Fake Receipts vs. Real Growth
There’s an awesome story in the NYT today about the business of making, selling, and using phony receipts in China. It isn’t a Big Story – it won’t change your mind about the state of the Chinese economy, or the relative ease of doing business in China, or whether the whole Chinese economy is a shell game that’s ready to collapse with a slight credit contraction. But it has a lot of amusing anecdotes!
These sorts of stories are usually presented in conjunction with the “China’s bust is coming!” Big Story – but it makes just as much sense as contrary evidence. Yes, the country is breathtakingly corrupt – but it’s been doing quite well in spite of that. It has a high level of human capital and a lot of underutilized natural and human resources. No matter how corrupt the country is, it can still realize huge gains in productivity by shifting people out of backbreaking subsistence agriculture in the countryside to low-wage industrial labor – not to even mention high-productivity value-added work.
Next time you see this type of story, ask yourself, “Could this have been written about America in 1890?”.