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Michael Pettis Profile picture
@michaelxpettis
Aug 19, 2019 • 6 tweets • 2 min read • Read on X
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Yes, agrees. Ironically democracy seems historically to be “in crisis” precisely when it is most proving its superiority to other systems, i.e. when it is managing us through a difficult, messy adjustment. The books cited here seem to worry that democracy is in trouble because...
...the electorate isn’t just, disinterested and well-informed, but I think this would only be a problem if the purpose of a political system were to express deep political truths. In fact I’d argue that nothing is more dangerous than such a political system: what we need is...
...one that allows our institutions to adjust, however clumsily, as conditions change, and unfortunately because there are times, like today, when change is extremely messy, chaotic and hard to predict, the best we can hope for is to adjust in a messy, chaotic and...
...unpredictable way. Like in the 1930s and the 1970s, I think the populism and “crisis of democracy” that we are experiencing today is just democracy doing what it is supposed to do. It is the non-democracies that are not adjusting, and while this may look like purpose and...
...stability, in fact I think it just reflects institutional rigidity. Jefferson is supposed to have wanted a bloody revolution every fifty years to drive institutional change, but while that may be more aesthetically pleasing, perhaps our way is better.
tabletmag.com/jewish-news-an…
I meant to paste this:
monticello.org/site/research-…

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More from @michaelxpettis

Michael Pettis Profile picture
Mar 26
1/9
 Reuters: "China said that Mexico's trade measures against it, including tariff increases, ​constitute trade and investment barriers and that it had ‌the right to take countermeasures."
rld/china/china-says-it-has-right-retaliate-against-mexicos-tariff-hikes-2026-03-25/
2/9
 This story was predicted by, and can be explained through, the insights of both Michael Kalecki and Joan Robinson.

In the former case, it illustrates the Kalecki Paradox as it applies to global trade.
3/9
 Kalecki pointed out that while an individual firm can raise its profits if it lowers its wages (i.e. relative to the productivity of its workers), if all firms do that, total profits will be lower for everyone. This is because when one firm does it, it reduces demand for...
Read 9 tweets
Michael Pettis Profile picture
Mar 25
1/5
 This new paper by the Fed concludes that China's export success stems from weak domestic demand "rooted in structural features of China's economy and financial system—particularly those that constrain household consumption."
federalreserve.gov/econres/notes/…
2/5
 "As China's export share has increased, exporters in advanced economies have experienced widespread losses in global market share. Losses are evident across most sectors and are particularly pronounced in economies with strong manufacturing bases, such as Japan and Germany."
3/5
 "Sectors with more policy interventions experienced faster export growth over the 2017 to 2024 period. The relationship is especially pronounced in motor vehicles and battery-related products, where extensive policy support coincided with rapid export expansion."
Read 5 tweets
Michael Pettis Profile picture
Mar 9
1/6
 China's deflationary environment continues to improve, with high-than-expected numbers in February. CPI inflation was 1.3% year on year and 1.0% month on month. Month-on-month inflation has been positive since December and mostly positive since July.
english.news.cn/20260309/3fc64…
2/6
 The Spring Festival always makes January and February data noisy, but ever since Beijing decided to go after the problem of involution last May and June, we've seen deflationary pressures ease. But we also saw investment growth decelerate sharply. This isn't just coincidence.
3/6
 Involution was largely caused by the post-2022 shift in investment growth out of property and into favored manufacturing sectors. Beijing's move to cut excess capacity in involuted industries reduced both total investment and defllationary pressure.
carnegieendowment.org/posts/2025/08/…
Read 6 tweets
Michael Pettis Profile picture
Mar 7
1/8
 Bloomberg: "China will issue 300 billion yuan of special sovereign bonds to recapitalize some of its largest banks, marking an expansion of Beijing’s efforts to fortify the nation’s financial system against a cooling economy and market volatility."
bloomberg.com/news/articles/…
2/8
 Chinese banks are caught between record low net-interest margins and worsening loan quality, and so are forced to recapitalize, but this just reflects the same set of inconsistencies between high growth targets and low consumption that we see everywhere else in the economy.
3/8
 Banks are forced to lower lending rates partly because highly-indebted borrowers are struggling to service their debts and partly because Beijing wants to encourage any additional investment it can in an economy that already has too much capacity.
Read 8 tweets
Michael Pettis Profile picture
Mar 5
1/7
 Xinhua: "China will actively boost consumption and implement an income growth plan for urban and rural residents, according to a government work report submitted Thursday to the country's top legislature for deliberation."
english.news.cn/20260305/4203c…
2/7
 This is certainly the right thing to say – the only sustainable way to raise the consumption share of GDP is to raise the household income share – but it tells us very little.

Raising the household income share means reducing the business and/or government shares.
3/7
 So how will these transfers occur? Almost certainly not at the expense of businesses. Given that much of China's manufacturing sector is barely breaking even, even after huge direct and indirect subsidies, the sector is clearly not efficient enough to tolerate...
Read 7 tweets
Michael Pettis Profile picture
Mar 5
1/6
 Xinhua: "China targets an economic growth of 4.5 percent to 5 percent this year."

While this is the lowest target in decades, it's still roughly twice what I think the economy can sustainably deliver without a lot more more non-productive investment.

english.news.cn/20260305/d0f4b…
2/6
 It is a good sign that Beijing has set a lower target this year (certainly better than rigidly sticking to a 5% GDP growth target), but the truth is that it doesn't change much. China will still have trouble – for all its promises – getting consumption growth to accelerate.
3/6
 This suggests that the underlying dynamics of the Chinese economy will remain the same. China still can't tolerate any significant decline in the trade surplus and, more importantly, it can allow only a very small deceleration in investment growth.
Read 6 tweets

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