ATHENS – As China embraced capitalism, its leading universities adopted mainstream Western textbooks to mold their students’ thinking about the economy. “Most of my colleagues pay only lip service to Marxism,” an economics professor in one of China’s top economics departments confessed to me. “Only a tiny minority take Marx seriously.”

That was two years ago. Today, the AI revolution is giving Chinese Marxist economics a mighty boost.

Chinese Marxists have long feared that the country’s capitalist turn would lead it into the “rent trap” familiar from the North Atlantic economies: a period of asset-price inflation, a rapid slowdown, stagnation, deindustrialization and social discord. When competition in the productive sectors drives profit rates down, rent-yielding property becomes more attractive to investors seeking the greatest risk-weighted return.

The more wealth chases rents, the higher asset prices rise and the faster wealth moves from industry to the rentier sector. Rent traps hollow out industry and turn once-proud industrial powerhouses, like England’s North and the American Midwest, into wastelands.

China already came close to a rent trap with the collapse of real-estate developer Evergrande — the tip of a speculative iceberg that nearly sank the Chinese economic miracle. Chinese loyalist academics dismiss such fears, confident that the Chinese state, unlike its Western counterparts, knows how to direct investment so as to evade the rent trap. They point to success stories like critical minerals, green energy, electric vehicles, ultrafast railways, microchips and, more recently, AI.

The minority of Chinese economists who remained loyal to Marxism........

© The Japan Times