Adventures in cognitive dissonance: China may consume too much

We smelt the steel
to make the hammers
to dig the mines
to mine the ores
to smelt the steel

Update 2: Added a Youtube video
Updated 1: Added snark

Noah Smith doesn’t understand why everyone who’s ever looked at Chinese development seriously is calling for a re-balancing and consumption led growth. Instead, he is worried about bliss points:

Or does it mean that consumption should rise faster than the other components of GDP? Fine, but consumption’s share of GDP can’t increase forever. Eventually, consumption’s share will hit a ceiling, and the “consumption-led growth” – if this is what it means – will be gone.

On the other hand, we have the historical record:

Image

Source  For those with low screen resolution, the declining right hand curve corresponds to China — an aging population filled with households that would very much like to consume if they were given the chance to do so. And yes, that is a consumption figure of only 35% of GDP which is most likely an overestimate.

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Adventures in cognitive dissonance: China may consume too much

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