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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
Jul 16
1/6
 Good SCMP article that illustrates one dilemma facing the Chinese economy: "While official manufacturing data for June showed continued expansion, electronics exporters in the region – one of China’s biggest industrial areas and a bellwether for the...
sc.mp/l1qix?utm_sour…
2/6
 national economy – said last week that a pickup in orders had yet to lift their bottom lines."

Or, as a friend who owns a medium-sized manufacturing business in China puts it: "Why is it so hard to find the happy people you'd expect to find in an economy growing at 5%?"
3/6
 Analysts often say that China's soaring exports and its widening trade surplus are the bright spots for the economy, but it's not as simple as that. These are brights spots in the sense that they contribute to economic activity and allow China to keep production growing.
Read 6 tweets
Michael Pettis Profile picture
Jul 8
1/10
The FT's Edward White argues that China urgently needs someone to close down huge swathes of China's inefficient and money-losing industries, much as former premier Zhu Rongji did in the late 1990s and early 2000s.
ft.com/content/9c4fe0…
2/10
In the former case, he writes, "the cuts ripped through China’s north-eastern rustbelt. Thousands of mines, steel mills and other industrial sites were shut for good. An estimated 30mn to 40mn workers lost their jobs."
3/10
White notes that today, "the share of lossmaking industrial businesses jumped from about 10 per cent in 2010 to nearly 25 per cent last year. This dynamic exists across everything from steel and cement to cars, computer chips and robots."
Read 10 tweets
Michael Pettis Profile picture
Jun 19
1/8
 FT: "That said, “the weakness in consumption is more structural”, Logan Wright added."

He's right. Every month there are incremental explanations as to why consumption was weak "last month", but the problem is not temporary. It is structural.
ft.com/content/7db729…
2/8
 The property sector can stabilize, the Iran war can end, the weather can get better, a new toy fad can emerge, Beijing can launch another consumption program, but while these may all cause temporary increases in consumption, overall consumption will continue to struggle.
3/8
 The reason, as I've argued for years, is that China's low consumption is not an accident or an oversight. It is fundamental to the way the economy works. It is China's low household share of GDP that drives both its low consumption share and the "competitiveness" of...
Read 8 tweets
Michael Pettis Profile picture
Jun 2
1/4
 This OECD study is likely to have an important effect on global trade discussions, but its worth noting that its measure of the extent of Chinese subsidies do not include two of the most important subsidies that drive the global competitiveness of Chinese manufacturing.
2/4
 The first and most obvious is the undervalued currency, which is the functional equivalent of a tax on imports and a subsidy for exports. Because it is hard to quantify the exact extent of the undervaluation of the RMB, most subsidy measures exclude it.
3/4
 The second is the financial subsidy. The study does try to quantify the extent to which certain manufacturers are able to borrow below "market" rates, but when the market rate itself is repressed, with nearly all credit being directed to...
Read 4 tweets
Michael Pettis Profile picture
Jun 2
1/6
 Financial Times: "A company-level OECD analysis of government subsidies across 15 key industrial sectors found that nearly 60 per cent of Chinese firms’ global market share gains since 2005 could be attributed to subsidies."
ft.com/content/885ca6…
2/6
 "The OECD researchers said that while subsidies led to increased market share, they did not contribute to a firm’s productivity or profitability. “Subsidies result in less productive players winning unfairly at the expense of more innovative and efficient ones.”"
3/6
 The OECD make two substantial points. First, China's export success is driven not by comparative advantage but by competitive advantage, a function of large household transfers that subsidize manufacturing and that require trade surpluses to clear.
michaelpettis858496.substack.com/p/comparative-…
Read 6 tweets
Michael Pettis Profile picture
Jun 1
1/5
 WSJ: "Labor’s share of gross domestic income (conceptually similar to GDP) sank to 51%, the lowest since records began in 1947. Profits’ share climbed to 12.1%, the highest since 1950."
@greg_ip
wsj.com/finance/stocks…
2/5
 Greg Ip has a good track record of zeroing in on the key point. The profit share of GDP is rising, he notes, but the wage share is declining. This is a problem, because, as Marriner Eccles explained in the 1930s, it is overall wage growth that sustains production growth.
3/5
 If the US were running a trade surplus, it would be net foreign demand that balances the gap between the two. The fact that it is instead running a trade deficit suggests that domestic demand is being propped up by rising fiscal and household debt.
nber.org/system/files/w…
Read 5 tweets

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