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Michael Pettis Profile picture
@michaelxpettis
Aug 19, 2019 • 6 tweets • 2 min read • Read on X
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
Oct 18
1/9
 China Daily says that the next Five-Year Plan might see a change in the way local governments collect taxes, shifting collection from the site of production to the site of consumption.
chinadaily.com.cn/a/202510/17/WS…
2/9
 This will presumably change local-government incentives from encouraging more production to encouraging more consumption. According to China Daily, "Local governments, eager for economic growth and...
3/9
 tax revenue, aggressively court the same favored industries with favorable policies. The result is a dangerous cycle of redundant construction, vicious internal competition, and ultimately, some oversupply situations."
Read 9 tweets
Michael Pettis Profile picture
Oct 16
1/5
 Chinese debt continues to rise quickly, with total social financing rising by 8.7% year on year in September (more than twice GDP growth) to RMB 437.08 trillion. This is equal to nearly 312% of 2025's expected GDP (versus 303% at the end of 2024).
caixinglobal.com/2025-10-16/chi…
2/5
 In the first nine months of the year, TSF rose RMB 30.09 trillion. If you assume interest on the stock of debt at an average of 2.5%, this implies that it required an increase in debt in the past year equal to 17% of GDP in order to boost nominal GDP by around 4%.
3/5
 Bank lending grew by less than expected, or 6.6%, a record low and down from 6.8% in August, and while many analysts have focused on the implications for credit growth, what it really shows is that in recent months there has been a shift in the locus of debt creation.
Read 5 tweets
Michael Pettis Profile picture
Oct 15
1/9
 WSJ: "According to the people close to Beijing’s decision-making process, Xi’s hard-line strategy is based on the belief that Trump will ultimately fold and offer concessions rather than deploy Washington’s own significant leverage."
via @WSJwsj.com/world/china/ch…
2/9
 If true, this could be a very high-risk strategy. According to the WSJ, "With hiring slowing, manufacturing contracting and prices rising, many economists say the U.S. isn’t positioned to absorb another major trade fight with China."
3/9
 But if you were to rewrite the sentence as: "With hiring slowing, domestic demand stagnant and prices declining, many economists say China isn’t positioned to absorb another major trade fight with US", it would no less true.
Read 9 tweets
Michael Pettis Profile picture
Oct 14
1/8
 WSJ: "President Trump is trying to publicly de-escalate tensions with China to soothe markets while privately keeping up pressure on Beijing—a difficult balancing act that is being closely watched by Wall Street."
via @WSJwsj.com/world/china/tr…
2/8
 This is also the impression I got from my meetings last week. There is a sense that Beijing overplayed its hand, perhaps because until China is able to boost domestic demand (something that will be extremely difficult), it is still very vulnerable to a trade contraction.
3/8
 Although it is the growing US trade deficit that accommodates the growing Chinese surplus, I suspect many in Beijing think that it is the bilateral surplus with the US that matters, which is why it believed it needed to "win" the trade discussions as quickly as possible.
Read 8 tweets
Michael Pettis Profile picture
Oct 2
1/9
 FT: " UBS's Paul Gong played down the chances of an EV industry-wide consolidation in the near term, as deep financial support for lossmaking groups from provincial governments and capital markets stands in the way."
ft.com/content/5f73d2…
2/9
 This is a very appropriate example of János Kornai's distinction between economies that operate under hard-budget constraints and those that operate under soft-budget constraints. The hard-budget constraint sets a limit to the extent of losses a business can have.
3/9
 In market economies, Kornai argued, hard-budget constraints prevent entities from persistent loss-making activities unless investors truly believe that future profits are likely to be enormously large. It is economics, not politics, that determines the extent of investment.
Read 9 tweets
Michael Pettis Profile picture
Oct 2
1/8
 Eduardo Porter argues in this FT piece that Latin America's import substitution industrialization (ISI) in the 1960s and 1970s "ended in a massive debt crisis that ushered in a period of economic decline known across the region as the “lost decade”."
ft.com/content/2f9dea…
2/8
 This is a very common misperception. The ISI period ran from the late 1930s to the early 1970s, and peaked in the 1950s and 1960s. During this period, ISI economies in Latin America grew extraordinarily quickly and produced many of the first development "miracles" in history.
3/8
 In fact at the time, it was widely accepted that several of the larger Latin American economies would reach European levels of development before the end of the century.

That all came apart by the end of the 1970s, but to blame it on ISI makes little sense.
Read 8 tweets

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