I don't see any justification for the Soviet analogy other than wanting to conjure up the image of the impending collapse of China. This sounds like the infrastructure version of the 'financial bubble' prediction that crops up every other year.
If one wanted to pick a positive story there would be the example of the American progressive era, the creation of the interstate system, the railway system during the 19th century, and so forth. Not every large infrastructure project is indicative of corruption, someone needs to build infrastructure, after all, I don't think we've somehow transcended the need for transportation.
That there's military or geopolitical motivation, especially as far as the land component of the belt and road initiative is concerned seems accurate, but doesn't strike me as particularly bad. From a Chinese perspective it obviously makes sense to invest into continental infrastructure because it does not control the sea.
From 3rd paragraph TFA, and unlike 1910-1950s USA,
Like the Soviet Union in the 1970s, China is coming to the end of a long labor-force boom, and hoping that an orgy of investment will keep the old magic going while stabilizing its fraying frontiers.
Cornelius Vanderbilt wasn't trying to overcome a graying America or shore up the Monroe Doctrine by building railroads in Latin America and Africa. If anything, I fail to see any justification for your comparisons between China and the progressive-era US.
The comparison to Soviet Union is problematic but definitely more relevant than US investment scenarios that you highlighted.
The US scenario you highlighted would be more comparable to Chinese investment in the last 25 years, no?
The clear difference between Soviet Union and China is that China has a growing and robust economy, with a firm grip on the situation whereas the Soviet Union was aching away on so many lies.
Chinese fabricated financials can be papered over with any kind of magic the state wants to apply to it - so long as the economy continues to move forward the numbers will say anything they want them to say.
The articles comparison may be overblown but it's not without reason.
I believe that the China boom has mostly been had, and we're going to see lower growth from here on in; that said, it'll be consistent and positive and they aren't going to disappear as a superpower.
I think the main point was that the Chinese investment seems to at times fly in the face of where trade really is / is going.
The us interstate system was where there was trade already and not many alternate routes / better systems.
China's strategic concers are obvious and make sense...and yet if push came to shove and they were cut off from the sea, are they really trading via rail with Europe or others in that scenario anyway? / is incurring the costs of whole backup systems making sense?
Personally I don't have a clue how any of this plays out, just speaking to what the article is indicating.
> it obviously makes sense to invest into continental infrastructure because it does not control the sea.
Easier and cheaper to pursue a Blue Water Navy than pump money into questionable projects in corrupt States -- projects who's success is anything but assured (See Malaysia PM planning to cancel all Chinese projects and the mess in Pakistan as recorded by WSJ recently).
> someone needs to build infrastructure, after all, I don't think we've somehow transcended the need for transportation.
It's more about the opportunity cost and ROI than the need, right?
> This sounds like the infrastructure version of the 'financial bubble' prediction that crops up every other year.
My favorite is the yearly "end of china" report by gordon chang. I remember the guy talking about china's collapse in the 90s and he's been wrong since.
>Great powers are the nations that best harness their economic potential to build up military strength. When they become overextended, the splurge of spending to sustain a strategic edge leaves more productive parts of the economy starved of capital, leading to inevitable decline.
This describes the US better than China. The US spends 7.8% of it's GDP on the military, while China spends only 1.9%. If any country is over-exerting itself and "starving the economy of capital", that's America.
And according to the military, most of this higher than average spending is due to the military being voluntary, and needing to compete on wages in one of the highest earning countries in the world. Whether you agree with the military's assessment or not, it's true that a significant portion of US military spending is spent on wages/compensation. A lot (not all though) of the difference between the US and russia/china is due to the later having much cheaper labor.
Also the last sentence certainly isn't true... there are many countries that spend far more a percent of GDP on their military: Russia, Saudi Arabia, and the typical example of military excess: north korea.
Whether China will come up ahead with Belt and Road is uncertain. What is certain is there's a tremendous infrastructure gap, particularly in Asia. This is a great way to turn the overcapacity in Chinese steel and cement into something useful for the world.
1: The Asia Pacific is "hitting the knee on the curve" and modernizing its economy. Also, it's the most populous region on earth. It's why economic forecasters call the 2000-2100 period the Asian Century: https://en.wikipedia.org/wiki/Asian_Century
2: The Silk and Road Project ranges far outside "economically stagnant" areas. It's adjusted investments according to projected future growth, and also hedged into already modernized economies. It's as much about supply chain and trade routes as it is about direct economic investment. It connects China to Europe.
One interesting project is the mostly Chinese-funded port of Gwadar, in Balochistan, Pakistan. They're trying to develop it as a deep water port as an alternative to Karachi. So far not with very much success, because of political instability and difficulty of attracting other foreign investors to the region.
Now this part is just my opinion, but the really, really hard part is the proposed road or high-speed rail cargo link from Gwadar to Western China. The Karakorum highway is no joke. It's narrow, twisty, carved into steep rocky mountain passes. I've driven from Islamabad via Gilgit to the Chinese border. It will take many, many billions of dollars of tunneling and road construction to bring it up to the standard of a highway that can take a large volume of 20/40ft cargo container traffic. Right now trucks spend a great deal of time in 1st gear crawling along at 15km/h.
China is located among countries with large populations. Border disputes and historical warfares with neighbors are among its handicaps.
Looking at the world as a grand chess board, the Belt and Road Initiative is a move which China turns this disadvantage into an edge. By promoting trades with neighbors, it gains geopolitical influence, potential integration into the local economies, and friendships with the political classes.
To match this, the US needs to further strengthen its ties with the countries in question. Several of which are projected to become some of the largest economies in the world by 2050 [1]. Regardless of the extent that the projection comes true, the regions from East Asia to South Asia, where about half of the world's population live in, clearly have great long-term strategic importance.
It isn't as much about sincere trade as much it is about making those countries dependent on China.
Just take a look at the projects completed so far, every single time they brought in their own people and companies to build oversized unnecessary infrastructure that remains mostly unused.
When countries default on those loans, things aren't quite bright.
When you compare the cost of Belt and Road to wars that cost trillions of dollars, the money spent is peanuts.
The belt and road is already working. China-Finland train link connects Nordic countries with China in 10-12 days. They carry heavy and expensive machinery and machine parts between China and EU. Too heavy for air-travel economically and needs to arrive relatively fast.
I don't think your example shows that, and the article disagrees with you:
"The value of freight between Europe and Yiwu, a much-touted overland rail hub near Shanghai, came to 2.27 billion yuan ($330 million) in the first four months of this year [snip] China’s top four ports alone process about the same value of cargo every three hours."
Come on, building and rebuilding other country's economies is a boon to the local economy, particularly when that other country is footing the bill. That's literally why the US was on top starting at the end of WWII. Not everything the Soviets were doing in the 70s is the reason for their downfall.
> building and rebuilding other country's economies is a boon to the local economy, particularly when that other country is footing the bill. That's literally why the US was on top starting at the end of WWII.
I'm sure it helped, but the U.S. was already by far the dominant power before that economic activity.
At the end of WWII, the U.S. produced half of the world's GDP, a staggering number. It was the only advanced country which was physically untouched by the war, it had troops stationed throughout Europe and the Pacific, and it was the only country with nuclear weapons.
It says a lot, IMHO, that the U.S. didn't pursue a global empire at that point.
"The bulk of major Belt and Road projects are in Malaysia, South Asia and Indochina" -- subheading of the 2nd chart
Malaysia and Indonesia control the Strait of Malacca, one of the world's busiest shipping lanes which doubled in traffic over the past decade [1]. The strait connects manufacturers in China to fast-growing large population centers in South Asia, including India, Pakistan and Bangladesh with over 1.5 billion people in total.
Most of the projects facilitate trades between South Asia, Southeast Asia, and China. About half of the world's population live in these regions [2].
The projects to connect China to Russia and Europe serve two major purposes:
1) Energy security: Over 40% of the oil China imports comes from the Middle East [3], where it does not have much influence. Even imports from elsewhere are largely shipped over the seas which China does not control.
2) Geopolitical influence through trade and investment
More info on the Strait of Malacca (emphases mine):
"The strait is the main shipping channel between the Indian Ocean and the Pacific Ocean, linking major Asian economies such as India, Indonesia, Malaysia, Singapore, China, Japan, Taiwan, and South Korea. Over 94,000 vessels pass through the strait each year (2008) making it the busiest strait in the world, carrying about 25% of the world's traded goods, including oil, Chinese manufactured products, coal, palm oil and Indonesian coffee. About a quarter of all oil carried by sea passes through the Strait, mainly from Persian Gulf suppliers to Asian markets. In 2007, an estimated 13.7 million barrels per day were transported through the strait, increasing to an estimated 15.2 million barrels per day in 2011."
Meanwhile, the USA will dump 1 trillion dollars at a time on things like the Obama stimulus to apparently no effect, a decade of massive subsidies to an insolvent financial sector, billions of dollars on failed school districts... China might overpay, eventually, if they actually invest their claimed amount of money (doubtful), but they do appear to at least get a road when they pay for a road.
> the USA will dump 1 trillion dollars at a time on things like the Obama stimulus to apparently no effect
What? The economy recovered, it could have gotten much more worse if Obama did nothing. Even Bush realized that, whatever became Obama's stimulus was planned before Obama took office, and passed with bipartisan support. It only became a whipping boy later because the Republicans saw and took the political opportunity.
> but they do appear to at least get a road when they pay for a road.
Yes, but the villages who live on the road probably can't pay the high tolls to use it.
Yeah, people keep saying China is a house of cards, but they're spending their money on things you can see and use. The train I take to work is 40 years old, and the tracks are over a 100. I'm envious of all the new things they're building with all their 'fake' growth.
Heh, again China 'collapses', such articles keep coming for ~20 years now, yet it's only getting stronger. If I had to bet my money, I would bet that China will outlast any current major power and USA is in much more dangerous position stabbing long time allies in the backs, isolating itself and monkey for a president.
FWIW, if some reports are anything to go by (see e.g. [1]), and indeed China itself (see e.g. [2]), China has an enormous (and growing) pile of bad debt. If true, things could get very ugly when the bubble pops.
China has been around for what? Three thousand years? Its not going anywhere. Even at its lowest point under Mao it still exerted enough influence to counter the Soviet and US political domination of Asia.
While the collapse was unavoidable, Soviet Union collapsed when it collapsed, ie. in the 198x instead of say 10 years later or 10 years earlier, because of confluence of 2 factors - cold weather of 198x resulting in bad harvests and low price of oil which didn't allow for enough import to cover the food shortage. Food is the key in support [or lack of it] of a regime by its populace. We have just again observed the same thing of food issues leading to great political upheaval - Arab Spring. Wrt. China - so far there is no food (or any other basic quality of life) issues on the horizon.
So much destruction post 1940s coupled with slave labor (local political prisoners and German prisoners of war) leads to roads and steel plants being built quickly. The population though lived on near nothing till the 60s.
The USSR also had many satellite nations, like the Eastern European block. Moscow was known to drain those countries' resources, with little local investment in return outside of military bases.
I only have personal anecdotes to back that up having grown up in one of those satellite countries.
Back then, the USSR was largely a rural backwater. After WWII, there was rapid industrialization, mechanization of agriculture etc.
Of course, during the entire cold war the USSR "overspent" on the military compared to the Western economies. But, during the WWII the economy was understandably 100% focused on the war. So even if the kept "overspending" on the military after the war, there was still a lot of industrial capacity left over that could be used for rebuilding and industrialization.
Stopped reading when it started talking about pipelines in military terms. This isnt 1942. A fixed pipeline is a vulnerable asset of little use in any substantial conflict.
Some interesting points in here that I had not considered in a while.
Definitely one of the big advantages of the western economies is the cutthroat nature in which they think about ROI.
If something won't return a profit to a high probability, then it's not built.
Japan has seen problems with the same Soviet top-down style, where there are a lot of excess infrastructure projects throughout Japan, particularly in rural areas.
Japan avoided the Soviet implosion, but it has still gone through a large period of flat growth since the early 90's.
Deflation has been a major problem since 1991 and still is.
China could be the exception to this top-down style and find a way to high growth despite it's inefficiencies, but I am betting that it all catches up to them suddenly. Maybe not for a few years, but it will most definitely happen like it has happened to every country that has adopted the top-down Japanese style modernization.
I don't agree that's the big advantage of western economies, especially for infrastructure project. Actually that's the big disadvantage, and short term of capital economy, as everything is about ROI, in short term. Think about high speed trail in California, the project at that scale, no private company can do that, in additional, it may take several decades to make any profit. Only the government can make such plan and invest on this project, but every four years election make it also impossible.
>"It’s worth considering all this misdirected spending in the context of the Soviet Union’s decline. Around the middle decades of the 20th century, Moscow presided over a China-style economic miracle that caused many in the West to fear they would be overtaken."
The key question may be to what degree China's economy resembles Russia's. If China's is some free-market lipstick on a planned-economy pig, they are likely to suffer Russia's fate. To the extent that the free-market reforms are real, they have a better chance of escaping it.
My personal opinion is that China's free market is real, but the state intervention is still fairly heavy for a "free market economy". What does that translate into in terms of China's chance to avoid collapse? I don't know.
While I think there's a certain romance and grandeur about enormous and lasting infrastructural projects, it's a little frightening how quickly we can forget our mistakes.
Even though so very much has changed in China since the Great Leap Forward in the 50s and 60s, I wonder how carefully the consequences of poor planning, overstretching one's resources, shifting economic conditions and miscalculation were taken into account.
[+] [-] Barrin92|7 years ago|reply
If one wanted to pick a positive story there would be the example of the American progressive era, the creation of the interstate system, the railway system during the 19th century, and so forth. Not every large infrastructure project is indicative of corruption, someone needs to build infrastructure, after all, I don't think we've somehow transcended the need for transportation.
That there's military or geopolitical motivation, especially as far as the land component of the belt and road initiative is concerned seems accurate, but doesn't strike me as particularly bad. From a Chinese perspective it obviously makes sense to invest into continental infrastructure because it does not control the sea.
[+] [-] lainga|7 years ago|reply
Like the Soviet Union in the 1970s, China is coming to the end of a long labor-force boom, and hoping that an orgy of investment will keep the old magic going while stabilizing its fraying frontiers.
Cornelius Vanderbilt wasn't trying to overcome a graying America or shore up the Monroe Doctrine by building railroads in Latin America and Africa. If anything, I fail to see any justification for your comparisons between China and the progressive-era US.
[+] [-] sonnyblarney|7 years ago|reply
The US scenario you highlighted would be more comparable to Chinese investment in the last 25 years, no?
The clear difference between Soviet Union and China is that China has a growing and robust economy, with a firm grip on the situation whereas the Soviet Union was aching away on so many lies.
Chinese fabricated financials can be papered over with any kind of magic the state wants to apply to it - so long as the economy continues to move forward the numbers will say anything they want them to say.
The articles comparison may be overblown but it's not without reason.
I believe that the China boom has mostly been had, and we're going to see lower growth from here on in; that said, it'll be consistent and positive and they aren't going to disappear as a superpower.
[+] [-] duxup|7 years ago|reply
The us interstate system was where there was trade already and not many alternate routes / better systems.
China's strategic concers are obvious and make sense...and yet if push came to shove and they were cut off from the sea, are they really trading via rail with Europe or others in that scenario anyway? / is incurring the costs of whole backup systems making sense?
Personally I don't have a clue how any of this plays out, just speaking to what the article is indicating.
[+] [-] factsaresacred|7 years ago|reply
Easier and cheaper to pursue a Blue Water Navy than pump money into questionable projects in corrupt States -- projects who's success is anything but assured (See Malaysia PM planning to cancel all Chinese projects and the mess in Pakistan as recorded by WSJ recently).
> someone needs to build infrastructure, after all, I don't think we've somehow transcended the need for transportation.
It's more about the opportunity cost and ROI than the need, right?
[+] [-] DanielGee|7 years ago|reply
My favorite is the yearly "end of china" report by gordon chang. I remember the guy talking about china's collapse in the 90s and he's been wrong since.
[+] [-] Anarch157a|7 years ago|reply
This describes the US better than China. The US spends 7.8% of it's GDP on the military, while China spends only 1.9%. If any country is over-exerting itself and "starving the economy of capital", that's America.
[+] [-] rgbrenner|7 years ago|reply
And according to the military, most of this higher than average spending is due to the military being voluntary, and needing to compete on wages in one of the highest earning countries in the world. Whether you agree with the military's assessment or not, it's true that a significant portion of US military spending is spent on wages/compensation. A lot (not all though) of the difference between the US and russia/china is due to the later having much cheaper labor.
Also the last sentence certainly isn't true... there are many countries that spend far more a percent of GDP on their military: Russia, Saudi Arabia, and the typical example of military excess: north korea.
[+] [-] Leary|7 years ago|reply
https://blogs.worldbank.org/ppps/forecasting-infrastructure-...
[+] [-] notveryrational|7 years ago|reply
1: The Asia Pacific is "hitting the knee on the curve" and modernizing its economy. Also, it's the most populous region on earth. It's why economic forecasters call the 2000-2100 period the Asian Century: https://en.wikipedia.org/wiki/Asian_Century
2: The Silk and Road Project ranges far outside "economically stagnant" areas. It's adjusted investments according to projected future growth, and also hedged into already modernized economies. It's as much about supply chain and trade routes as it is about direct economic investment. It connects China to Europe.
[+] [-] walrus01|7 years ago|reply
https://www.google.com/search?q=gwadar+port+china&ie=utf-8&o...
Now this part is just my opinion, but the really, really hard part is the proposed road or high-speed rail cargo link from Gwadar to Western China. The Karakorum highway is no joke. It's narrow, twisty, carved into steep rocky mountain passes. I've driven from Islamabad via Gilgit to the Chinese border. It will take many, many billions of dollars of tunneling and road construction to bring it up to the standard of a highway that can take a large volume of 20/40ft cargo container traffic. Right now trucks spend a great deal of time in 1st gear crawling along at 15km/h.
https://www.google.com/search?q=karakoram+highway&ie=utf-8&o...
[+] [-] nopinsight|7 years ago|reply
Looking at the world as a grand chess board, the Belt and Road Initiative is a move which China turns this disadvantage into an edge. By promoting trades with neighbors, it gains geopolitical influence, potential integration into the local economies, and friendships with the political classes.
To match this, the US needs to further strengthen its ties with the countries in question. Several of which are projected to become some of the largest economies in the world by 2050 [1]. Regardless of the extent that the projection comes true, the regions from East Asia to South Asia, where about half of the world's population live in, clearly have great long-term strategic importance.
[1] https://www.pwc.com/gx/en/issues/economy/the-world-in-2050.h...
[+] [-] zeusk|7 years ago|reply
Just take a look at the projects completed so far, every single time they brought in their own people and companies to build oversized unnecessary infrastructure that remains mostly unused.
When countries default on those loans, things aren't quite bright.
[+] [-] nabla9|7 years ago|reply
The belt and road is already working. China-Finland train link connects Nordic countries with China in 10-12 days. They carry heavy and expensive machinery and machine parts between China and EU. Too heavy for air-travel economically and needs to arrive relatively fast.
[+] [-] robocat|7 years ago|reply
"The value of freight between Europe and Yiwu, a much-touted overland rail hub near Shanghai, came to 2.27 billion yuan ($330 million) in the first four months of this year [snip] China’s top four ports alone process about the same value of cargo every three hours."
Also see this graph from the article: https://www.bloomberg.com/toaster/v2/charts/e6c45ea06db24277...
[+] [-] monocasa|7 years ago|reply
[+] [-] forapurpose|7 years ago|reply
I'm sure it helped, but the U.S. was already by far the dominant power before that economic activity.
At the end of WWII, the U.S. produced half of the world's GDP, a staggering number. It was the only advanced country which was physically untouched by the war, it had troops stationed throughout Europe and the Pacific, and it was the only country with nuclear weapons.
It says a lot, IMHO, that the U.S. didn't pursue a global empire at that point.
[+] [-] nopinsight|7 years ago|reply
Malaysia and Indonesia control the Strait of Malacca, one of the world's busiest shipping lanes which doubled in traffic over the past decade [1]. The strait connects manufacturers in China to fast-growing large population centers in South Asia, including India, Pakistan and Bangladesh with over 1.5 billion people in total.
Most of the projects facilitate trades between South Asia, Southeast Asia, and China. About half of the world's population live in these regions [2].
The projects to connect China to Russia and Europe serve two major purposes:
1) Energy security: Over 40% of the oil China imports comes from the Middle East [3], where it does not have much influence. Even imports from elsewhere are largely shipped over the seas which China does not control.
2) Geopolitical influence through trade and investment
[1] http://www.seatrade-maritime.com/news/asia/exclusive-malacca...
Also: https://www.shipmap.org/
[2] More People Live Inside This Circle Than Outside Of It https://brilliantmaps.com/population-circle/
[3] http://www.worldstopexports.com/top-15-crude-oil-suppliers-t...
[+] [-] nopinsight|7 years ago|reply
"The strait is the main shipping channel between the Indian Ocean and the Pacific Ocean, linking major Asian economies such as India, Indonesia, Malaysia, Singapore, China, Japan, Taiwan, and South Korea. Over 94,000 vessels pass through the strait each year (2008) making it the busiest strait in the world, carrying about 25% of the world's traded goods, including oil, Chinese manufactured products, coal, palm oil and Indonesian coffee. About a quarter of all oil carried by sea passes through the Strait, mainly from Persian Gulf suppliers to Asian markets. In 2007, an estimated 13.7 million barrels per day were transported through the strait, increasing to an estimated 15.2 million barrels per day in 2011."
https://en.wikipedia.org/wiki/Strait_of_Malacca
[+] [-] kyrieeschaton|7 years ago|reply
[+] [-] seanmcdirmid|7 years ago|reply
What? The economy recovered, it could have gotten much more worse if Obama did nothing. Even Bush realized that, whatever became Obama's stimulus was planned before Obama took office, and passed with bipartisan support. It only became a whipping boy later because the Republicans saw and took the political opportunity.
> but they do appear to at least get a road when they pay for a road.
Yes, but the villages who live on the road probably can't pay the high tolls to use it.
[+] [-] sct202|7 years ago|reply
[+] [-] kbart|7 years ago|reply
[+] [-] ddebernardy|7 years ago|reply
[1]: http://carnegieendowment.org/chinafinancialmarkets/75355
[2]: https://www.caixinglobal.com/2017-10-20/china-must-guard-aga...
[+] [-] phobosdeimos|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] trhway|7 years ago|reply
[+] [-] duxup|7 years ago|reply
I'd like to read more about what was happening then, was it largely military investment?
[+] [-] yostrovs|7 years ago|reply
[+] [-] consumer451|7 years ago|reply
I only have personal anecdotes to back that up having grown up in one of those satellite countries.
[+] [-] jabl|7 years ago|reply
Of course, during the entire cold war the USSR "overspent" on the military compared to the Western economies. But, during the WWII the economy was understandably 100% focused on the war. So even if the kept "overspending" on the military after the war, there was still a lot of industrial capacity left over that could be used for rebuilding and industrialization.
[+] [-] sandworm101|7 years ago|reply
[+] [-] PeterStuer|7 years ago|reply
[+] [-] socrates1998|7 years ago|reply
If something won't return a profit to a high probability, then it's not built.
Japan has seen problems with the same Soviet top-down style, where there are a lot of excess infrastructure projects throughout Japan, particularly in rural areas.
Japan avoided the Soviet implosion, but it has still gone through a large period of flat growth since the early 90's.
Deflation has been a major problem since 1991 and still is.
China could be the exception to this top-down style and find a way to high growth despite it's inefficiencies, but I am betting that it all catches up to them suddenly. Maybe not for a few years, but it will most definitely happen like it has happened to every country that has adopted the top-down Japanese style modernization.
[+] [-] taobility|7 years ago|reply
[+] [-] baybal2|7 years ago|reply
>"It’s worth considering all this misdirected spending in the context of the Soviet Union’s decline. Around the middle decades of the 20th century, Moscow presided over a China-style economic miracle that caused many in the West to fear they would be overtaken."
[+] [-] AnimalMuppet|7 years ago|reply
My personal opinion is that China's free market is real, but the state intervention is still fairly heavy for a "free market economy". What does that translate into in terms of China's chance to avoid collapse? I don't know.
[+] [-] exploringBabel|7 years ago|reply
Even though so very much has changed in China since the Great Leap Forward in the 50s and 60s, I wonder how carefully the consequences of poor planning, overstretching one's resources, shifting economic conditions and miscalculation were taken into account.
[+] [-] noetic_techy|7 years ago|reply
https://www.cnn.com/travel/article/trans-siberian-road/index...
https://en.wikipedia.org/wiki/Pan-American_Highway
[+] [-] phobosdeimos|7 years ago|reply