Interesting article by Daniel Lacalle:
https://www.dlacalle.com/en/chinas-new-silk-road-is-just-old-white-elephants/
"Proponents of the mega stimulus plans ignore the importance of real profitability in favor of “sustaining GDP” in any possible way. A study by Deepak Lal , UCLA professor of international development, discusses the devastating impact on potential growth and debt of stimulus plans in China, and Edward Glaeser’s ” If You Build ” analysis destroys the myth repeated by many of the multiplier effects of public infrastructure. Advocates of infrastructure spending at any cost ignore the most basic cost-benefit analysis, underestimating the cost and magnifying the estimated benefit through science-fiction-multipliers."
The "New Silk Road" plan of the Chinese Dictators is an example of a huge centrally planned infrastructure project. Due to the fact that there are many variables affecting this plan, it seems very difficult to centrally make the right decisions.
E.g. who knows:
-if 20 years from now we will still use highways (for cars) and railway?
-which countries/regions will develop well and should be included in this project?
-if there will be enough demand for this infrastructure?
I think some years from now we will look at this project and summarize that much money has been wasted and that the Chinese people have paid / pay the bill.
I would not call this a strategy, it is state-directed economy, planned failure.
What do you think?
Interesting Post! Upvoted 👍
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