What would happen to the world if all the species of birds were wiped out?

Ask Mao Zedong – he knows best.

During his crazy reign in the ‘60s & ‘70s, he had some brilliant ideas.

In addition to erasing Chinese culture & to sacrificing big chunks of the population, he wiped out the sparrows of China. During the Four Pests Campaign of 1958–1962, the population was ordered to kill following pests: mosquitoes, rodents, flies and sparrows.

The first three of them are somewhat reasonable, as they are carriers for really nasty diseases – e.g., malaria and ‘the Black Death’. The sparrows were hated, because they picked the seeds after the peasants had sown the fields.

Logically, killing all the sparrows equals higher yields, right?

Let’s do it.

Mao: 1 – Sparrows: 0

The people actually hunted the birds by all means. Peasants made a constant noise around trees, to prevent the small birds from landing. The exhausted sparrows just fell down to the ground after a while, as they couldn’t find safe places to rest. It is estimated that 2 Billion of them were killed in a short time.

Mao: 2.000.000.000 – Sparrows: 0

With the sudden extermination of the species, a never-seen problem arose.

Indeed, the sparrows were eating a part of the seeds. But, what they actually ate the most were insects – e.g., grasshoppers. After the peasants rid the sparrow overnight – a natural predator –, the number of grasshoppers exploded. Billions of them swarmed over the fields & destroyed whole harvests with their immense appetite.

A biblical punishment for dumb decisions.

The crops were bitterly needed during the Great Leap Forward. People were already starving, due to man-made famines. An estimated 20–40 million persons died. The Grasshoppers made things even worse. It took years to control this special (gu)pest.

Even today, the sparrow population hasn’t completely recovered.

As you have seen, the disappearance of a single species causes years of famine.

Just hope that your scenario never ever happens and be nice to sparrows

Sparrows: WIN – Mao: T.K.O.

Mao. That escalated quickly.

Are the Chinese economy numbers “fake”?

I am about to tell you something which you probably don’t know.

The reason I say this is because I, myself, and most people I know didn’t know this basic fact, despite reading a lot about politics and economics.

The man below is called Michael Pettis

He is a professor of finance, working at Guanghua School of Management at Peking University (Beijing).

He alleges that China’s growth is less than half of what is reported:

So far, so “mainstream”. Many others have made this point. What is fascinating about his analysis is that he isn’t alleging that China is “faking” the numbers.

He is merely stating something he says is a fact – the way China calculates GDP is different from the rest of the world.

GDP isn’t a standardized thing. Even France and the UK calculate GDP in a slightly different way. China just calculates it in a very different way.

You could argue, perhaps legitimately, that every country has a right to calculate GDP in the way it sees fit.

That may be true, but we also, therefore, have to see how these different definitions might affect the overall picture.

As the old saying goes, “lies, damn lies and statistics”!.

To quote him directly “the Chinese economy operates under soft budget constraints. A hard budget constraint means “you’ve got to have the money to spend it,” whereas a soft budget constraint means there’s no limit to one’s spending and losses can in principle be rolled over indefinitely.

Local governments in China operate under soft budget constraints, in contrast to the hard budget constraints of other major Western economies, and because they comprise a significant share of economic activity, China’s GDP numbers are fundamentally different in nature and as such, incomparable.

He illustrates this point by two hypothetical, identical Chinas—with the only difference being one has hard budget constraints and the other has soft budget constraints.

In the first China, a construction firm spends $100 digging a hole, then $100 filling it up. “In a hard budget constraint economy or in a normal accounting, you have an expense of $200 and nothing to show for it,” said Pettis.

In the second China, a construction firm similarly spends $100 digging a hole, then $100 filling it up. “But in [this] China, you don’t expense it,” he explained. “You call it an asset.

You say, I have now built an asset worth $200.” This, Pettis noted, is how GDP accounting works in the China that we all know. What this means is that China’s official GDP figures as currently reported are significantly inflated relative to actual economic conditions, and are also impossible to compare with the GDP figures of other nations.

You can see the full article here:

What China means when it says it wants “high quality” GDP growth
Beijing wants to focus on quality over quantity of GDP growth, but that’s much easier said than done.

To give a simple example to his point, let’s say one province in China has a GDP of 600billion and the target is 6% growth (so 630 billion is needed).

Now let’s say there is so real growth of 3%. However, it is fairly easy, with the soft budget constraints for the local government to engage in unproductive (or low-yielding at least) investments to achieve the other 3%, which wouldn’t be counted in a hard constraint economy.

That is one reason there are so many ghost cities and excessive infrastructure projects in China, such as second and third airports in cities that don’t need them.

So, China grew by 5.95% in 2019 versus 2%-3% for the US, using both country’s accepted GDP growth measurements.

However, if you were to standardize the measurements, China and the US would have grown by a similar amount.

What is interesting is that he also appears regularly on the Chinese state, so his findings aren’t seen as embarrassing by the regime, and China itself is now focusing on “high-quality growth” because they recognize the problem.

I have yet to find somebody who has actually refuted his central claim that there is not necessarily any lying or manipulation going on, but the different use of statistics is distorting the total figures.

This should be interesting for investors thinking about investing in Mainland Chinese private companies.

I don’t think it makes any difference to those looking to invest in Chinese stocks because GDP growth and stock market performance often aren’t linked.

So, we can’t say that weaker GDP growth will mean lower valuations for Chinese stocks, especially as they look very cheap compared to some markets.

Chinese vs. American Political Philosophy

A comparison of Chinese political thinking against American political thinking, focusing primarily on China. As always, if you enjoy the video please consider supporting the channel with a like/subscribe/comment/share, or consider supporting me with $1 on Patreon: https://www.patreon.com/rchapman.

0:00 Intro

01:47 The Basics

05:29 Confucianism

08:02 The CCP

10:52 The Left and the Right

13:33 Linear vs. Lateral Thinking

22:19 War

23:57 Outro

Sources:

The Analects – Confucius

The Art Of War – Sun Tzu

The Governance Of China – Xi Jinping

The Selected Works Of Mao Zedong – Mao Zedong

On China – Henry Kissinger

The American Political Tradition – Richard Hofstadter

China In The 21st Century – Jeffrey Wasserstrom

The Party – Richard McGregor

Culture Hacks – Richard Conrad

Has China Won? – Kishore Mahbubani