This week on King World News financial strategist Robin Griffiths is interviewed on a range of macro topics. Around 13:00 into the MP3 file Griffiths says (approximately transcribed):
I do think that being a command economy and not a democracy is an advantage for China at the moment, because if it finds that it’s moving in the wrong direction, as it recently did, it can just suddenly say to the banks “right now I want you to do these different things and cool it,” and it instantly starts to happen…but It’s a very efficient form of government at the moment to keep their show on the road
Just after (the new Year) we will get a new five-year plan from China. And I understand that will amount to a massive plan to stimulate the domestic economy and switch the emphasis away from selling exports to America through Walmart. As long as they do tend to deliver on their five year plans…having a five year plan out there will encourage people to invest and keep the show on the road.
Some questions for Griffiths:
- How would the central planners know what is the “wrong direction” for the economy?
- Without prices and a profit/loss system how would the planners know what instructions to give to banks (or any other firms) in order to get the results they want?
- How can central planners monitor whether banks are carrying out their instructions?
- Without prices and a profit/loss how can central planners have any idea of what to plan?
- Why does consumption need to be “stimulated”? Why is it necessary to plan consumption? Doesn’t everyone want to consume goods?
- How will the central plan ensure that the that what gets produced are the goods that people want to consume?
I have been a skeptic of the Chinese growth miracle for some time. Last year, I blogged about a Chinese ghost town built by central planners but never inhabited. Via a friend I received amazing satellite and ground photos of Chinese ghost cities. These mind-blowing photos show multiple cities, some of which have a few dozen cars owned by central planners parked around government offices, others totally vacant. In my view these empty cities are more indicative of the results of central economic planning than the fantasy world that Griffiths lives, in which central planners snap their fingers and the results they want arrive.