Less government, better coping
[comment on Daily Speculations post on various potential crises in China]“The Chinese government is struggling to cope…” Newspapers regularly report that governments or federal agencies working hard to deal with the crisis-of-the-week. We have a impending water shortage in China this week. Last week the headlines were of massive floods in China. This suggests an opportunity to improve infrastructure (though western environmentalists still oppose new dams). When water is owned and has prices less will be wasted. If Chinese farms cannot compete without “free” water, they will shift to different crops. When farms pay more for water they economize and innovate, and some on the margins go out of business. Chinese farmers, starved of capital for generations, need far fewer workers as they gain access to modern farm machinery and methods. Workers naturally migration to village and city factories. ”Social upheaval” is more the consequence of Chinese government intervention in capital markets, restricting investment in some areas and subsidizing it in others. Chinese economic growth of 10% is celebrated, yet a free China would grow faster with less pollution and resource waste. Michael Cox offers this analogy. One man struggles to clear a path through the jungle. With a machete he can move ahead much faster (up to 10%, say). But when those behind him find the trail, they can go much, much faster. China found the capitalist trail and would have run along it much faster without the remnants of communist bureaucracies “struggling to cope.” An online source reports the U.S. imported 150,000 tons of apple juice concentrate from China in 2006. That takes a lot of water to grow. U.S. customers won’t notice slightly higher prices from less Chinese apple juice, though U.S. orchardists would. Ending water subsidies for apple production in China could benefit many, while harming some in the short term. Higher pork prices hurt the poor but encourage efficient pig farmers to expand, and to clean up their operations to better avoid disease. Will “social upheaval” follow higher pork prices, or just more fish for dinner?