The Economics of Joseph and the Amazing Technicolor Dreamcoat

Many believe the discipline of economics began with Adam Smith and his seminal work, “The Wealth of Nations.” This is true in the sense that Economics was not separated from other disciplines such as Political Science before this time. However, the ideas that economics and what it is attempting to describe pre-date this point in history. In other words, before Adam Smith, rules existed and had economies and economic development. Ignoring these periods is a mistake, particularly if one is attempting to think about international comparative economics.

One night, I found myself in a conversation about the Chinese economy. It became increasingly heated. Most in the group were strong in their US economic knowledge but weak in how that model could not be applied without an equivalent understanding of the cultural and economic history of China. This often results in incorrect and out-of-context assumptions on what is happening there. Their reasons for sociopolitical economic decision-making as as a result can often be so far off as to be culturally inulting. China after all neither has the same agenda nor mechanisms for managing their economy.

Ultimately, unable to get them to appreciate how incorrect their framework was, I blurted out: “If you want to understand what’s going on in China, the best comparable is ‘Joseph and the Amazing Technicolor Dreamcoat’. How strong is your Andrew Lloyd Webber?”

Lest you think I was making up some fictitious comparison, this modern retelling of the story of Joseph from the Bible’s Old Testament is thought to be based on actual historical events. I believe it can illustrate a particular strategy one might use to manage one’s economic cycles.

In both the biblical and Broadway versions of the story, Joseph is a pious young man who happens to be able to interpret dreams. Through a series of sad events, that include jealousy and betrayal from his eleven brothers, slavery, and then deceit by the wife of his master, Joseph ends up in the slammer. It’s a super low moment in his life. 

But as luck would have it, the Pharaoh of Egypt is having weird recurring nightmares. Believing them to be an omen and desperate to understand them, he hears of Joseph’s ability and makes him a deal. Read my dreams, and not only do you get out of jail, but you’ll become a trusted advisor (aka rich AF). 

After a wonderful scene in which an Elvis-like Pharaoh recounts his dream, Joseph exclaims that it indicates 7 years of abundance followed by 7 years of famine. He suggests to the Pharaoh that they should build grain silos (i.e. invest in infrastructure) and store enough grain to make it through the drought. The Pharoah does this and sure enough, after 7 years of plenty, drought comes and there is famine. Egypt thrives during this period as all come to seek out work (cheap labor) given it was the only place with “plenty.” He releases the grain into the economy (i.e. fiscal stimulus) to keep Egypt in the best possible economic conditions to weather the drought. They also prosper because food cost (i.e. inflation) is managed via the release of stored grain.

To me, this little parable does more than any economic theory to describe what China has done and is currently doing. China has undergone more than 20 years of strong and largely uninterrupted economic growth. It moved to coal before the war in Ukraine and bought up every bit of oil it could when prices dropped below $30 a barrel. It has invested heavily in infrastructure. In the last few years of runaway inflation in many Western nations, China’s inflation showed a very boring 2%. 

And yes, there are still loads of problems right now. You have Evergrande and similar blow-ups in the debt market. You have the signs of deflation. Trade wars and real wars are all causing issues for a country that pre-2020 exported more than 1.5x what it imported. 

Can China’s economic strategy be explained using MMT or Chicago School? Maybe. Can it be explained in terms of Joseph and the Amazing Technicolor Dreamcoat? Easily.

So, what’s in store for the future? That will largely depend on how current geopolitical conflicts play out. I might explore this in a future posts. 

I would end by saying this: China is much easier to understand if you think of it in feudal terms. Like the Pharoah, Xi Jinping is–-no matter how we in the US feel about him–-just trying to get (what has become) his kingdom through the drought.