Relaxing China's Hookoo laws will encourage more migration to cities, boosting economic growth and efficiency.
The UK's regional inequalities highlight the challenges of deindustrialization and regional disparities, contributing to the country's economic decline.
Deep dives
China relaxes Hookoo laws to boost urbanization
The Chinese province of Jiangsu has started relaxing its Hookoo laws, which restrict the free migration of Chinese citizens within China. This relaxation makes it easier for rural workers to move into cities, access social benefits, and acquire property. This move is significant because China is facing a demographic decline, with a fertility rate well below replacement level. By accelerating urbanization, China can counteract the decline in population by increasing the size of the urban working population. This will help mitigate the long-term economic impact of low fertility rates. China has considerable room for economic expansion as it is currently only the 121st most urbanized country in the world, with 61% of its population living in urban areas. Relaxing the Hookoo laws will encourage more migration to cities, boosting economic growth and efficiency.
Examining the economic decline of Britain
The Financial Times published data suggesting that the United Kingdom's GDP per capita is lower compared to competitor nations in Europe and the United States. The data also reveals extreme regional disparities within the UK, with London having high per capita GDP, while other cities like Edinburgh lag behind. The regional inequalities in the UK highlight the challenges of deindustrialization and regional disparities, which are fracturing even developed economies. Britain is facing a decline in overall living standards and wealth, with limited opportunities for economic renewal. The high cost of housing, low productivity, wealth inequality, and job insecurity contribute to the country's economic decline.
The distorted nature of housing as an investment
The rising cost of housing is not solely driven by supply-side issues or planning regulations. Instead, housing has become increasingly treated as an investment asset due to financialization, low interest rates, and wealth concentration. This shift has resulted in housing being priced like stocks or bonds, with investors seeking rental income and capital gains from price appreciation. The increasing demand for housing as an investment asset is fueled by an aging population, concentrated wealth, and low returns in financial markets. The inflated housing prices, relative to average wages, are not solely attributable to supply and demand dynamics, but rather to the perception of housing as a lucrative investment.
Examining the misrepresentation of housing supply-demand dynamics
The prevalent narrative that rising house prices are solely due to a supply and demand imbalance is not fully supported by evidence. Contrary to popular belief, empirical data does not strongly correlate high house price-to-income ratios with slow home building relative to population growth. Instead, the housing market is driven by financialization, low interest rates, wealth inequality, and an aging population. While supply and demand dynamics may have some impact in extreme cases, housing is primarily priced as an asset, attracting investment due to limited alternative options. The persistence of high house prices relative to wages across developed markets underscores the significance of these broader economic factors in shaping housing affordability.
This week, the lads have latched onto a report in the Financial Times which claims to show that outside of London, Britain is often poorer than the poorest US state - and equally, that it has fallen way behind its European peers like Germany. Our duo argue the toss: is this just bad accounting? Or is there something more fundamental here, to do with how a different kind of bad accounting has allowed the UK to obscure its long-term decline for far too long?
On a related point, Philip Pilkington has been dodging brickbats all week, after he told UnHerd readers that the problem of housing expense may not be all a question of bad planning laws limiting supply. Why, he asks, is this also the case in territories with such different planning and demographics situations as New Zealand, Hungary and Japan? Patiently, he re-explains his argument to Andrew Collingwood.
Finally, one Chinese province has repealed its Houkoo Laws. These are the communist diktats that forbid citizens from moving beyond their home province. If this internal Berlin Wall crumbles, as Andrew Collingwood points out, it may well lead to a huge economic boon in the East.
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