This dedicated to the government of China and its apologists who clearly need some basic lessons in development economics.

The goal of economic development is the material welfare of a nation's entire population. National power, military might, christian values or the creation of a new socialist man might occur as goals to some. The first two of these goals place people at the disposal of the state. The last two make them involuntary servants of antiquated and dismal cults. Here Wonks Anonymous follows Branko Horvat and many others. The best rough measure of national development for most nations is income/output per person.

Because in the long run it is this simple: If you do not produce goods and services you cannot consume them.

Production is the application of human effort to natural resources - call this land - and to machines and other products of human effort - call these capital. Output per worker depends on the quality of human effort to a certain extent. The quality and quantity of land and capital available are much more important. In this scheme economists treat education as a special product of human effort, human capital

A nation develops by increasing its stock of capital per worker and improving the quality of its land. This requires the expenditure of resources to create capital and improve land or to produce goods that can be sold to buy capital abroad.

In this context foreign currency and foreign securities are not capital. Money that is not ventured in production but buried in bank vaults is barren and produces nothing. It produces no addition to output per worker. Remember the Parable of the Talents.

When a nation has a trade surplus it is using some part of its resources - its labor, land and capital - to buy money. When a nation runs a persistent trade surplus it is buying money and burying it in its vaults. It is not inappropriate to call this operation - described in detail in a prior post - sterilization.

The resources that China uses to send goods abroad could be used to produce goods for domestic consumption or they could be used to produce capital for domestic producers - including the poor peasants who currently live by migrating to the export zones to find work. They could probably be used to slow the degradation of the land and the environment in the arid interior of the nation. Instead the rulers of China send these resources to the wealthy nations and get money in return.

Sure China invests but every dollar of the trade surplus is a dollar worth of goods and services that is sent abroad for nothing.

The rulers of China are like a miser who starves his children, beats them to keep them quiet and then excuses his sharp business dealings because he needs to care for his poor abused children.