I am old enough to remember when almost everyone believed that the Russians were, as Khrushchev put it, going to “bury” us. Even leading economists such as Paul Samuelson were taken in by such nonsense.
Of course, no such burial occurred, because just producing vast quantities of concrete, steel, and H-bombs is no evidence that anything of genuine value is being produced. Later Japan became the Godzilla that was going to eat the U.S. and European economies with its bureucratic setup for picking and subsidizing “winners.” Before long that setup too collapsed in a heap and gave way to perpetual stagnation. Now almost everyone quakes in his boots while beholding the mighty Chinese economy. Again the hysteria has no firm foundation. An economy shaped and guided by government bureaucrats and Communist bigwigs by means of tariffs, subsidies, state-controlled credit, and state-owned industries cannot be a real growth miracle for long. This too shall pass.
Of course, no such burial occurred, because just producing vast quantities of concrete, steel, and H-bombs is no evidence that anything of genuine value is being produced. Later Japan became the Godzilla that was going to eat the U.S. and European economies with its bureucratic setup for picking and subsidizing “winners.” Before long that setup too collapsed in a heap and gave way to perpetual stagnation. Now almost everyone quakes in his boots while beholding the mighty Chinese economy. Again the hysteria has no firm foundation. An economy shaped and guided by government bureaucrats and Communist bigwigs by means of tariffs, subsidies, state-controlled credit, and state-owned industries cannot be a real growth miracle for long. This too shall pass.
And when it does Americans will learn nothing from their most recent mistake. If people really understood sound economics, they would not continue to make this same mistake again and again.
Robert Higgs is Senior Fellow in Political Economy at the Independent Institute, author or editor of over fourteen Independent books, and Editor at Large of Independent’s quarterly journal The Independent Review.The above originally appeared at the Independent Institute.
The Chinese approach is different. The Soviet Union wanted to prove they could produce more. The Japanese companies competed for customers. The Chinese approach is to subsidize Chinese companies such that manufacturing is done in China and the US manufacturing capital ends up scattered to the wind or simply scrapped. The Chinese approach can work. It just depends on how long they can avoid disaster and how much cheaper US manufacturing can make things and keep business and thus hold on and stick around.
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