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Urbanization in China (crosspost from Crooked Timber)

June 16th, 2013

The NY Times has an interesting, but unsatisfactory, article, on government attempts to promote urbanization in China, with a target of 70 per cent by 2025. The story is mostly about farmers whose land has been acquired by fiat, which fits into well-established journalistic frames. The bigger issue, buried right near the end, is the fact that, under the hukou system of registration, people classed as rural can’t legally live in the city. So, while about 35 per cent of the population is legally urban, the true figure is more like 53 per cent. That makes nonsense of the figures quoted at the beginning of the article, and the suggestion of forced urbanization on a historically unparalleled scale. In reality, the announced target implies a modest slowdown in rural-urban migration, which has occurred despite official disapproval.

The big question, at least from the viewpoint of rural Chinese, is whether China can shift to a universal social welfare and retirement income system to replace the workplace-based system of social welfare, of which hukou was part, and which made sense with comprehensive state ownership. This topic is touched on in the NYT article, but in a fragmentary and confusing way, and it’s one about which I know little. I’d be grateful if anyone could point to a more comprehensive treatment.

From an Australian point of view, the continued construction of high-rise apartment buildings, highlighted in the article, is a big deal, since it drives much of the demand for steel, and therefore iron ore and coking coal, that has underpinned our amazing run of good economic fortune, along with the willingness of both Australian and Chinese governments to implement large-scale fiscal stimulus at the time of the global financial crisis.

Update Paul Romer makes much the same points, from a more informed perspective than mine.

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  1. Ikonoclast
    June 17th, 2013 at 09:25 | #1

    The salient point is that the world economic collapse has now commenced. Every thing that happens from now on will be conditioned by this fact. We cannot keep doing economics, demography and sociology as if we are living in an infinite world with infinite resources and the sustaining capacity for endless growth. Any approach to these subjects that does not start from the premise of limits to growth is destined to look foolish and irrelevant very soon.

    The collapse of the world economic system began with the Global Financial Crisis (GFC) or Global Recession of 2009. A financial system akin to a Ponzi scheme and leveraged off low resource and energy prices imploded when oil prices hit up to US$145 a barrel.

    What are the features that set these events apart from other economic crises which were followed, sooner or later, by recovery? The defining feature is that genuine recovery is no longer possible. This is primarily due to resource depletion and limits to growth. Simply, we have hit the limits. A second issue is that global capitalist economics has reached a near end point in capital accumulation and financialisation with its associated stagnation and collapse in demand. The attempt to save global capitalism by growing China and India and exploiting these and other areas of low wage structures will founder on the physical realities of resources shortages.

    The collapse of Europe has commenced. Greece, Portugal and Spain are now in a Great Depression with Italy and and then France clearly soon to follow. MENA (Middle East and North Africe) is collapsing into chaos and conflict. These are typical collapse symptoms precipitated by resource shortages, shortages of food and essential goods and high prices. Initially, the global collapse will be patchy. Some places will even continue growth momentum for a short time.

    Australia might appear for a while to be exhibiting an “amazing run of good economic fortune”. (Though why we would say this about a country that apparently cannot afford free tertiary education when it could a generation ago is a bit of a puzzle.) China is about to hit the limits to growth. It can never complete its tranformation. There are not enough resources left globally for that to happen.

    I’ve said it before and I’ll say it again. Limits to Growth denialism is just as egregious as an intellectual and scientific error (or set of errors) as AGW denialism.

  2. David Irving (no relation)
    June 17th, 2013 at 12:15 | #2

    Ikoniclast, I think that denial of limits to growth and of AGW spring form the same source – a dim awareness that accepting them means an end to growth capitalism – those damned hippies were right all along (and having more fun as well).

  3. iain
    June 17th, 2013 at 12:27 | #3

    “people classed as rural can’t legally live in the city” – this isn’t correct. Everyone, more or less, in China has a hukou card, basically it is just a family ID card, typically reflecting family residence history, and confers some minor educational positives and negatives. Westerners tend to blow up the importance of this. It is just another way to control and classify population, when necessary (not much different to the shenfenzheng or a passport). Many waidiren legally own apartments in Beijing, Shanghai etc and send their kids to schools in tier 1 cities.

    China can’t afford a universal pension welfare system, even less so than Australia. Informally, the working age population has already peaked, since retirement age in China is traditionally regarded in the 50s. Many will now need to work well into normal retirement age, much the same as is now happening in Australia with age pension creep (which will be ongoing, until pension is abolished).

    Health care in China will likely be a bigger issue than in the west, given; demographics, air pollution, water and food quality issues. I am optimistic about health care technology addressing this issue (more so than a welfare system).

  4. Tim Macknay
    June 17th, 2013 at 13:19 | #4

    @Ikonoclast

    I’ve said it before and I’ll say it again. Limits to Growth denialism is just as egregious as an intellectual and scientific error (or set of errors) as AGW denialism.

    I agree with this, up to a point. But how exactly do you define “limits to growth denialism”? Belief that infinite growth, can and will, occur counts as denialism, sure. But your own record of commenting creates the impression that you would class any skepticism that current economic problems are caused by the limits to growth as denialism as well.

    The reasons that “limits to growth” discourse is marginalised is not just because of ideological denialism, or “cornucopianism” as it’s sometimes known, but also because the last time the discourse was in vogue (the 1970s) its proponents got it badly wrong*. The economic malaise of the time turned out not to be caused by limits to growth, but by transient sociopolitical factors.

    So when limit-to-growthers start saying things like “These are typical collapse symptoms precipitated by resource shortages, shortages of food and essential goods and high prices”, it’s reasonable to be skeptical that this is, in fact, the “final collapse”. particularly since there’s no such thing as “typical collapse symptoms”. Civilisational collapse, as a concept, is not particularly well defined, let alone understood. The “symptoms” could be just as readily identified as those of a transient downturn.

    Notwithstanding the underlying logic of the proposition that we live on a finite planet, on present evidence the voices loudly proclaiming that the limits to growth have arrived appear to be every bit as ideological and faith-based as the cornucopians. As long as that remains, it will continue to be difficult to get policy makers to take seriously the task of taking ecological limits into account .

    *Yes, I’m aware that the Meadows Report’s “standard run” model was broadly consistent with the way global growth has gone since 1972. When I say the proponents got it badly wrong, I’m not talking about the Club of Rome specifically, but about the broader social belief that the 1970s oil crisis was caused by limits and would precipitate an irreversible decline. In fact, since the Club of Rome’s “standard run” suggested that the limits wouldn’t be reached until circa 2040, I rate that as a reason to be skeptical that “the world economic collapse has now begun”, rather than to believe it.

  5. John Quiggin
    June 17th, 2013 at 13:58 | #5

    @Iain I’m obviously not an expert, but your post seems internally inconsistent. You compare the hukou card to a passport, but in my experience, living on a foreign passport entails a wide range of restrictions on activity of all kinds. And others with first hand experience, commenting on my Crooked Timber crosspost, report reasonably strenuous police attempts to discourage rural people from migrating to the city.

    Do you have any links that would help clarify things?

  6. hc
    June 17th, 2013 at 15:07 | #6

    I am living in the south of China now and the NYT article seems to be blocked so I cannot comment on its content.

    But from your description it sounds wrong. Wages in the countryside have risen as industry moves away from the coast westward and surplus labour in the countryside disappears. It sounds to me that the pace of urbanization is likely to fall. Its a bit weird since large cities are being constructed everywhere in the countryside so maybe that is what the NYT article is on about.

    BTW the city I am living in is not large by Chinese standards (Changsha, 7 million) but it, like all the “smaller” cities I have visited in southern China is badly polluted and heavily traffic congested. Urban life must start to look less attractive eventually. Rural settlements are often more like large towns than small villages.

    China now has 50 cars per 1000 residents compared to the US’s 750. I cannot imagine how life would be in a China with 100 cars per 1,000.

    I agree with Iain. The Hukou system doesn’t prevent people from migrating – there are settlements of migrant workers everywhere – but it does sometimes restrict access to social benefits, housing and schooling. Not in some areas such as Chongching and there do seem to be ways around it.

  7. Ikonoclast
    June 17th, 2013 at 19:30 | #7

    @Tim Macknay

    Your points all have validity when looked at in a certain light. I could be and have been accused of calling the growth limit and the collapse too early. I might be wrong (though I doubt it) on the timing. However, it appears to me, on the balance of probability that the growth limit (measured in terms of a healthy, growing economy and sustainable natural world underpinning) has been reached.

    Another point I might add is that it is not actually all that important whether peak production is reached now or in 20 years time. The principle, the empirical irrefutability of the LTG thesis, as a hard cold fact is what really counts. If an unsustainable process still has 20 years to run that does not alter the fact that it is ultimately unsustainable. It’s the lack of a sense of urgency, even the lack of a sense of global emergency, that bothers me. The processes, forces and dynamics involved are so large, the momentum of growth to the limits so powerful, that probably 20 to 40 years lead time action are (or rather “were” since it is now probably too late) necessary to avoid catastrophe.

    What if there is still twenty to forty years to disaster? That is in essence irrelevant. In historical terms, that’s like 2 to 4 seconds before hitting a brick wall at 200 kph. And here we humans are still driving with the pedal to the metal. It’s total insanity.

    At the same time, one has to admit that a realistic assessment of the short planning and concerns horizon of most, if not all humans, suggests there never was any chance of us doing anything in time anyway. Couple that with the view suggested by Realpolitiks (nations and peoples will continue grappling in conflict right up to the point they all go over the cliff together) then we see what a hopeless case it is.

    Why do I speak up in that case? A person once said to me that I had a bad habit of speaking out with things that were true but not useful. I had to admit the truth of that. But I also asked, “Well if these things true why are they ignored?” I place truth (empirically testable truth) as the highest value and a value in itself. Lack of utility does not void a truth.

  8. Jim Rose
    June 17th, 2013 at 22:14 | #8

    anyone read coase’s book on china. may discuss this.

  9. Peter Whiteford
    June 18th, 2013 at 01:25 | #9

    Also cross-posted from the comments at Crooked Timber:

    There is a lot of analysis of the Chinese pension system on the World Bank website, but for an OECD perspective see http://ssreform.treasury.gov.za/Publications/Pension%20Reform%20in%20China-Progress%20and%20Prospects%20%28Salditt%20and%20Whiteford,%202007%29.pdf

    I don’t think that they will get to a nationwide sytem for some time to come, partly because there are vast differences between regions but also because there does seem to be a problem of the urban Chinese looking down on the rural Chinese.

    Arguably migrant workers are actually subsidising the urban pension system.

  10. rog
    June 18th, 2013 at 07:06 | #10

    Limits to growth may have already peaked, among many others Fitch warns of impending collapse of credit bubble and plenty of indications of over supply and over capacity point to a decreasing demand for commodities and a slowing economy.

  11. Jim Rose
    June 18th, 2013 at 11:05 | #11

    rog :
    Limits to growth may have already peaked, among many others Fitch warns of impending collapse of credit bubble and plenty of indications of over supply and over capacity point to a decreasing demand for commodities and a slowing economy.

    sounds like an investment strategy.

    do you plan to put your super into futures to take advanatage of the limits of growth, the growing scarcity of resources, as well as the over-supply of commodities and falling demand for them.

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