A6 OPINION

Monday 11 March 2013 Shanghai Daily

How to bring the country to the city and city to the country
Wang Yong LAST Monday I brought my colleague at work a small bag of fresh veggies I had bought on Sunday from the farm near my home in suburban Shanghai. He cooked the veggies and fou nd them except iona l ly delicious. His wife and daughter loved them and two vegetable dishes were devoured. No wonder. Veggies freshly picked from the soil are rare in most downtown food markets in Shanghai. There youll find most greens sprayed with water to look fresh. The small bag of Chinese cabbages I brought to my colleague cost only 2 yuan (32 US cents), but they were dry and sweet like no watered counterparts could possibly be. pesticides and fertilizer. I a m fort u nate to l ive near vast farm fields that belong to Fengbang Village and Shenjingtang Village in Zhaox ia ng Tow n , Qi ng pu District, western Shanghai. But theres a risk to my newfound fortune of fresh food. Construction on a new subway line may begin late this year and the section passing Zhaoxiang Town is designed to run above ground. While that will definitely improve our transportation, the elevated rail may well eat into nearby farmland. I wonder whether I will still be able to buy fresh vegetables naturally raised chicken and ducks for that matter at my doorstep in three years time, when the subway line is expected to be completed. Uncle Shi, the 70-year-old farmer who owns the small plot where I buy my fresh vegetables, told me last week that he may lose his home and land to make way for the subway. But he expected to be relocated, since farming cannot make him rich, while compensation for his home and land can. Uncle Shi loves working in the fields. I am poor, but I have fresh air and fresh food, he told me two weeks ago. But last week he entertained the idea of being relocated and compensated once and for all, new path of economic growth that stops the one-way hemorrhage of peasants. Take Uncle Shi and his likes for example. When the new subway line is completed, possibly by the end of 2016, it will take at most 15 minutes to travel from the Hongqiao Airport Station to Zhaoxiang Station, which means much easier access of urban dwellers to the farmland of farmers like Shi.

Win-win growth model

Illustration by Zhou Tao/Shanghai Daily It could be a win-win growth model: Urbanites get more fresh food more easily and peasants get more income more quickly. You dont have to shovel peasants off the land to enrich them. Getting more people from the city to the farmland will be in the best interests of farmers long separated from urban customers. Imagine traveling on an elevated rail flanked by rolling fields of grass and crops. Few surface routes can offer such a view. What meets the eye instead are high-rises after high-rises, planted between factories and even next to trash dumps. If Shanghai finally builds that subway line (with aboveground sections) flanked by vast stretches of farmland, we will all have a better city, better life that comes from fresh food, fresh air and fresh mood.

Shanghai finally builds that subway If (with above-ground sections) line flanked by vast stretches of farmland, we will all have a better city, better life.
even if it means he will leave the land forever. After all, the one and a half mu (0.1 hectares) of farmland he owns brings his family a mere 20,000 yuan (US$3,226) in annual income. In most seasons he uses human fertilizer only, which guarantees safer food than chemical fertilizer, although the latter helps crops grow faster. As I chatted with him last week, I saw another small piece of land adjacent to Shis. It was uncultivated. Uncle Shi and a garbage collector near that plot told me the owner had abandoned farming and found a city job. The wasted land will probably be used for consruction. Its not in the blood of all peasa nts to rebel aga i nst the land. In many cases of urbanization across China, farmers migrate to cities not because they love city life expensive, noisy and polluted but because working the land alone cannot feed a family. Shanghai point the way to a

Dress well, eat poorly

Local fresh vegetables are a real luxury these days, as urbanization has driven farmland out of the view and reach of most urban dwellers. If you look at what young white collars wear and eat every day, youll probably find that many of them dress well but eat poorly. LV bags and Burberry scarves are common accessories, but seldom do these people eat safe food, since they are often exposed to dishes made with swill oil or vegetables transported to the city from afar and tainted with chemical

Why stimulus wont make gardeners work faster

Shawn Mesaros WE would like to consider what US$6 trillion in stimulus has gotten the USA over the past five years. Same static joblessness of around 14 percent unemployment and a higher stock market despite a record (48 million) Americans on food stamps. How can this be? Service sector economies simply do not respond well to stimulus. Consider the wisdom of lending money to a runner, expecting him to run faster as a result of being more in debt? Consider the wisdom of lending money to a shoe shine boy expecting him to personally shine more pairs of shoes? Consider the wisdom of lending money to a group of gardeners expecting them to clip rose bushes faster as a result of their being further indebted? Rubbish? Absolutely rubbish. Ma rg i n a l product iv it y q u ic k ly evaporates in the service sector as employment is added, ravaging profit margins and increasing total costs. History is replete with examples. Service sector economies are legendary in their ability to reach an efficiency maximum in very short periods of time. They say that in the long run we are all dead, but for a service sector economy in search of marginal productivity as a natural by-product of more debt the answer may be far different. You are already dead. The debt can never be repaid due to falling margins and then increased per unit cost by trying to falsely create more employment in the same service sector. As the service sector takes over more and more of economic output, displacing industrial production, we have interest rates less effective vis-a-vis economic stimulus. This is because theres far less potential leverage in low interest rates when expanding service sector economic drivers relative to industrial drivers. Factor performance may be easily demonstrated in America as we witness the falling benefit of economic stimulus, and as the economy becomes more services based. more tangible resources, engaging more of the real economy. Simply put, the work product may be improved upon as the economy rapidly turns itself over and over again, whereas when I invest in more people clipping the same rose bushes my marginal productivity gain trends below zero quickly, because I only have so many roses. Could it be so simple? Actually not it gets much, much worse. When governments both expand to employ more displaced rose-clippers and borrow more money (thus creating more debt) to employ more gardeners, we are stuck with both the incremental debt and the complete lack of marginal utility as likely permanent systemic costs, which must be politically reinforced to be justified. That means in order to keep the system afloat, we are effectively now in need of more of what got us into this fine mess in the first place. Factories need people to produce. They need equipment, they need engineers, they are mechanized, in which case theres a depreciable life to assets for an industrial business. That means that when risks are taken within the confines of an industrial economy, there are known spreads, margins, risk, and a real life cycle approach to investments. Industrialized economies take on more efficiency by expanding output and so long as more automation and turnover occurs, it is quite a limitless opportunity to drive margins and efficiency higher in an almost permanent upward trajectory. By comparison, one can simply not improve on the process of clipping hair for a basic haircut, shining shoes better, flipping burgers faster, or clipping roses any better than 600 years ago.

Final straw
In one business model (industrial economy) we can borrow capital and expand with great efficiency and expected profitability gains. In services model we have market saturation quickly established and then negative marginal contribution also expected as a result of borrowing. Ser v ices sector econom ies that stimulate through monetary easing and debt creation risk the final straw that PIMCO (Pacific Investment Management Co LLC) has described as a credit supernova whereby we have a profits deflation plus a debt inflation, which can only lead to massive monetary inflation as margins will ultimately descend below zero, prompting money printing simply to keep the system alive.
The author is managing director, Pacific Asset Management.

Short-swing activities
This also means that the time to negative economic leverage is shorter as marginal benefit may quickly fall below zero, just as the banking sector in America is experiencing. And service sector jobs are, frankly, far more likely to be short-cycle or shortswing activities relative to industrial production opportunities, which employ