1/9 Bloomberg's Chris Anstey notes that "the consumer — not the...
Michael Pettis@michaelxpettis
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Oct 19, 2025
~2 min read
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1/9
Bloomberg's Chris Anstey notes that "the consumer — not the producer — has been the main focus of officials in Washington. By contrast, China’s leadership, drawing on Marxist tradition, of course focused on production."
@AnsteyEco
bloomberg.com/news/newslette…
Bloomberg's Chris Anstey notes that "the consumer — not the producer — has been the main focus of officials in Washington. By contrast, China’s leadership, drawing on Marxist tradition, of course focused on production."
@AnsteyEco
bloomberg.com/news/newslette…
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2/9
There is nothing wrong, of course, with maximizing consumption. The whole point of economic development, after all, should be to improve total welfare. This was one of Adam Smith's main points.
There is nothing wrong, of course, with maximizing consumption. The whole point of economic development, after all, should be to improve total welfare. This was one of Adam Smith's main points.
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What academic economists have real problems understanding, however, is that to be sustainable, the rise in consumption has to be supported by a rise in production, not by a rise in debt and certainly not, most foolishly of all, by minimizing the price of imports when these...
What academic economists have real problems understanding, however, is that to be sustainable, the rise in consumption has to be supported by a rise in production, not by a rise in debt and certainly not, most foolishly of all, by minimizing the price of imports when these...
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are caused by industrial policies abroad that subsidize production at the expense of domestic demand. This boosts consumption mainly through growing US trade deficits, and deficits mean that Americans consume more not by producing more, but by borrowing or by selling assets.
are caused by industrial policies abroad that subsidize production at the expense of domestic demand. This boosts consumption mainly through growing US trade deficits, and deficits mean that Americans consume more not by producing more, but by borrowing or by selling assets.
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The only sustainable way to grow consumption is by growing production. When Americans produce more, they can sustainably consume more, regardless of the cost of imports.
ft.com/content/89110b…
The only sustainable way to grow consumption is by growing production. When Americans produce more, they can sustainably consume more, regardless of the cost of imports.
ft.com/content/89110b…
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China's problem is a very different one. Because income is so badly distributed, Chinese households cannot consume a large enough share of what they produce. As a consequence, Chinese growth has been locked into non-productive investment to achieve growth.
China's problem is a very different one. Because income is so badly distributed, Chinese households cannot consume a large enough share of what they produce. As a consequence, Chinese growth has been locked into non-productive investment to achieve growth.
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Americans believed that success meant consuming more than they produce, and the Chinese believed that success meant producing more than they consume. They were both wrong, of course.
Americans believed that success meant consuming more than they produce, and the Chinese believed that success meant producing more than they consume. They were both wrong, of course.
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But thanks to terrible economic advice, the two were able to match policies for decades until it became unsustainable. The US is now focused on production, but its continued rising deficits show that this isn't yet working, and debt continues to rise.
But thanks to terrible economic advice, the two were able to match policies for decades until it became unsustainable. The US is now focused on production, but its continued rising deficits show that this isn't yet working, and debt continues to rise.
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China wants to raise consumption, but its rising surpluses (among other things) show that this isn't working either. Its debt is higher and rising far more quickly.
The key to a global transformation is when the US is finally able to reduce its deficits and reindustrialize.
China wants to raise consumption, but its rising surpluses (among other things) show that this isn't working either. Its debt is higher and rising far more quickly.
The key to a global transformation is when the US is finally able to reduce its deficits and reindustrialize.
