Sunday, 30 September 2012

Vampire Logic

"The need to keep the economy running therefore serves as a brake against reckless militarization of Chinese foreign policy."
So says J.M. Cole in an editorial for the Ottawa Citizen entitled "The Limits Of Chinese Hard Power"However, as I mentioned to someone yesterday in a gmail chat window, I think there are good reasons to suppose that the CCP's need to "keep the economy running" is at the same time what drives the militarization of their foreign policy.

The reasoning goes something like this...

Premise 1: In order to survive, the CCP must continue to induce aggregate economic growth and prevent aggregate unemployment and "social unrest" from rising too high.

Premise 2: The CCP's current policies in pursuit of this goal, e.g. stimulus spending, are unsustainable over the medium to long term.

Premise 3: The establishment of an Asian-Pacific maritime tributary system under the control of the PRC, is seen by some within the CCP as offering an alternative means to the ends mentioned in Premise 1.

Conclusion: The threat of domestic economic failure, coupled with an inability to reform, incentivizes the CCP to acquire alternative means of economic power - a predatory system of maritime tribute appears to them to provide just such a means.


First, it is unclear what "level" of aggregate unemployment or social unrest would be "too high" to constitute a threat to the survival of the CCP. Without clarification of this point, the first premise is unfalsifiable.

Second, stimulus spending can be pursued indefinitely by means of debt repudiation.

Third, the establishment of a maritime tributary system would increase import and export costs throughout the Asia-Pacific region and would therefore negatively impact aggregate trade numbers within and without the region.


I don't find any of these objections convincing. First, the fact that a proposition may be unfalsifiable due to being insufficiently specific doesn't mean that it is false. Second, stimulus spending can only "work" to the extent that it does not cause malinvestment and consequent asset bubbles (which it generally does tend to cause); repudiating the debts incurred by stimulus spending will likely result in a crash characterized by the low growth, high unemployment and possible "social unrest" that the CCP fear. Third, I would bet that there would be no shortage of "economic advisers" to the CCP leadership who would believe that the consequences of any possible reduction in aggregate trade to the tributary value they could extract would be something that could be "managed".

Am I missing anything here?

No comments:

Post a Comment

Comment moderation is now in place, as of April 2012. Rules:

1) Be aware that your right to say what you want is circumscribed by my right of ownership here.

2) Make your comments relevant to the post to which they are attached.

3) Be careful what you presume: always be prepared to evince your point with logic and/or facts.

4) Do not transgress Blogger's rules regarding content, i.e. do not express hatred for other people on account of their ethnicity, age, gender, sexual orientation or nationality.

5) Remember that only the best are prepared to concede, and only the worst are prepared to smear.