Saturday, November 01, 2008

China's OODA Loop Runs Faster Than West's

China is demonstrating why it is a better long-term investment than the economies of the Anglo-West (US, UK/Commonwealth, EU):

China's cabinet has pledged extra infrastructure spending to stimulate the world's fourth-biggest economy amid the global slowdown. The government has already lowered rates three times in the past two months, increased export rebates and cut property transaction taxes.

China's one-party rule enables a much faster decision cycle than the West's ponderous decision-making. China has no difficulty deciding to rapidly cut interest rates or push fiscal stimulus. If the US is to compete effectively after Great Depression 2.0 eviscerates its global leadership, it will have to find a way to streamline the way it executes macroeconomic policies.

Might I be so bold as to offer a suggestion? Fiscal policy would be more effective if the US jettisons its cumbersome income tax code for something simple - say, a flat tax on income and a national value-added tax on retail sales. Adjusting a flat tax up or down is politically simpler than crafting tax bills loaded with special perks designed to micromanage business activity.