Frank Dikotter

From Going Full Retard on Communism to Full Retard on Keynesian Money Printing – Why China is About to Have an Epic Collapse

rafifarber Economics, The Jewish Libertarian Blog , , , , ,

I have almost finished reading Professor Frank Dikotter’s “Mao’s Great Famine”. It is a history of Mao Zedong’s Great Leap Forward from 1958 to 1962. I had to get through it quickly because it is so fantastically horrific that lingering over the book and reading it slowly will be bad for my mental health. There were parts where I became nauseous and could not continue reading without a break.

Those 4 years in China encompassed the absolute worst assault on human liberty ever, resulting in the most disgusting and grotesque man-made catastrophe in all of human history. Worse than Stalin, worse than Hitler. By far.

Here is Professor Dikotter discussing his book. (Take a look at the book on the right of Dikotter, shoulder level shelf.)

What basically happened, in a nutshell, is full blown and complete communism for 4 years. Mao decided on a Great Leap Forward for China. He was going to implement communism, fully and completely, across the entire country encompassing some 600 million Chinese people. The state was going to control absolutely everything. Plan and run the entire economy, abolish all private property. The results were complete and utter chaos and destruction, resulting in the worst misallocation of resources imaginable.

The delicate balance of supply and demand, which tells entrepreneurs what to produce and how much of it to produce through the price system, was totally destroyed. With the state in charge of production and distribution and all private property confiscated and abolished, almost nothing got to where it needed to go. The environmental catastrophe resulting from intensely exploitative farming methods and irresponsible coal mining and timber felling was absolutely mindboggling.

For example, at the beginning of the Great leap Forward, Mao had this insane idea that China had to surpass Great Britain in steel production. So he had all labor move to the steel industry. To meet quotas, the Chinese burnt capital in backyard furnaces, including farming tools, door knobs, pots and pans, anything, just to increase output so Mao could boast that China produces more steel. The result was that no farming tools were left, nobody had any pots and pans or metal window frames, and not enough people were farming, with the predictable result of not enough food for the population.

Humongous irrigation systems were conceived up by idiotic central planners trying to impress the regime. The results were almost always waste, the reservoirs being useless from shoddy workmanship, and as the rainy season came on, inundated the cities because the new trenches destroyed the ability of the land to soak up rainwater.

Hundreds of thousands of tons of food rotted at government train stations because there were not enough trains to transport resources to where they were needed.

At the worst of the famine in 1960 and 1961, families traded their young children between them to slaughter and eat them. Bodies were exhumed from cemeteries and eaten for lack of food.

The brutality in many of the collectivized communes was intense and almost indescribable.

As I read this book, I look at everything the government controls in Israel. All the misallocation going on here because they care nothing about the money they spend. In everything, every road (more people die on the government roads every year than in wars and “terrorism” combined), every public school, every government institution I see the potential for the sort of absolute insanity. It was as if China was put in the hands of a group of 5 year olds who had absolute power and cared nothing for the consequences of their actions. Anywhere from 45 to 55 million people died.

I could write on and on about this, but here’s the point. China hasn’t changed much, in terms of its economic mentality and faith in political leadership. Interview Chinese who went through the Great Leap Forward and they still have no clue what happened or why. A statue of Mao still stands in the Beijing. He’s still the father of the country.

Mao went full retard on communism for four years. One more year and the death toll could have doubled to 100 million, but his cronies eventually came to their senses and shut down the communes, giving back the right to privately own land and farm it.

I go on and on about the evils of Keynesian money printing. Keynesianism is a toned down version of communism that says that the government should only intervene when the market “fails”. Since there is no such thing as a market failure, that means that practically, Keynesianism says that the government should intervene in the market whenever it feels like it. That is not conceptually very far from full blown communism at all.

The cornerstone of Keynesianism is manipulation of a government monopoly of the money supply. As much as I hate the Fed, they are ultra conservative compared with the People’s Bank of China. Here’s what I mean.

Here’s the US money supply since 1996.

united-states-money-supply-m2

It’s gone from just under $4 trillion (say $3.8T eyeballing it) to $12.453 trillion as of last week. That’s an increase by a factor of 3.3. That’s going to cause a big crash, much worse than 2008 when it stops, and it will stop when the dollar begins to hyperinflate. It’s going to be bad, but probably not result in mass starvation in the United States unless Trump is president and decides to cut of all trade with everybody to “save American jobs” and then use his Great Wall of Trump to keep all the starving masses inside the country from running to Mexico for food.

Now here’s China’s money supply since 1996.

china-money-supply-m2

It has increased from CNY5.84 trillion in 1996 to (!) CNY137.4 trillion. That’s an increase of a factor of 23.5! When the printing stops, China’s economy is going to be so misallocated and whacked out that the devastation will be intense. Not as intense as the Great Leap Forward hopefully, unless Beijing decides to lock everyone down in their jobs and save factories from going bankrupt by bailing everything out and freezing the economy in place. Then yes, mass starvation will again result.

Chinese leadership tends to go full retard on a lot things. It’s a repeating pattern. The Great Wall of China, the Great Leap Forward, and now the Keynesian insanity. When the Chinese crash really starts to take effect this time, watch what Beijing does. One billion lives will depend on it. If I were Chinese, I’d take my money and run the heck out of there now. Same with Venezuela by the way.

 

Reading Mao’s Great Famine, but Not Sure I can handle it

rafifarber Economics, The Jewish Libertarian Blog , , ,

I bought Frank Dikötter’s “Mao’s Great Famine” on Black Friday. It just arrived. It took over a month because the State controls the post office. That seems rather benign, but this book shows how scary even that is. Dikötter got special permission to peruse over 1,000 documents in previously restricted Chinese communist archives.

I am four pages into the preface of the book, and already, my eyes are welling with tears. I don’t know if I can handle reading this thing. I was both excited and scared to read it. Now I’m more scared than excited. But I’m going to try hard to get through it without losing my mind.

Here is a taste.

A vision of promised abundance not only motivated one of the most deadly mass killings of human history, but also inflicted unprecedented damage on agriculture, trade, industry and transportation. Pots, pans, and tools were thrown into backyard furnaces to increase the country’s steel output, which was seen as one of the magic markers of progress. Livestock declined precipitously, not only because animals were slaughtered for the export market but also because they succumbed en masse to disease and hunger – despite extravagant schemes for giant piggeries that would bring meat to every table. Waste developed because raw resources and supplies were poorly allocated, and because factory bosses deliberately bent the rules to increase output. As everyone cut corners in the relentless pursuit of higher output, factories spewed out inferior goods that accumulated uncollected by railway sidings. Corruption seeped into the fabric of life, tainting everything from soy sauce to hydraulic dams. The transportation system creaked to a halt before collapsing altogether, unable to cope with the demands created by a command economy. Goods worth hundreds of millions of yuan accumulated in canteens, dormitories and even on the streets, a lot of the stock simply rotting or rusting away. It would have been difficult to design a more wasteful system, one in which rain was left uncollected by dusty roads in the countryside as people foraged for roots or ate mud.

The book also documents how the attempt to leap into communism resulted in the greatest demolition of property in human history – by far outstripping any of the Second World War bombing campaigns. Up to 40 per cent of all housing was turned into rubble, as homes were pulled down to create fertiliser, to build canteens, to relocate villagers, to straighten roads, to make room for a better future or simply to punish their occupants. The natural world did not escape unscathed either. We will never know the full extent of forest coverage lost during the Great Leap Forward, but a prolonged and intense attack on nature claimed up to half of all trees in some provinces. The rivers and waterways suffered too: throughout the country dams and canals, built by hundreds of millions of farmers at great human and economic cost, were for the greatest part rendered useless or even dangerous, resulting in landslides, river silting, soil salinisation and devastating inundations…

Any attempt to understand what happened in communist China must start by placing the Great Leap Forward squrely at the very centre of the entire Maoist period. In a far more general way, as the modern world struggles to find a balance between freedom and regulation, the catastrophe unleashed at the time stands as a reminder of how profoundly misplaced is the idea of state planning as an antidote to chaos.

What is so disturbing to me is this one sentence:

Countless people were killed indirectly through neglect, as local cadres were under pressure to focus on figures rather than on people, making sure they fulfilled the targets they were handed by the top planners.

Focus on figures rather than on people. This is what governments do. This is the argument behind every single regulation. Figures rather than people. I see echoes of the Great Leap Forward in every GDP calculation, every figure-based argument for minimum wage or drug law, every attempt to increase exports by manipulating the money supply. It’s all the same evil. It’s just a question of degree.

Mao took statism to its penultimate conclusion, and 45 million people were murdered. Not even Stalin took it that far.

Why does nobody know or care? Why does everyone know that 6 million Jews were murdered in a race war, but not that 45 million Chinese were murdered in an economic war? Many reasons, but my wife had some wise words. Jews have a cultural memory. We are perhaps the tightest knit group of people on the planet. Kill us, and we can mobilize to the point that everyone will be hearing about it forever.

But most people are just individual people. Nobody will mobilize for them. But I will do my best to remember those 45 million faceless Chinese who are remembered by nobody, as statues of Mao still stand in Beijing and China is about to undergo another gigantic crash fueled by insane money printing that has expanded the Yuan supply by a factor of 23.5 since 1996.

It won’t be as bad as the Great Leap Forward of course, but it will be quite bad.