Monday, February 22, 2010
China. My uncompleted thesis was supposed to be an evaluation of the China threat. The basic idea was meant to be a simple evaluation of capabilities and intentions. What it foundered on was the impossibility of getting reliable numbers as to what China's GDP really was. There were numbers used or at least reported by the banks and those reported by the Chinese government and there are large numbers of economists employed by the CIA to stare at the black box and guess what is inside it but the fact is that we do not know. We can track most of what goes in and comes out but the fact remains that only a fool would believe anything reported from an official source and there are real impediments to observing what happens in vast portions of the country for three reasons.
1. In any 3rd World (Developing) country the veneer of managers trained to competently record and report information at the level desired by Western standards is very thin. Most places simply lack the capacity to do the job, even if their intentions are good.
2. In any 2nd World (Communist) country the costs of failure are so high and the expectations are so irrational that managers are trained to to submit false reports and keep their enterprises alive by any means including political maneuvers, graft, nepotism, and theft. Actually delivering a product is way down the list of expectations.
3. Max Weber pointed out that China's Confucian social and ethical system, like its equivalent in Southern Europe, produced a sliding scale of moral obligations. One's duty to their father exceeded their duty to their brother. The loyalty to one's brother justified deceitful conduct towards a cousin, loyalty to your home village exceeded that due to the inhabitants of a distant province, etc. While in theory everyone owed loyalty to the Emperor in practice he was far away.
The fathers and grandfathers of the current managers in China grew up evading the irrational expectations and random bouts of violence of Mao's rule. The government was told that the Great Leap Forward was producing tons of steel in back yard furnaces and that millions of happy chickens were laying billions of eggs for the Red cause. It was all a lie. When a disaster due to system failure happened people would protect the leader by saying "If only Mao (or Stalin etc.) knew." Keeping the prestige of the leader intact through ignorance may actually be a feature of these systems.
New York City is now approaching 67 years of experience with the effects of the temporary war time program of rent controls that are still while modified in place. They have contributed significantly to all of the pathologies that afflicted the city since. What a program of price controls in medicine will do is decrease the supply of good doctors and increase the supply of lawyers and financial regulators, or their partners trained regulation avoiders.
Last night the popular show Boston Legal was on. One of the plot lines was about the poor child whose mother was killed by her crazy stalker father. They sue the insurance company for not protecting her personal information since the father was able to go into their web site and impersonate her, after all he as her former spouse had her identity information, to find the location of her doctor, where he murdered her. The fat tired and lame old white guy insurance executive sits there while his lawyer makes a perfunctory statement to the jury that the effect of holding for the poor little girl will be higher costs and less access to medical care for everyone then the lawyer for the plaintiff tells the jury that the NSA is reading their email and wins almost $3,000,000 for his client. We may save whiskey the trouble and write his commentary for him.