Off the Charts.

            The regular public schools work OK for many people.  They don’t work for other students.  At least that’s the perception.  Many of the allegedly under-served students are Black or Hispanic.[1] 

            Republicans have long endorsed giving vouchers to families to spend on whichever school they prefer.  This approach sought to open taxpayer dollars to a market competition.  They anticipated that private schools would soak up much of the money in what amounted to a referendum on the public schools in any given constituency. 

            Thirty years ago, Democrats bent before the winds to avoid breaking.  They agreed to charter public schools.  Charter schools enjoy a degree of autonomy from the school district bureaucracy, but receive public funding.  Moreover, and here’s the rub, students have to apply and be accepted.  In effect, this allows the charter schools to cull out all the students who are undesirable for one reason or another.  Special-needs students get culled.  So do the unmotivated.  So do persistent discipline problems.  All this dross gets left behind in the regular public schools.  They are doomed. 

That is exactly the—often unspoken—motivation for parents who want to enroll their children in charter schools.  Some public schools (and some entire school districts) were in a downward spiral long before the charter school movement arose.  Students in charter schools, it is alleged, are freed from disorder and distraction.  Students in charter schools, it is alleged, can actually engage in learning.  Poor people who see education as a way out like charter schools. 

Charter schools have proved themselves popular.  Today, 3.6 million students attend 7,700 charter schools.  There are several million more students on waiting lists to get into charter schools.    Of these, better than two-thirds are from low-income households. 

The Obama Administration favored charter schools.  Hence, it came as a surprise when Joe Biden expressed reservations about charter school.[2]  Now the Biden Administration has proposed additional regulations for charter schools.  As justification, critics of charter schools point to a series of scandals involving some of the “for-profit” charter schools.  However, the “for-profits” account for 12 percent of the charter schools, while the new regulations will apply to all the charter schools (about one-half of the total) that receive federal funds. 

One requirement has drawn much fire from charter school supporters.  Teachers unions and school districts have resisted the growth of charter schools.  The regulation would accord priority in gaining grants from the federal Charter School Program to charters that partner with regular public schools.  This would allow the school district to brake the growth of the charter schools in their area.  Similarly, new schools would have to assess “unmet demand.”  That appeared to be defined in quantitative terms, rather than in terms of public school failure to educate.  The reaction against the regulations has been intense and bipartisan. 


[1] Erica L. Green, “Charter Rules Pushed by U.S. Spur Backlash,” NYT, 14 May 2022. 

[2] President Biden is best understood as a “time server.”  This old-timey expression means someone without any personal convictions who thinks that s/he must follow the prevailing spirit/beliefs of the time in which s/he lives.  Hence, Senator Biden was tough on crime in the Nineties and is appalled at mass incarceration today.  He supported opposition to mandatory bussing to integrate the schools and is now appalled to have it thrown in his face by Kamala Harris. 

Put in the Stocks.

            Stocks have had a very good run.[1]  From 2011 through 2021, the annual return on stocks averaged 17 percent.  Interest rates have been at very low levels for a very long time.  The Trump tax cut may have produced a “sugar high,” but who doesn’t like sugar?  Generous government payments sustained consumer spending through the Covid pandemic.  Correspondingly, unemployment was held down.  All this kept companies performing well during the pandemic.  With just over 50 percent of Americans owning at least some stocks, that increased wealth and generated income for many people through capital gains and dividends.[2]    It also generated a lot of tax revenue for government.  These things held true both before and during the pandemic. 

            Now economic troubles have disrupted the market.  Inflation is running at an alarmingly high level.  Essential goods—food and energy—suffered painful price increases.  The Federal Reserve Bank has begun raising interest rates and taking other measures to bring down inflation to its target level of 2-3 percent per year.  Companies with poor long-term situations are having the life-support system taken away.  Even companies with excellent long-term prospects are suffering declines in the price of their shares.  The prospect of an economic slowdown and the shifting of investment conditions have sent the stock market lower.  So far, there have been six weeks of continuing losses. 

            Beyond the immediate bleeding, there exists the possibility of a long run of lower returns from the stock market.  It is impossible to predict the future, but a number of economists are muttering-in-print about a 5 percent annual return for several years.  That’s going to be a painful drop from 17 percent.  That will affect spending by asset-owners and it will effect tax revenue available to government.  Retirees may feel a particular pinch.[3] 

            What significance do these developments hold for politics?  Commonly, the party in power loses seats in Congress in off-year elections.  Those are approaching in November 2022.  So, the razor-thin majority held by Democrats in the House of Representatives is in danger.  The dead-lock in the Senate, breakable by the Vice President only in budget-related “reconciliation” votes, could shift to favor Republicans.[4] 

            The Federal Reserve Bank is talking about continuing the interest rate increases through 2023 in order to defeat inflation.  That suggests that inflation will not be under control before the off-year elections.  The larger economy may well slow down.  No president, let alone Fightin’ Joe Malarkey, can do much except wait for the Federal Reserve Bank to follow its policy.  About all he will be able to do is to inveigh against the rich not paying their fair share of taxes and corporations that engage in price gouging to fatten their profits.  This will be ugly. 


[1] Michael Corkery, “For Stocks, Era of Easy Money Jerks to a Halt,” NYT, 14 May 2022. 

[2] Stock ownership in America is both fairly wide-spread and narrowly concentrated.  Thus, just over half of Americans own some stock.  On the other hand, the top 5 percent of asset owners own 72 percent of the stock. 

[3] To belabor the obvious, retirees have a limited pool of assets to generate income in addition to what they receive from Social Security and—sometimes—pensions.  Those assets have to last until some unknowable future death date.  There’s a tension between maintaining a suitable level of spending by burning through assets at an accelerated pace and tightening your belt to make sure that you don’t die in a refrigerator box under an overpass. 

[4] In which case Democrats will congratulate Senate Majority leader Charles Schumer for not getting rid of the filibuster. 

My Weekly Reader 16 May 2022.

            The rise of strong states forms one of the three key features of European history in the Seventeenth Century.[1]  There were, however, two rival forms of the strong state.  By far the most popular took the form of royal absolutism.  Here, France provided the very model of a modern centralized bureaucracy.  Less common was the “constitutional” government.  Here, Britain led the way through monarchs governing in cooperation with the elected representatives of the rich and powerful.  Between 1688 and 1815 the two countries and systems fought it out.  Britain won. 

            What did the British do with their victory in the century that followed?  First, Britain enjoyed the “free security”[2] that came from the absence of any real rival until late in the Nineteenth Century.  Pre-occupied with the problem of nationalism, Continental Europeans had neither the interest or the power to fight Britain.  Elsewhere, once-great states like China, India, and the Ottoman Empire were rapidly decaying.  Britain built a vast over-seas empire while pursuing a policy of “splendid isolation” in Europe.  Second, it led the world economy as the “first industrial nation.”  This generated vast new wealth, albeit very unevenly distributed.  Third, and perhaps most impressively, Britain both achieved this world leadership and economic transformation without suffering immense domestic convulsions.[3] 

            How did the British achieve these remarkable successes?  Plausible answers would include, science, prosperity, two-party representative government, and bourgeois values.  Advances in biology, chemistry, medicine, and engineering offered authoritative explanations for and solutions to pressing problems.  Truth bent the Liberal political ideology of limited government into new form.  Public health, sanitation, education, and labor regulations all advanced.  By the dawn of the Twentieth Century, the welfare state had begun to appear.  The increased wealth from trade and industry paid for these reforms that ameliorated, rather than exacerbated, social tensions.  Political competition between Liberals and Conservatives expanded the electorate, which forced social problems onto Parliament’s agenda.  The bourgeois values of hard work, self-restraint in almost everything, patriotism, and education made the broadening middle class an effective storm anchor. 

            Why did this century of triumph come to an end?  Again, the answers are multiple and complex.  Essentially, all of the conditions that had favored British success in the Nineteenth Century turned against Britain in the Twentieth Century.  The century of free security gave way to a century of wars—hot and cold–against powerful enemies around the globe.  Britain lost its economic primacy as many other countries followed the British path to industrialization and prosperity.  The easy amelioration of social tensions gave way eventually to fights over shares of the pie.  The Liberal Party changed as much as it could without changing as much as it needed to in order to remain viable.  A more polarized set of choices faced the British people as they faced decades of challenges.  . 

            Still, if Britain has declined, it would be hard to argue that the British people have declined.  Health, wealth, and freedom have found a new equilibrium at a much higher level. 


[1] The others were the emergence of a global capitalist economy, and the triumph of human reason over tradition. 

[2] I borrow the term from the Nineteenth Century American experience of having two vast oceans as buffers against foreign intrusion and no serious continental rivals. 

[3] David Cannadine, Victorious Century: The United Kingdom, 1800-1906 (2017). 

What May Be True.

            “In war, much is uncertain.”[1]  The war in Ukraine remains filled with uncertainties. 

            Even so, important verities resurface.[2]  First, grating as American leadership may be, disruptive as is the change fostered by the American political and economic model, no one sees a viable alternative.  Liberal democracy and an open world economy exert a powerful pull on people around the world.  They tantalize with visions of individual freedom and prosperity.  American weapons and tactics, so recently discredited in places where people felt themselves fighting merely for American goals, appear to work just fine in a place where people feel themselves to be fighting for their own cause.  Few people want to live in a world dominated by Russia or China.  “Prison camps, boiler suits, and a damn long march to nowhere.”[3] 

Second, the “Gods of the Copybook Headings” return.[4]  Alliances are like labor unions: people only join because they are drove to it by a greater danger.  So disparate an alliance as that of the United States, Great Britain, and the Soviet Union only came into existence because of the danger posed by Hitler’s Germany.  After the defeat of the Soviet Union in the Cold War, the North Atlantic Treaty Organization (NATO) decayed.  Germany, in particular, ran down its military forces and renewed historical ties to Russia.  Neither President Obama’s cajoling nor President Trump’s rough tongue made any difference.  With the Russian invasion of Ukraine, NATO sprang back to life.  European countries that once declined to join found an urgent new interest in membership.  Germany began the long process of re-building its military and eventually sent arms to Ukraine. 

In like fashion, people have been reminded for the umpteenth time that economic sanctions have little real effect on how countries behave.   

In our age at least, nationalism claims many hearts.  This seems less true in North America and Western Europe.  For example, the European Union (EU) is a supranational project three-quarters of a century in development.  It has created an alternative sense of identity for many of its members.  One effect has been to reduce the power of nationalism for many of its members.  Furthermore, traditional nationalism is too closely linked in many minds with war and racism.  Among the newer members of the EU, those added as a result of the collapse of the Soviet Empire in Eastern Europe, nationalism remains a much stronger force.[5]  Ukrainians are fighting for their own sense of national identity, which involves a sense that they want to be part of the West, not of Russia. 

“These facts, which if true,…”[6]  Perhaps these verities will stand the test of events, perhaps not.  The Ukraine crisis is a short-term crisis.  Perhaps things will re-set afterwards.  If not, everyone is going to have some hard thinking to do about how to adjust policy to reality. 


[1] Sir Desmond Morton, MC.  He would know.  He had been shot in the heart during the First World War, but survived.  See: Arthur Marder, Operation “Menace”: The Dakar Expedition and the Dudley North Affair (1976).    Also, Gill Bennett, Churchill’s Man of Mystery: Desmond Morton and the World of Intelligence (2006).   

[2] Walter Russell Mead, “Biden Needs a “Pivot” to the World,”  WSJ, 28 February 2022. 

[3] The character Jim Prideaux in John Le Carre, Tinker, Tailor, Soldier, Spy (1974). 

[4] See: https://www.kiplingsociety.co.uk/poem/poems_copybook.htm 

[5] That nationalism has troubled the EU in places like Poland and Hungary.  In part, Britain’s exit from the EU springs from a revived sense of specifically English nationalism triggered by the Scottish independence campaign. 

[6] Some Republican moron in Congress years ago. 

Errand in the Wilderness.

            Back in late 2021, a couple of New York Times reporters gave some thought to the question posed by Will McAvoy: “If liberals are so fucking smart, why do they lose so God-damned always?”[1]  They pretty much concluded that liberal elites are good at the standardized exams that govern ascent in the public and private institutions of our increasingly Mandarin society.  In real terms, however, they are stupid and out of touch with ordinary people.[2] 

            Think of the political arena as a quadrant with Liberal policies on the left and Conservative policies on the right across the top; and with Economic policies and Social/Cultural policies running down the left side.  In the imagination of liberal elites, say the reporters, the majority of American voters think like liberal elites: they are fiscally conservative and socially liberal.  It follows then that fiscal conservatism will tend to rein-in social liberalism while social liberalism tests the limits of fiscal conservatism. 

            Polling data suggests that this belief is—to a degree–nonsense.  Certainly, this type of moderate voter exists, as do moderate elected officials of both parties.  However, many Americans are the reverse of the imagined fiscal conservative, social liberal voter. 

Many are socially conservative.  Thus, most Americans support restrictions on abortion.  Some are hard-core abolitionists.  Many others want to restrict abortion to the first trimester.[3]  Thus, support for restricting immigration is widespread.  Thus, most Americans always opposed the de-fund the police movement that briefly energized Democratic activists after the death of George Floyd.[4] 

Many are economically liberal.  Thus, they support gore-the-rich policies to pay for enhanced benefits for lower income groups.  The targets include both rich individual taxpayers[5] and corporations that are seen as predatory.  These favored policies include reducing the price of prescription drugs, expanding health-care both to under-served populations and in the scope of what is covered by Medicare (vision, dental, hearing). 

One central problem is how to pay for expanded benefits.  The choices are between running up the deficit and printing money, and heavily taxing corporations and wealthy individuals.  In this sense, the gore-the rich policy actually is fiscally conservative.  In contrast, “fiscal liberalism” would appear to mean running up the deficit, printing money, and courting the danger of severe inflation. 

Socially conservative voters with grave economic concerns were the voting base of the New Deal.  “Tax-spend-elect” was the policy of the New Deal.  It is possible that historians will conclude that the fifty year-long shift of the Democratic Party toward cultural and expressive liberalism turned out to be an errand in the wilderness that helped create Trumpism. 


[1] See: https://www.youtube.com/watch?v=wTjMqda19wk 

[2] David Leonhardt and Ian Prasad Philbrick, “As Democrats Misread Americans, They Shoot Themselves in the Foot,” NYT, 29 September 2021. 

[3] This position is a retreat from the Supreme Court’s Roe v. Wade decision, even though a majority of Americans say that they support Roe.  It may reflect concession to fifty years of public outcry against abortion.  It may reflect revulsion against pro-choice lobbying for abortion on demand and public funding of abortions.  Probably it reflects something else I haven’t considered. 

[4] People living in high-crime minority areas seem to have wanted a strong police presence, but with abuse left off. 

[5] Defined as anyone making more than $400,000 a year. 

Baby Bust in China.

            Between 1980 and 2015, China sought to push back the danger of over population with the “one child” policy.[1]  Birth rates dropped from about 23/1,000 in the mid-1980s to about 13/1,000 by 2005.[2]   Still, this left a lot of young people in the pipeline. 

            In 1990, about two-thirds of the Chinese population were between 15 and 64 years old.  A huge demographic shift took place over the next twenty years.  The share of those aged between 15 and 64 rose to 75 percent.  Essentially, young people with few dependents flooded out of the countryside into the labor market of coastal cities.  At the same time, China entered the world market.  A world in search of cheap goods produced by labor-intensive industries encountered a huge and growing Chinese labor force. 

By 2005, birth rates had stabilized at the lower level.  Now the share of the population of working age is falling.  Worse still, the fertility rate (1.3 children per woman) has fallen below the replacement rate (2.1 children per woman).  This portends a host of decisions. 

Some are economic.  Productivity gains from moving peasants from rice paddies to factory jobs will be reduced.  The growth in the absolute size of the labor force will slow.  The price of labor will be bid up, one way or another.  Automation offers one response.  Will the government invest resources in the technology that is required?  Moreover, “what China makes, the world takes.”  Will labor shortages drag on China’s ability to produce for export? 

            Some are social.  Generally, the young labor migrants left behind middle-aged parents who were still working.  Now, ten to thirty years on, those young migrants are themselves middle-aged and their parents need care and support.  Some 18.7 percent of the population is 60 or older.  This adds to the problems of working children.  Similarly, China’s efforts to get people to have more kids merely adds to the problems of working parents.  All this may pull people away from a tight focus on work. 

On the other hand, having built a culture of long hours on the job, China may have a difficult time changing the minds of managers and of workers.  Will China invest resources in creating systems of child-care and elder-care to enable productive workers to keep working long hours?  Will it make robust investments in education to address he concerns of parents?  Will it offer financial inducements for more children?  Vague promises of new measures accompanied the announcement of the new policy. 

Some are political.  One thing high-lighted by the announcement of the three-child policy is the degree of defiance of the government on a deeply personal matter.  One story quoted both a woman insisting that she wouldn’t have any children and another relieved that her previously-illegal third child could now come out of the shadows.  In this environment, the pretensions of an authoritarian state rankle, while its admission that a policy rigorously pursued for seventy years had unforeseen consequences can only make people wonder what else it has gotten wrong. 

            It isn’t clear yet if there is a sweet spot where all solutions align. 


[1] Nathaniel Taplin, “China Baby Bust to Be Felt Globally,” WSJ, 2 June 2021; Sui-Lee Wee, “China Will Let Families Have Three Children,” NYT, 1 June 2021. 

[2] See: https://en.wikipedia.org/wiki/One-child_policy  When an authoritarian state imposes such a policy, many grim stories follow.  In 2016, China adopted a two-child policy.  This failed to slow the slump in population growth.  In 2021 it adopted a three-child policy. 

Public Opinion on Abortion in May 2022.

            Broadly, a majority of Americans support the right to abortion in most or all cases, while a large minority opposes it in most or all cases.  On average, 54 percent of Americans support the right to an abortion, while 41 percent oppose it.  In a more murky fashion, a larger majority (better than 60 percent) believe that Roe v. Wade should be maintained.  At the same time, about as many people believe that abortion should be limited to the first trimester.  So long as Roe v. Wade nationalized the right to an abortion, the law reflected democratic preference. 

However, Americans are regionally fractured over the issue of abortion.[1]  In thirteen states, state legislatures have passed laws that will automatically ban abortion IF the Supreme Court overturns Roe v. Wade.[2]  These states are clustered in the West and the South.  This too is democracy in action: polls show that 52 percent of the people in these states oppose abortions in most or all cases, while 43 percent say that it should be legal in most or all cases. 

In contrast, support for abortion rights is strongest in the Mid-Atlantic and the Northeast, in the Far West, and the Upper Mid-West.[3]  There are 25 states in this group. 

These groupings contain puzzles.  Anti-abortion opinion is strongest in seven Southern and Border states.[4]  While, opinion in Alabama and West Virginia is clearly in the anti-abortion camp, neither state has yet passed a law outlawing abortion if Roe v. Wade is overturned.   Opinion in South Carolina, Indiana, and Nebraska is mildly in the anti-abortion camp, but none of these states has yet passed such a law.  In contrast, opinion in both Missouri and Oklahoma is mildly pro-abortion rights, but both states have passed laws banning abortion if the Supreme Court tosses Roe v. Wade. 

What might be the political consequences if the Supreme Court de-nationalizes the right to an abortion and returns the decision to the states?  A great wave of outrage probably will arise in all the pro-abortion states.  In most of these states, however, support for the right to an abortion is already a litmus test for politicians.  In the anti-abortion states, opposition to abortion is already a litmus test for politicians.  Yelling and screaming doesn’t get you anywhere.[5]  Organizing and campaigning does get you somewhere in a democracy. 

There are seven states where majority opinion supports legal abortion by less than 1 percent to less than 10 percent.[6]  One key goal for supporters of a right to abortion may be to secure control of the state houses in these seven states.  Similarly, one key goal for opponents of abortion may be to flip these states. 

Of course, the Supreme Court may decide that abortion anywhere is a threat to unborn life everywhere. 


[1] Nate Cohn, “How Opinions On Abortion Vary, And Why That Matters,” NYT, 5 May 2022. 

[2] Those states are Idaho, Utah, Wyoming, North Dakota, South Dakota, Texas, Oklahoma, Louisiana, Mississippi, Arkansas, Missouri, Tennessee, and Kentucky.  Florida has passed a law banning abortions after the first trimester. 

[3] States with a better than 10 percent majority in favor of abortion rights are Alaska, Hawaii, Washington, Oregon, California, Nevada, Arizona, Colorado, Minnesota, Wisconsin, Michigan, Illinois, all of New England, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, and Florida. 

[4] To use the terminology of the Civil War.  They are Alabama, Mississippi, Louisiana, Arkansas, Tennessee, Kentucky, and West Virginia. 

[5] Except put to bed without your supper in the old days. 

[6] Montana, New Mexico, Kansas, Iowa, Ohio, North Carolina, and Georgia. 

China and Inflation 2.

            Inflation surged in much of the world during 2021 and the first months of 2022.[1]  Eurozone inflation reached an annual rate of 7.5 percent in April 2022; in the United States the inflation rate hit 7.5 percent in 2021 before climbing to 8.5 percent in March 2022. 

            But not in China.  For thirty years to government has held inflation in check, with an average of 2.6 percent price rise per year over the last ten years.  The Chinese government has continued the effort in the face of the current wide-spread inflation.  There the annual inflation totaled 0.9 percent in 2021 and climbed to 1.5 percent in March 2022.  The government has set a target cap of 3 percent for 2022. 

            Why is China so determined to check inflation?  The link between inflation and political unrest has been suggested as a chief motivation for China’s stronger line against price rises.  Run-away inflation in the 1930s and 1940s undermined the legitimacy of the Kuomintang government.[2]  A sudden rise in consumer prices during 1988 is sometimes suggested as one of the contributing factors in the Tiananmen Square demonstrations in 1989. 

How has China managed this feat?  China’s economy differs from Western economies in several ways.  First, investment, rather than consumer demand, is the most important driver.  The Chinese government has far greater control over investment than is common in Western countries.  Second, China’s response to Covid involved far less stimulus than was the case elsewhere.  This pumped much less money into the hands of consumers to either spend or save for later spending. 

            China has sought to fend off importing inflation from other economies.  It hasn’t been easy.  Russia’s war in Ukraine has helped push up world prices for carbon and grains, both major Chinese imports.  As a result, producers who transform raw materials into consumer goods have experienced a sharper rise in costs and prices—8.3 percent between March 2021 and March 2022—than have consumers. 

            While the United States maintains a strategic petroleum reserve, China has stored all sorts of key resources.[3]  This has allowed the government to counter the rise in import prices to a degree.  So, too, has the Chinese government’s large stake in the economy through state-owned firms.  These can be ordered to absorb some of the rising costs, rather than passing them on to consumers.  The government also limited steel exports to damp-down domestic price rises. 

Can China sustain its success?  All prediction is reckless.  Still, several observations may be valid.  First, China has unusually large reserves of strategic goods.  Those reserves aren’t unlimited.  Second, China depends on imports of food and energy.  What happens in the rest of the world will have something to say about what happens in China.  Third, Western countries have their own unpleasant memories of inflation from the 1970s.  The turn to resisting inflation in the West offers real hope that China will be able to ride out its current difficulties. 


[1] Stella Yifan Xie, “Beijing Uses Its Pull to Tame Inflation,” WSJ, 9 May 2022. 

[2] See Chang Kia-Ngau, The Inflationary Spiral: The Experience in China, 1939-1950 (1958). 

[3] There is a National Food and Strategic Reserves Administration.  For example, it stores aluminum, copper, rice, wheat, and soybeans.  If you don’t mind digging around a bit, you can learn more at https://news.knowledia.com/US/en/topics/AToxS 

China and Inflation.

            The ability to provide a rising standard of living to ordinary people forms one, but only one, of the central pillars of the legitimacy of the Chinese government.  Off and on over recent decades, the government has used subsidies and informal price controls to hold down inflation. 

Relatively low labor costs and stable prices have helped make China’s economic strategy work.  China has thrived on the export of cheap goods.[1]  Inflation would make those goods less cheap.  China has thrived on the import of food and raw materials.  Inflation would push up the cost of those imports.  Passing along costs to middle-persons or consumers could choke down domestic prosperity. 

A relatively under-valued currency also helped make China’s economic strategy work.  An under-valued (priced) currency makes that nation’s goods more competitive on foreign markets.  It also makes foreign goods more expensive to China.  China has long preferred to maximize foreign sales of finished goods.  That has required China to find ways to hold down production costs from comparatively expensive imports of food and raw materials.  Inflation would force China to choose between holding to an under-valued currency and currency appreciation.  What do you want more, the sales or the raw materials and food? 

More than a year ago, many observers warned of a global wave of inflation looming on the horizon.  Many factors contribute to these price increases.[2]  In May 2021, the Chinese statistical agency warned that prices for key goods had risen by 9 percent in the previous year. 

It could be argued that the government still had some time before taking action against inflation.  The covid pandemic had slowed down exports to much of the world.  Lock-downs in China had reduced production, even while logistical bottle-necks has caused a back-up in foreign ports.  The prices of many goods had not risen or had risen by small amounts.  In short, there was some slack in the economy.  This could be taken up before the government had to start pumping the brakes a little. 

China’s government wasn’t buying it.  The government responded with new subsidies for small businesses, which have smaller profit margins than do big business, and by restricting futures trading in hopes of reducing stockpiling of goods (“hoarding” or “speculation”).  Bigger businesses would just have to eat the rising cost of American wheat and Australian iron-ore.  These measures seemed to be kinda-sorta working by early June 2021. 

In addition, the government has allowed the foreign-exchange value of the currency—the renminbi—to appreciate against other currencies.  Both oil and wheat imports are denominated in dollars.  A stronger currency gets China the same amount for less or more for the same amount.  In Spring 2020, the renminbi was trading at 7.1 to the dollar.  By Spring 2021, it had risen to 6.4 to the dollar.  If foreign purchases did not shrink as prices rose, then some of the costs of China’s strategy could be exported to its trading partners. 

China looks like a predatory power, selling cheap to take over markets and exporting inflation when necessary.  Still, countries have policies for their own gain, not to help others. 


[1] Keith Bradsher, “In Battling Inflation, China Decides Not to Wait,” NYT, 10 June 2021. 

[2] Notable causes are said to be over-loaded shipping and port infrastructure and rising oil prices as the world’s economy rebounds from Covid.  Often left unsaid by the NYT is the great money creation by central banks as part of the response to Covid’s economic effects.