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Chinese Ghost Town

November 22, 2009

It is sad to see a once-thriving city deserted. The heart-breaking sight of a handful of forlorn stragglers and struggling businesses remaining from what once was a bustling community makes us wonder, "why, why?" Only the most cold-hearted could be indifferent to the painful legacy of broken families, the receding memories of what once was, and hopelessness among the young. Take this city in China, for example. Oh wait...sorry....scratch that. The city in that video has never been inhabited in the first place. It was constructed by central planners to contain around one million people, but no one bothered to move there. The video contains eerie shots of a few solitary construction workers driving down the empty streets between never-occupied buildings.

This is an example of why I am a skeptic of the China growth story. A lot of the so-called GDP growth is spending by central planners that has no real economic value. The reporter says that "a country can raise its GDP by spending more", which is almost a tautology, since GDP counts spending. But GDP growth does not necessarily mean real economic growth. Real growth can only be accomplished by expanding the capital base, and that requires economic calculation by entrepreneurs who are risking loss of their own capital. Just building a lot of physical stuff and counting the amount you spent is not the same thing.

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