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How is that even possible? What keeps consumption so low, and how have the Chinese been able to invest so much without (until now) running into sharply diminishing returns? The answers are the subject of intense controversy. The story that makes the most sense to me, however, rests on an old insight by the economist W. Arthur Lewis, who argued that countries in the early stages of economic development typically have a small modern sector alongside a large traditional sector containing huge amounts of “surplus labor” — underemployed peasants making at best a marginal contribution to overall economic output. The existence of this surplus labor, in turn, has two effects. First, for a while such countries can invest heavily in new factories, construction, and so on without running into diminishing returns, because they can keep drawing in new labor from the countryside. Second, competition from this reserve army of surplus labor keeps wages low even as the economy grows richer. Indeed, the main thing holding down Chinese consumption seems to be that Chinese families never see much of the income being generated by the country’s economic growth. Some of that income flows to a politically connected elite; but much of it simply stays bottled up in businesses, many of them state-owned enterprises. It’s all very peculiar by our standards, but it worked for several decades. Now, however, China has hit the “Lewis point” — to put it crudely, it’s running out of surplus peasants.
Rainstorms that are said to be the worst in five decades have flooded large areas of southwest China, washing out bridges, setting off a landslide that buried dozens of people and destroying a memorial to victims of the 2008 earthquake in Sichuan Province that flattened large parts of the same area. Connect With Us on Twitter Follow @nytimesworld for international breaking news and headlines. Twitter List: Reporters and Editors Enlarge This Image China Daily, via Reuters Firefighters used a rope to help a woman walk across flood waters on Tuesday after heavy rains hit China's Sichuan Province. The state news media reported Wednesday that heavy rains, which began last weekend, have killed more than 50 people across China and disrupted two million lives.