How China overtook the US and what lies ahead for Ukraine
In Ukraine, there is growing debate about the country’s economic development model and the role of fiscal policy in economic growth.
How did China, followed by South Korea, then Singapore, Taiwan and Hong Kong, and finally Japan, each in turn overtake the US?
A single-factor economy — hunting and gathering.
A two-factor economy — the use of means of production. Financing through savings.
Some African countries are still at this stage.
Three-factor — the production of means of production.
Ukraine was here, and is still holding on here... If the current policies of the NBU and the Cabinet of Ministers remain unchanged, we will fall back to a two-factor economy, as exporters of raw materials, the so-called ‘resource hub of Europe’. Financing — savings, weak lending.
Four-factor economy — financing: savings, loans, private venture capital. Potentially profitable ideas are financed. The US and the EU have reached this stage.
Five-factor economy — financing: savings, loans, intensive ‘window guidance’-style lending, private venture capital, state venture capital, municipal state venture capital.
All ideas are funded. This is where China and the rest of the Asian Tigers fit in.
The technology has been known to everyone since the days of Germany’s Hjalmar Schacht in the 1930s — intensive lending to the industrial sector. Japan came to an artificial halt in 1979, but the entire structure is ready for the next leap forward. Vietnam has already overtaken Ukraine. We are now being overtaken by Uzbekistan, the Philippines and Paraguay. Ethiopia will do so in a few years.
But, as the country’s most famous Timofey used to say: “Poverty is the choice of the poor.” It seems this is our state policy. I have never once heard any of the economic leaders or the country’s top officials say anything about the paths to economic growth.
No! I have heard that ‘once the war in Ukraine is over, there will be significant economic growth’. I’ve even heard from the architects of ‘lasting peace’ that ‘exponential growth’ awaits us. And I’ve heard about the ‘European tiger’ too. We’re not short on imagination.
And I’ve heard about 6% growth from the architects of the ‘economy of the future’ too. Talking the talk is easy. For three million euros, they could have written 8%. They even skimped on the percentage points.
UPD: In today’s world, governance is driven by finance. What gets funded is what develops. Who is in charge of monetary policy here? What is being funded? Treasury bills? Exactly.
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