What is China’s GDP? Glass-Steagall for tech?
What is China’s GDP?
To answer this question, Michael Pettis, professor of finance at Peking University’s Guanghua School of Management argues GDP, the statistics supposedly able to measure both on growth and ability to service debt, never perfectly achieved so (building a bridge to nowhere counts the same as building a much-needed bridge). But this is particularly problematic with China given “the huge amount of non-productive activities were counted as growth inside China.” He also points out another fundamental issue with China’s GDP is that most nations measure GDP on output, but China measures it on input. In other words, it’s a number based on forecasting to meet its government’s consensus on growth target, “which engages in the requisite amount of activity, usually funded by debt. (So) as long as China has debt capacity, and as long as it can postpone the writing down of non-productive assets, Beijing can achieve any growth target it desires. ” Read more here
Glass-Steagall for tech?
(Rep. David Cicilline/GETTY IMAGES)
On March 4, Financial Times reported that David Cicilline, the head of the House antitrust subcommittee, suggested separating social media platforms from selling information and data, or so-called “Glass-Steagall for tech”. (The Glass Steagall Act was enacted in 1933 in the wake of 1929 stock market crash to separate investment and commercial banking activities. It was repealed in 1999 due to many loopholes that were found. To this day, it still remains debatable whether the repeal contributes to the 2008 financial crisis.)
Since this report, many have challenged the validity of “Glass-Steagall for tech”, including FT’s own columnist Zabella Kaminska. She argues:
“social media and tech platforms are structurally different to banks… (because) data mining is intrinsic to the ability of social media platforms to generate income.”
Instead of an oversimplified separation, Zabella asks regulators to pay attention to platform companies moving into financial services.
“By crossing the board, growing assumptions (and concern) is that the ultimate objective of the tech companies is to compete directly with banks – while benefiting from a much lower regulatory burden than banks are currently subject to. (In other words),the bigger threat is ‘(tech platform companies’) capacity to use customer capital to misdirect the entire economy from a singular algorithmic command point,” warns Kaminska.
On a different note, James Cockayne, Director of The Centre for Policy Research at United Nations University, warns
“command economies* are already becoming tech platforms. Hence China’s social credit system . Geostrategy now turns on how states & biz scale competing with platform economies,” he tweeted.