Economic Myths Everyone Should Understand

Hat tip goes to the great blog, Cafe Hayek, for posting about this article in the Washington Post, Five Myths about China's Economy. I found the most compelling myth to be one of the least understood,

5. China's economy has grown mainly through the cruel exploitation of cheap labor.

Every time a developing economy starts growing fast, richer countries accuse it of "cheating" by keeping its wages and exchange rate artificially low. But this isn't cheating; it's a natural stage of development that comes to an end in every country, as it will in China.

If I had a nickel for every time someone posited this myth in one form or another, I'd be rich. (But apparently, exploiting their ignorance.)

I think it is critically important to understand that in China - where labor is cheap on a relative basis, to the Chinese, getting paid what we see as ridiculously low wages is the alternative to no pay and certain death. So - it is hard for anyone to conclude the Chinese standard of living is not rising dramatically, and swiftly.

I know many people become disappointed by this line of reasoning and are still unconvinced - insisting that raising wages is the only way to make things "fair." However, to reiterate the same point made above - let's say the UN Human Rights council was able to cajole China into raising all wages to a minimum. Can you imagine all the workers who would then go without? Again, at their level of poverty - their choice is often between working in admittedly harsh conditions for little money or death for themselves or their family members who count on them.

Going Green: So Good It's Bad?

This study sounded like bunk when I first read about it in the Freakonomics column, but after reading the study, I understand why the conclusion that people who buy green products are more likely to cheat and steal than people who buy conventional products or who are merely exposed to green products.

But don't take it from me, read the short paper yourself.

Communists for Clean Energy

In what I anticipate to be an extremely troubling new rally-cry and tally-mark in the column entitled "The Joys and Benefits of Socialism" - environmentalists everywhere are simultaneously rejoicing in China's lead in adoption of green technology and their hutspa when it comes to simply forcing people to do what they say as long as its for the good of the earth. They seem to forget this use of force is applied to every aspect of the Chinese people's lives - but no matter - they all have solar-heated water tanks via government force, isn't that so much better than freedom??

Via TriplePundit,

The Pew Charitable Trusts released a study showing that for the first time, China is leading the United States in green technology investment. Considering that China is four times the size of US, the study may not be surprising, but the pace at which Chinese investment has increased is certainly shocking. Five years ago, the Chinese had only invested about US $2.5 billion in green and clean technologies. But in 2009, that figure had soared to US $34.6 billion, almost twice that of the United States, which lagged at US $18.6.

The Pew study found that countries with strong and clear national policies, mandated clean energy quotas, prioritized loans for renewable energy projects and a carbon market, were leaders in the green technology revolution.

Via GreenChipStocks,

In China, the central government in Beijing does pretty much what it wants. Like it or not, the nucleus of power in that still-Communist country can catalyze market changes with more force than D.C. policymakers ever could.

I notice neither report indicates how China achieved these extraordinary changes and what the net benefit versus cost (both monetarily and to society) has been. I also think we need to temper our enthusiasm for totalitarian dictatorships and be thankful that despite whatever supposed losses we face coming in behind China for green advances, we can hopefully salvage in precious freedoms the Chinese do not have. The fact this needs to be said is very sad.