Investment, not austerity

Updated: 2013-05-21 08:02

By Tom Clifford (China Daily)

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Faith restored. There are differences, not all stark, between the landmasses of China and Europe but there is much in common, too.

Certain areas are less well off than others, and certain areas less fertile than others. Some areas are coastal, some inland. Europe is not poor, but the eurozone is acting as if it were bankrupt. It is not. Most of the bailout money given to Greece actually went to banks. Only about 15 billion euros out ($19 billion) of the 410 billion euro Greek bailout actually went into the economy, the rest went to financial institutions

Guizhou is not China's most prosperous province but it is investing heavily. It would be easy to plead any number of reasons not to. Alright, China has more money than Europe and can afford to invest. That argument stands up until countered by the simple fact that China is still a developing economy and besides, Germany is wealthier than Guizhou.

Cranes are blooming in Guizhou. Ah, says the naysayer, exactly the type of profligacy we saw in Ireland and Spain. Well, no: Guizhou is investing not just in buildings but also roads and transport networks, in villages and communities. Affordable housing and communities were never a priority in Ireland or Spain during the boom years. There is no guarantee in any economic planning that investment forecasts will be met, that all the goals will be achieved. It is a risky venture and a degree of caution is not to be scoffed at. But there comes a point where faith must be placed in the people or institutions. The priority, within clearly defined restraints and disciplines, must be jobs not bottom-line figures.

The United States had its "New Deal" under FDR, its "Great Society" under LBJ and, to a certain extent, Barack Obama is now investing with QEs I, II and III. This alphabet soup of progress worked and is still working. The Chinese Dream is taking shape in places such as Guizhou, and what happens there may have ramifications in places where investment is considered heresy and too much faith has been placed in austerity.