Chinese Mountain-leveling Cities Show the Communists are Super-Keynsians!

It is now a proverb that Keynes believed you could stimulate the economy by paying someone to dig a hole and paying someone else to fill it up again. That should sound strange to many people, though when they’ve heard Paul Krugman extol a fake alien invasion or a hurricane as keys to helping the economy, Keynes seems relatively restrained.

Well, the Chinese ruling class has apparently replaced Karl Marx with John Maynard Keynes. The Chinese government is almost literally following the cliché by paying people to dig up mountains and also to fill up valleys to produce flat land on which to construct unneeded and unaffordable cities.

BBC reports:

Researchers from Chang’an University in China have warned that dozens of mountains have already been flattened – and this is causing air and water pollution, soil erosion and flooding.

They say that this activity is happening on an unprecedented scale.

They report their concerns in the journal Nature.

Prof Peiyue Li, from Chang’an University’s School of Environmental Science and Engineering, said: “Because there have been no land creation projects like this before in the world, there are no guidelines.”

China’s cities are expanding rapidly as its economy grows, and moving mountains is one way to supply more land for development.

About one-fifth of the country’s population lives in mountainous areas.

Around the country, in cities such as Chongqing, Shiyan, Yichang, Lanzhou and Yan’an, dozens of hilltops have been leveled.

The soil and rock is then used to fill in valleys, and overall this has so far created hundreds of square kilometers of flat terrain.

The story only covers the environmental concerns, but the real story is the about the obvious folly of economic stimulus. China has been building empty cities for years now, using its command-economy system to dictate development and, thus, keep “economic growth” going.

But it is not economic growth. It is malinvestment. Those cities are all misallocated resources.

Back in 2011, the Australian Dateline show covered China’s ghost cities before they had become so reckless as to concern environmentalists and safety experts. China’s Ghost Cities are called the modern-day pyramids.

If you have time to watch the video, you will find many fascinating facts beyond the creepy scenes of vast cityscapes with no one in them.

  • The Chinese are doing this to keep their GDP numbers up. They are spending in order to boost the measure of spending that is (wrongly!) considered a measure of economic growth. But GDP can be boosted by prostitution and drug dealing or by making health insurance more expensive, even as it reduces discretionary spending.
  • You can see how stimulus, debt, and bubbles produce a widening income gap. Because all investment is going into apartments and condominiums that no one can afford, millions live in squalor in the shadow of empty luxury apartment buildings. If the government had not interfered, people would have invested in housing that more people could actually afford. But all the investment dollars have been sucked up into these doomed projects. The poor get poorer and the rich get richer—until the collapse comes.
  • While the government is doing all this damage, it benefits some groups at the expense of others. These groups naturally lobby for the government to defy economics and keep the bubble expanding. I’m sure construction firms are telling these politicians they are doing the right thing. This is much like our own corrupt Chamber of Commerce protecting the Federal Reserve.

China is headed into an economic disaster precisely because its economic theory is the same as ours. They are just getting there faster because their government is more powerful.