Will China Surpass the U.S.?, continued
BEIJING — During its decades of rapid growth, China thrived by allowing once-suppressed private entrepreneurs to prosper, often at the expense of the old, inefficient state sector of the economy.
Now, whether in the coal-rich regions of Shanxi Province, the steel mills of the northern industrial heartland, or the airlines flying overhead, it is often China’s state-run companies that are on the march.
As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people. The beneficiaries are state-owned interests that many analysts had assumed would gradually wither away in the face of private-sector competition.
In other words, China is engaged in “planned capitalism,” an oxymoron if ever there was one. China may achieve high growth for a while under this approach, but the inefficiencies of central planning will show themselves over time.
Categories: My Blog
Jess Austin
My limited experience with Asian nations such as Singapore argues that this shoe could take generations to drop. If that turns out to be the case, we can’t make any useful predictions based on the inevitable failure of state planning.
How are these countries different than Western ones with which we’re more familiar? There is a greater tendency to “conform” (at least in the sense of accepting lightly-enforced and non-representative authority), but I think that tendency changes enough from one generation to the next not to be salient here. I think the biggest difference is the existence of a sort of noblesse oblige among the higher-ranking cadres. I won’t speculate on possibly Confucian origins, but the leaders of Singapore and China both seem content to seek smaller rents than their Western counterparts would. (Mao et al. certainly didn’t fit this description, but for thirty years Chinese leadership has been reacting and re-reacting to that overreach.) I find the regular Chinese executions of overly-corrupt mid-level officials fascinating and instructive.
Any “enlightened” ruling class will of course suffer failures of imagination, but at least in Singapore they’ve tried to combat this by nurturing markets and entrepreneurship. Our own elected masters don’t impress on that measure.
Z
Planning does occur under capitalism. It is decentralized planning done “by the consumers and producers as expressed in the free price system which coordinates all economic activity.” – Viception (http://viception.wordpress.com)
ElGreco
“…, but the inefficiencies of central planning will show themselves over time….”
Yes indeed, they will…when Chinese per capita GDP converges to a level of, say, being equal to 50% of US per capita GDP. While such an increase will, overall and in absolute terms, still be a good thing for humanity, a world where the average Chinese produces 50% as much as the average American is a world where China’s economy is more than twice as big as the US economy (1.3 bil people/ 0.3 bil people * 50% = 2.17).
Ironically, if the US adopts the same model as China its per capita GDP will probably converge to the same point i.e. 50% of what US per capita GDP is today in relative terms.
In summary, the message to Americans is simple:
If you want an exceptional standard of living compared to other denizens of this planet, you need exceptional per capita production, which, in turn, requires exceptional individual incentives to produce. There is no perpetual machine of prosperity that can enable Americans, or any other nation for that matter, to sidestep this connection between exceptional prosperity, exceptional productivity and exceptional individual incentives to produce. And exceptional individual incentives to produce are not what the Welfare State we’re headed into is about. And unfortunately there is no return from Welfare-Statedom.
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But let me dare a hypothesis:
A world comprised of many capitalist states, even if formally authoritarian, may not be such a bad thing after all, IFFF of course, immigration and flow of capital is unrestrained (admittedly a very-very big IF).
Why? Because, after all, this is what the uniquely prosperous American corporate environment is. Small authoritarian islands which, of course (and this is the big difference) have to COMPETE amongst each other for free moving talent and capital. The end result is the irony (but not the mystery) that I, as a European immigrant, find that: overall, I am treated much better by American companies than I was ever treated by the presumably more regulated and more socially restrained companies of Europe.