a LOT worse shape than we are being told, although – IMHO – any one of us can see that fact, if we merely open our eyes. Everyone will know it when the local and state jobs start hemorrhaging, e.g. N.J. public workers consider retirement:
Much of the US economy has been built on GIANT government Ponzi schemes, e.g. Social Security and government pension funds:
Basic Math says – If you are a taxpayer, your share of the current national debt is $113,111 … if everyone – e.g. a baby born yesterday – is included, then their share is around $40,000+ (if I recall correctly).
In closing, one more thing that Obama and the Dem Congress is not telling us, i.e. that they have their eyes on a VAT (Value Added Tax) that starts out around a 23-25% tax on basically everything anyone buys…
Its not my “opinion” that you can disagree with. It is a logical and fundamental law of economics. You cannot eat your own body parts into health. Same thing goes for tax funded projects as government is a parasitic entity, with absolutely no capacity to produce. The smaller they are the better the chances of healing. And doing nothing.. absolutely nothing (like shutdown and go home.. without pay) is the best option for govt to stimulate the economy.
A rail project is like a robber taking your wallet away and giving you a couple of bucks for the bus back. What happened there is not that the robber bought you bus tickets, even though progressives like to see it that way.. but he freakin stole your wallet!
This “fundamental law of economics” that you talk about doesn’t jive with history. You say that it is impossible for government to spend money in a productive manner. Yet that is exactly what happened during the New Deal, it’s happened in the 1950′s with the interstate highway project and it happened in the 1960′s with the NASA project to take mankind to the moon. And more recently, the internet came into existence via government R&D spending.
The libertarian idea of shrinking government is both dangerous and counterproductive.
What is needed is good governance, something we have had remarkably little of in the last 30 years. And such a thing does exist, we’ve had it before and we can certainly have it again if we make it our goal.
Social Security is not a Ponzi scheme.
And we should thank our lucky stars that it exists because it’s been one of the few things holding the economy together.
Both State and Corporate pensions are another matter entirely. All I can say is that it is impossible to take out of a system more than you put into it.
If we choose to cut taxes, let infrastructure crumble, let our productive jobs be exported, let Private Equity firms pump and dump our businesses, let Wallstreet sell AAA rated toxic waste to our pension funds and let our politicians funnel funds from our treasury directly to wallstreet… then it’s not gonna matter what kind of pension you were promised because any paper money you recieve won’t be worth the paper it’s printed on.
Either we invest in our future or we’re in deep trouble.
Either we invest in our future or we’re in deep trouble – that’s what Roosevelt said.
Why is Social Security often called a Ponzi scheme?:
The baby boomers (aka later “investors”) have recently started joining the ranks of retirees (I joined last year), and their numbers are huge.
Yes, I know what Cato/Libertarians say about Social Security. They are incorrect.
Here’s some major differences from a ponzi scheme:
1) Ponzi schemes require an ever increasing number of investors. Social security has no such requirement. If anything, a stable population distribution is prefered. Boomers will stress the system but not break it.
2) Ponzi schemes tend to offer unreasonably high returns. Returns on social security payments do not tend to be unreasonably high.
3) Ponzi schemes are fraud that requires lying to investors about how thier money is being “invested”. Details on Social security are well documented and available to the public.
4) Market panics usually ferrit out ponzi schemes. Even Madoff’s scheme which offered rather low returns for a ponzi scheme was outted in the 2008 crash.
And yes I know our boomers are retiring enmass. That’s fine. It’ll stress the system a bit. They might have to up the SS taxes at some point in the future. But really it should be the least of your concerns compared to everything else which is currently going wrong.
Most boomers have seen the money they had invested in Wallstreet and money they had invested in real estate all go POOF in the last couple years. Wallstreet, for it’s part, hates Social Security because it’s the only damn thing they cannot directly steal.
And Corporate&State pensions are all looking to be in rather dubious shape at the moment. States are broke and a good number of corporations are filing for bankrupcy with underfunded pension plans. Now, part of the reason that corporations are going broke is that Private Equity groups have been loading them with debt and defunding thier capital investments in pump and dump operations. Check out the story of the Simmons matress company, about 10% of US corporations are in the same Private Equity boat with Simmons.
http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?_r=2
Boomers should be thankful that FDR created Social Security.
Do you know that Social Security is and is not an Old age Insurance scheme?
If that isn’t lying, what is?
Here is Grandma’s test of when you are getting robbed
Say no thank you to the kind gentleman offering you their “service”, see if anyone threatens to hurt you or hurts you.
Apply that to SS.. see what you get.
“Returns on social security payments do not tend to be unreasonably high. ”
This is your test of not a ponzi scheme?!
I don’t have a big enough facepalm.