The Wall Street Journal in its Letters section today has two good comments on Ruchir Sharma’s “How Spending Sapped the Global Recovery,” (op-ed, Jan. 16). The on-line teaser, “Nothing to Lose but Our Keynes: Government spending on infrastructure is only worth doing if it enables future value creation by the private sector.”
Of particular interest is the letter from Austrian Mario J. Rizzo.
“An increase in GDP isn’t reliably an indication of growth when the output isn’t valued at either market prices or some suitable near-surrogate. The fact that, for example, China has unused malls, empty apartment complexes and so forth means that this output should not be valued at its expenditure value or cost of production. Thus, much of the growth attributable to the stimulus was actually negative. Mr. Sharma’s case is stronger than it may seem because even the temporary spurt in growth is an illusion.”
Image: Chinese ghost city of Ordos.
