1930s Germany and Soviet Union,
China uses the Gerschenkron’s model
The model postulates that the more backward an economy is at the outset of economic development, the more likely certain conditions are to occur: Special institutions, including banks or the state, will be necessary to properly channel physical capital and human capital to industries. Gerschenkron’s model
China’s economy and its challenges are complex. Let me jot down some notes:
Overall Trends
Xi Jinping assumes office 2013
Economic reform started 2014-15, but Chinese equity markets crash Aug 2015, so reforms stop
-harsh capital controls: strict control of foreign exchange transfers, especially for purchase of int’l shares, real estate
-provincial, city gov’ts borrowed huge amounts, now deleveraging campaign
-anti-corruption campaign, increased importance of CCP -> slowed growth
-stock market down 30%
-real estate bubble
-trade war and tariffs with US
-aging of labour force
-pharmaceutical scandals
-XJP wants total allegiance to CPP for all people, companies
-yuan devalues 9% to just over 7:1 US
It is no big news that for the majority of the 99% of regular people the last 10 years in North America has been economically tough. Our young have a difficult time finding stable employment. In fact finding stable work has been a challenge for quite a long time. Products from China undercut our domestic manufacturers who have largely gone out of business. Our kids will not have a better life than us. It is clear that larger forces than the Canadian environment are at play here.
Anyone who lives here in Scarborough, Ontario, Canada, a suburb of Toronto, can tell you that incomes have markedly dropped. We see it in our schools and neighbourhood. A Toronto Star article on the widening income gaps here in Toronto brought me to a couple interesting maps by Dr. J. David Hulchanski. His paper “Report: The 3 Cities within Toronto, Income Polarization, 2007” gives much food for thought.
Dr. Hulchanski’s paper includes a couple of maps of Toronto by change in income from 1970 to 2000. It is a very sobering map for those of us who live in Scarborough, a suburb of Toronto. It is not that we are special, because other suburbs of Toronto have also experienced similar income drops.
