China's Productivity Miracle
Reflecting the Progressive Era’s reform agenda Simon Patten (1852–1922) argued that freeing markets from one source of economic rent (by taxing land rent) would merely leave the surplus to be taken by other monopolists and rent extractors (railroads, Wall Street trusts, and basic privatized utilities). To prevent unearned income (economic rent) from adding to the economy’s cost of living and doing business, potentially rent-yielding infrastructure should be kept in the public domain as a “fourth factor of production.” Instead of rentiers making a profit by charging access fees and user fees, the return to public investment should take the form of reducing the economy’s overall price structure. (Michael Hudson)
- 10 million young people enter the workforce every year;
- Because so many existing jobs get destroyed by automation.
Automation raises productivity and, therefore, wages. Wages in China are rising 15% a year.
Economists refer to a rise in output per input of capital and labour as a gain in “total factor productivity”.
Such gains have many sources. One textile boss got 20% more out of his seamstresses by playing background music in his factory, recalls Arnold Harberger of the University of California at Los Angeles.
The striking thing about the growth in China’s total factor productivity is its speed: the fastest in the world over the past decade. Between 2000 and 2008 it contributed 43% of the country’s economic growth, according to the APO. That is just as big a contribution as the accumulation of capital, which accounted for 44% (excluding information technology). The Economist.
|St. Louis Federal Reserve|
So that’s the story on China’s economy: annual productivity growth of 17% means wages rising 15% and national tax income rising 22% which means rising investment in education, infrastructure, and health care.
It also means that the Chinese people continue to give their government 85%–95% trust and approval ratings, year after year. Hardly surprising, when you think about it.
As always, your comments are welcome and encouraged. Issues like this need more than just one opinion. And do feel free to add links to useful sources and stories!