China Bulls Recant

Two Austrian China-bulls have recently recanted their opinions. One is Gary North, whose opinion I unfortunately cannot provide a link to, as it is hidden away on his website, while the other is Tim Swanson, who goes so far as to point out his mistake:

Roughly eight months ago, Premier Wen Jiabao announced a $586 billion stimulus package to combat a plunge in economic activity.

At the time, analysts such as James Pressler noted that the stimulus might simply be a rebranding of previously known spending packages rolled into a big fancy plan.[1]

Suffice to say, this is not the case. I was wrong.

Wrong, as in he thought that Chinese authorities' stimulus plans were "stimulus in name only." Rather, they turned out to be the real deal, and a disastrous whopper of a scheme at that, as pointed out by Ambrose Evans-Pritchard in an article I have referenced before. As an Austrian, Swanson recognizes that this is a tremendously bad idea. At the time he gave his first opinion back in January, I opined that I thought all these lovestruck, starry-eyed Austrians were mistaken. Since that time I have more fully fleshed out why I thought things were not going to go as well for the Chinese economy as the Austrians seemed to believe, and, in my opinion, have been proven correct. I even successfully predicted that civil unrest would result from all of this, and indeed it has, though not quite in the way I would have first guessed. OK, OK, my head is starting to swell. Cue the list of screw-ups over the past half-year... Yes, I'll admit I made some pretty bad calls. At any rate, China watchers will never be able to understand Chinese economics if they do not first understand the most fundamental characteristics of Chinese culture. Stop reading the books about "saving face" and Taoism; start doing things like watching the movies they make and -- here's a thought -- talking to them! They're nice folks; most don't bite. And Austrian economists will never get things quite right so long as they persist in acting like Keynesian statistics-mongers and ignore the most fundamental contributing factor to economic development: ethical codes and conduct. It's funny how so many members of the one economic school that argues that economics is not a quantitative discipline but a qualitative one get so caught up in the numbers. The numbers, for what little they are worth, are highly context sensitive. Two practical recommendations for Austrian economists like Tim Swanson who would like to improve their Sino-prognostication:

• marry a Chinese woman
• read this book