China Revises Economic Growth Upward

In January, China’s National Statistic Bureau released a report revising its GDP growth for the past several years upward significantly.

The NSB reviseed upward GDP growht estimates for every year from 1993 to 2004 except for 1998. Based on the new figures, China’s economy grew an average of 9.9 percent annually from 1993-2004.

And these new figures may still understimate the growth of China’s GDP since it is so difficult to accurately measure much of China’s economic activity which occurs in cash transactions.

Despite all this growth, China has maintained a very low inflation rate.

After decades of mismanagement under Communist management, China’s economy today is the sixth largest in the world. Despite the huge population it has, however, its economy is still only about half the size of the United States.


China lifts annual growth figures. BBC, January 9, 2006.

China Moves Toward Liberalizing Its Currency Market

China has started making moves toward liberalizing its currency market, though not fast enough for some in the U.S. government who bizarrely complain that China keeps the yuan artificially low.

In December, China announced that it approved 13 foreign and domestic banks who would be market movers for the yuan. If it follows through, this will change China’s long-standing micromanagement of its currency designed to keep its value from rising against the yen, pound and dollar.

Having a number of banks that are market movers for the currency would, in theory, limit the ability of China to intervene to keep the value of the yuan down.

There are a lot of reasons that China should stop such intervention, but one of the odd things is watching U.S. officials complain about the cheap yuan. The argument goes that the cheap yuan is largely responsible for the U.S. trade deficit in which the United States imports far more goods from China than it exports to that nation.

But if China is crazy enough to essentially subsidize exports to the United States, why should the United States object? The United States get goods far cheaper, raising the effective buying powers of wages, and China gets cash it uses for the capital investment necessary to continue its economic growth.


China reforms its currency market. BBC, December 30, 2005.

Lester Brown — New Century, But Same Book

Just randomly web surfing the other day I ran across a page promoting Lester Brown’s latest book, Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble. According to a promotional page at the Earth Policy Institute,

“Environmental scientist have been saying for some time that the global economy is being slowly undermined by environmental trends of human origin . . .,” says Brown, President and Founder of the Earth Policy Institute, a Washington, D.C.-based independent environmental research organization.

Although it is obvious that no society can survive the decline of its environmental support systems, many people are not yet convinced of the need for economic restructuring. But this is changing now that China has eclipsed the United States in the consumption of most basic resources, Brown notes in Plan B 2.0, which was produced with major funding from the Lannan Foundation and the U.N. Population Fund

China the world’s major consumption of basic resources? How can this be when Brown assured us in 1995’s Who Will Feed China? A Wake-Up Call for a Small Planet that China was on course for an imminent food disaster that, would see China’s food production fall drastically off.

China had, at the time, gone from being a net grain exporter to a net grain importer, and as far as Brown was concerned it was all downhill from there leading to massive worldwide increases in food prices.

Instead, China has done what Brown suggested was impossible — it has gone back to being a net food exporter and last year was taken off of the World Food Program’s list of countries that it provides food aid to, saying the Communist country no longer needed such aid.

As Robert L. Paarlberg noted in a 1996 review of Who Will Feed China? for Foreign Affairs, Brown was playing a bit fast and loose with his interpretations of data related to Chinese agriculture,

Brown justifies his extraordinary pessimism about China by predicting a massive loss of land now used for growing grain — roughly half by 2030 — through degradation or conversion to other uses. He argues that better crop yields will not be enough to offset the loss. This is misleading because switching from grain to high-value crops, such as vegetables, should be viewed as a gain for Chinese farmers, not a loss, and it is unjustified because it is based on an imperfect analogy to the experiences of countries such as Japan, Korea, and Taiwan. They converted land away from farming, including grain production, as their economies developed, but did so because they had fewer options for growth in agricultural production than China has today.

Not to say Brown ever changes his tune. In Plan B 2.0 Brown points to various rates of resource consumption — such as China’s voracious consumption of oil that has fueled steep increases in the price of that commodity over the past few years — and notes that if things continue as they are today (the one refrain from doomsayers that never changes) then the world is headed for a catastrophe.

But some of these alleged catastrophes are so silly that it is hard to believe Brown would even bring them up. For example he notes that if China reaches the U.S. level of per capita resource consumption,

China’s paper consumption would be double the world’s current production. There go the world’s forests.

Not. Most paper is harvested from trees specifically planted for such purposes (i.e., these trees would not even exist if it weren’t for the anticipated demand for paper). All that will happen if China starts demanding more paper is that paper companies will purchase land formerly used for other purposes and plant trees their for paper production.

The doomsayer formula is always the same. Take some trend that is current at a moment in time — the number of Pokemon cards being bought by kids is increasing by 250 percent annually. Then project that trend out over the next 30 years and note that if that trend keeps going then all of the world’s forests will be used up just printing Pokemon cards. And at no point ever take into account that people might grow tired of Pokemon cards (what economists call an elastic demand) or find different ways of obtaining them (these new fangled computers and portable game consoles) or find more capacity to produce them (planting more trees for Pokemon production).

The thing that distinguishes Homo sapiens is our incredible ability to quickly adapt and modify our behavior to ever-changing conditions. We’ve been doing it for 50,000 years rather successfully, and the doomsayers argument essentially says, “yes, but this time we’re really screwed” and the only solution is to adopt, as Brown pleads for in Plan B, “a restructuring of the global economy so that it can sustain civilization.”

Instead, perhaps Brown should focus on writing a book that could sustain its argument past a 24-month window when everything changes and his wild extrapolations are shown to have been for naught.


Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble. Earth Policy Institute, Accessed: January 10, 2006.

Rice Bowls and Dust Bowls: Africa, Not China, Faces a Food Crisis. Robert L. Paarlberg, Foreign Affairs, May/June 1996.

Australian Model Sarah Jane Does PETA Anti-KFC Ad

Australian model Sarah Jane is appearing in an ad on behalf of People for the Ethical Treatment of Animals urging consumers to boycott KFC.

The ad is targeted at Hong Kong, where PETA plans to distribute 20,000 flyers featuring the ad.

Jane told newspapers,

I hope that, no matter how you feel about eating meat, you will agree with me that animals raised for food should not be grossly mistreated. Chickens raised for meat are commonly crammed by the tens of thousands into filthy warehouses with no access to fresh air or sunlight. . . .I will feel satisfied if this campaign can shock, confront and awaken people globally and make known the suffering of chickens at the hands of KFC. I urge everyone not to set foot in another KFC restaurants until the company ends its chickens.

Interesting how PETA is so effective at attracting people whose main talent seems to be their ability to disrobe.


Animal welfare group enlists star for anti-KFC campaign. Agence-France Presse, August 3, 2005.

Sarah Jane out of her shell. Herald Sun, August 4, 2005.

Aussie chick to nearly reveal all in KFC protest. Dennis Chong, The Standard (China), August 4, 2005.

Most downloaded woman urges KFC to clean up its low-down, dirty ways. Press release, People for the Ethical Treatment of Animals, Undated.

Worldwide Demand Sends Iron Ore, Steel Prices Upward

Worldwide demand for steel is driving iron ore and steel prices to new heights.

China’s economic expansion, which has helped drive oil upward, has also put strains on worldwide supplies of iron ore and steel sending prices through the roof. According to the BBC, for example, the cost of steel jumped 8 percent in January 2005 alone and in China the price of steel jumped 24 percent in the same month.

The demand for steel has led iron ore producers to boost their prices. In February, for example, mining companies Rio Tinot and Cia. Vale Do Rio Dolce reached an agreement with Japanese steelmaker Nippon that raised the price Nippon paid for iron ore by 72 percent. Other iron ore producers are expected to seek similar increases.

Steelmakers, meanwhile, have to pass on those costs to someone and the result is companies looking to boost steel prices 20 to 30 percent, which in turn would cause a ripple effect of price increases in goods that use steel (and/or encourage exploration and use of steel alternatives).


Ore costs hit global steel firms. The BBC, February 23, 2005.

European can makers fear knock-on effect of steel prices. FoodProductionDaily.Com, October 14, 2004.

Kyoto Protocol Goes Into Effect Without United States

The Kyoto Protocol went into effect on February 16, without the world’s largest generator of greenhouse gases, the United States. In addition, the protocol exempts large greenhouse gas generating countries such as China and India from its requirements.

Under the terms of the treaty, it would be ratified once countries representing 55 percent of greenhouse gas emissions had signed it. That point was reach when Russia ratified the treaty in November 2004.

The United States has rejected the treaty arguing that it would be too expensive too implement controls on greenhouse gases, and that it would put the U.S. at an unfair economic disadvantage to make such changes given that China, India and other countries will not be forced to make the same cuts.

President Bill Clinton signed the treaty in 1999, but the Senate has refused to ratify it ever since, and is unlikely to do so in the forseeable future.

Even among those countries which did ratify the treaty, reducing emissions is likely to turn into an accounting game with high-emissions countries trading emissions rights with low-emissions countries without making much of a dent in emissions. This is one of the reasons Russia changed course and finally ratified the treaty since it will likely benefit economically from such emissions trading. As the Washington Post summed it up,

Moreover, they [the United States and Australia] say, many countries, including Japan and several in the European Union, are unlikely to meet their emission-control targets and will have to buy “credits” — most likely from Russia, which will have plenty to sell because many of its industrial plants shut down during the economic meltdown in the 1990s.

“They are going to take credit for sagging economies and flat populations,” said James L. Connaughton, chairman of the White House Council on Environmental Quality. Bush’s proposals for voluntary emission controls and incentives to develop clean technologies would have as much impact on American emissions as Europe would achieve under Kyoto, he said.

Critics counter that binding emissions quotas are needed to create the changes necessary to reduce the threat of global warming, but its difficult to see how a shell game in which major CO2 producers are exempt altogether will accomplish anything beyond symbolic.


Kyoto Treaty Takes Effect Today. Shankar Vedantam, The Washington Post, February 16, 2005.

Kyoto Protocol comes into force. The BBC, February 16, 2005.