Chanos on China, Krugman on Asia 1994 / USSR 1960

by: Nick Gogerty

Arguably the world's most successful and well known short seller, Jim Chanos has some strong opinions on China's urban real estate bubble. Regardless of your opinion on the matter, his debate and argument is worthwhile watching in regards to macro China. In regards to China, I have deep concerns and am nervous about the global ramifications of a half awakened giant stumbling.

This video has poor audio and lasts an hour but provides insight into the thought process of short specialists' thinking processes, a useful bit of education.

98% of the time the average Western person can ignore sovereign debt and the Chinese economies. That may not be true in the near future.

In the video Chanos says the best essay he has ever read on emerging markets is by Paul Krugman written in 1994 before the Thai Bahtulism etc. unfolded in 1997. Regardless of your opinion on Krugman, his thoughts in this "The myth of Asia's Miracle, a fable" are worth weighing in the current context. The opening of Krugman's paper:

Once upon a time, Western opinion leaders found themselves both impressed and frightened by the extraordinary growth rates achieved by a set of Eastern economies. Although those economies were still substantially poorer and smaller than those of the West, the speed with which they had transformed themselves from peasant societies into industrial powerhouses, their continuing ability to achieve growth rates several times higher than the advanced nations, and their increasing ability to challenge or even surpass American and European technology in certain areas seemed to call into question the dominance not only of Western power but of Western ideology. The leaders of those nations did not share our faith in free markets or unlimited civil liberties. They asserted with increasing self-confidence that their system was superior: societies that accepted strong, even authoritarian governments and were willing to limit individual liberties in the interest of the common good, take charge of their economies, and sacrifice short-run consumer interests for the sake of long-run growth would eventually outperform the increasingly chaotic societies of the West. And a growing minority of Western intellectuals agreed.
The gap between Western and Eastern economic performance eventually became a political issue. The Democrats recaptured the White House under the leadership of a young, energetic new president who pledged to "get the country moving again"--a pledge that, to him and his closest advisers, meant accelerating America's economic growth to meet the Eastern challenge.
The time, of course, was the early 1960s. The dynamic young president was John F. Kennedy. The technological feats that so alarmed the West were the launch of Sputnik and the early Soviet lead in space. And the rapidly growing Eastern economies were those of the Soviet Union and its satellite more (pdf).