STAFF NEWS & ANALYSIS
Chinese Leaders Turn to Urbanization to Cure Economic Woes
By Staff News & Analysis - June 17, 2013

China's Great Uprooting – Moving 250 Million Into Cities … Moving 250 Million Into Cities … China's government-driven effort to push the population to towns and cities is reshaping a nation that for millenniums has been defined by its rural life … China is pushing ahead with a sweeping plan to move 250 million rural residents into newly constructed towns and cities over the next dozen years — a transformative event that could set off a new wave of growth or saddle the country with problems for generations to come. The government, often by fiat, is replacing small rural homes with high-rises, paving over vast swaths of farmland and drastically altering the lives of rural dwellers. – New York Times

Dominant Social Theme: Time to give those peasants a real life.

Free-Market Analysis: In the previous article, we pointed out that Fitch just discovered what Daily Bell readers have known for years, that the Chinese Miracle isn't exactly what it seems to be.

What created the "miracle" and continues to support it is an almost-impossible-to-comprehend credit bubble that has left a swath of mold-ridden, empty cities and vacant skyscrapers throughout China.

But in this article, we see the other side of the Chinese dilemma … the determination of Chinese leaders to fight back. These top officials are setting up a policy with at least two main focal points.

We've written about one previously, which is the determination of the ChiComs to allow even more free-market activities at the lower reaches of society. The danger, as we pointed out, is that free-market reforms get out of control and begin to affect the real financial power base of the regime in areas such as banking and finance.

The other response is the one mentioned in this New York Times article. It has to do with the determination of top men in China to inflict a full-scale urbanization on the Chinese. The idea is that an urbanized, Western-style democracy, when combined with increased free-markets domestically, will provide the Chinese economy with the steroids it needs to continue its torrid growth.

We use the word "steroids" because this kind of massive social planning, when combined with the calculated stimulation of fewer market constraints, constitutes a calibrated, faux-freedom that will only advance the Chinese system so far before it will either collapse or turn into something else entirely. As Ludwig von Mises long ago pointed out, it is impossible for countries, especially large ones, to be a little bit socialist.

Nonetheless, the Chinese government is committed to its bifurcated plan: more market freedoms and massive societal remodeling. Here's more from the article:

So large is the scale that the number of brand-new Chinese city dwellers will approach the total urban population of the United States — in a country already bursting with with megacities. This will decisively change the character of China, where the Communist Party insisted for decades that most peasants, even those working in cities, remain tied to their tiny plots of land to ensure political and economic stability.

Now, the party has shifted priorities, mainly to find a new source of growth for a slowing economy that depends increasingly on a consuming class of city dwellers. The shift is occurring so quickly, and the potential costs are so high, that some fear rural China is once again the site of radical social engineering.

… Across China, bulldozers are leveling villages that date to long-ago dynasties. Towers now sprout skyward from dusty plains and verdant hillsides. New urban schools and hospitals offer modern services, but often at the expense of the torn-down temples and open-air theaters of the countryside. "It's a new world for us in the city," said Tian Wei, 43, a former wheat farmer in the northern province of Hebei, who now works as a night watchman at a factory. "All my life I've worked with my hands in the fields; do I have the educational level to keep up with the city people?"

China has long been home to both some of the world's tiniest villages and its most congested, polluted examples of urban sprawl. The ultimate goal of the government's modernization plan is to fully integrate 70 percent of the country's population, or roughly 900 million people, into city living by 2025.

The 20th century shows us clearly and convincingly that this kind of insanity doesn't work. You can't take hundreds of millions of people, divorce them from their ancient ways of survival and expect anything other than a genocidal mess.

In the US, increasing urbanization has not brought prosperity but the opposite. The great recession has revealed the flaws in a model that relies on an urban bureaucracy to create the living standards that an agrarian population used to be responsible for.

One could compare it to the age-old debate between the republican agrarian Thomas Jefferson and the authoritarian technocratic Alexander Hamilton. Hamilton has won numerous battles, but Jefferson – or more correctly his perceptions about the reality of human action – will win the war, metaphorically speaking, anyway. Too bad we have to live through it.

The changes taking place in China are being driven by a small clique of men determined to stay in power, from what we can tell. They will turn all of China upside down if they have to. The internal logic of what's happening in China has to do with their survival, not with any inherent urban bias.

People are certainly easier to control in cities, and socialist policies are easier to implement. But eventually, urbanization reveals its dark side. Prosperity gives way to poverty and city living is gradually seen not as a panacea but as a flawed solution with none of the redemptive qualities initially promised.

That is what is happening in Europe and the US today. As societies run out of money to support vast, artificial urban agglomerations that have been constructed, decay sets in.

Chinese farmers may live in rural poverty today. Tomorrow they may live in an urban squalor.

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