Adam Tooze was famous for saying that Germany can take a 5% GDP hit by cutting off Russian energy without having to go through deindustrialization. Look where Germany is heading today lol.
He was also adamant that the countries could just export their goods to one another when Trump went off with his Liberation Day tariffs because the US comprises only a small proportion of the world trade.
I really want to like Adam Tooze because he seems very knowledgeable in many things but also incredibly naive in others.
Regarding China, it was never about economic collapse. The real questions to ask are why hasn’t China’s incredible GDP growth and technological advancements translated into wage growth and social safety nets for the poor? There lies the answer to China’s deflation problem.
I’ll just give one example to make the point: China absolutely dominates the solar panel industry, and easily took 90% of the global market share. It has no peer competition in the world. It produces twice the amount of global solar panel demand in a single year!
And yet all major Chinese solar panel companies including their entire supply chain are now making huge losses and none of that growth ended up being transferred to income growth for the workers in the sector. If anything, we’re looking at production and investment downsizing simply out of sheer overproduction crisis, and that means unemployment down the road.
A major reason that the solar panel industry has not yet imploded was because the local governments had invested so much wealth (guess where did the money come from) into giving massive subsidies to the solar panel companies that it has become a sunk cost for the local governments. If the solar panel companies shut down their production, it’s going to incur even more losses to the local governments (the main tax revenue for both central and local governments is value-added tax) this will in turn impede their operating expenditures (somebody has to run the subways, trains, road maintenance, public services, and pay the civil servants etc, you know) and their ability to pay off the massive amount of debt these governments have owed to the financial institutions.
And so, even more wealth (again, where did those money come from) had to be invested to keep the industry from imploding, and then they wonder why the average working class people refuse to spend their money to consume?
PS. does anyone know what’s the beef between Tooze and the Chapo boys? The last time I heard about him being mentioned on the pod (maybe 2021 or 2022, some time around Covid, Matt was definitely still around) they got really sarcastic about him. I remember something about Felix insinuating that he was hitting on their partners or something?
To be fair, it is very difficult to govern a country with 1.4 billion people, and many problems began their rot at the municipal/provincial level that were not adequately or incapably addressed by the central government. This is why there has been so much corruption scandals across all levels being exposed in recent years. Almost scary to see a never ending number of corruption cases, almost on a daily/weekly basis. A long-term consequence of post-Mao decentralization, which clearly needs to be reformed.
As an enjoyer of Chinese history, I cannot help but notice the recurring pattern across the dynasties: centralization of power led to inefficient bureaucracy and economic calcification, while decentralization led to a flourishing economy but also set in the rot of corruption with disastrous consequences down the road. A cyclical trend that has gone on for thousands of years as dynasties rose and fell. Sometimes I wonder if the Communist Party in China will also succumb to the same cyclical pattern that has so pervaded the entire history of our civilization? What does the future even look like? After all, the country is not even 80 years old - a mere blip along the 5,000-year civilizational history.