By Bill Broderick – Re-Blogged From iPatriot
Communist China: Saves the Regime by Total Surrender to Capitalism!
It was the summer of 2016, my first trip to Europe. Our group spent the first day touring Prague, a city with a long and colorful history. After visiting three or four sites, it was apparent that our tours included large numbers of Asian tourists. On day two, I went to the Marriott desk, said: “the economies of Asia must be doing really well, since there are so many tourists from Asia. Can you tell where they are from?” I expected to hear South Korea, Japan, Taiwan, maybe Indonesia. He said: “Mainland China.”
Hmmm. The economic history of China for 4000+ years is one of six degrees of poverty, right? China has no tradition or history of a middle class of people and families with discretionary income able to afford to travel. So what has happened to China that enabled tens of thousands of its citizens to travel to Europe and elsewhere? In a word, Capitalism!
In the early 1990’s, the Communist regime of China witnessed the collapse of the Soviet Union. One of the great events of human history, 500+ millions of people liberated without a single shot being fired. While the collapse of the Soviet Union had primary causes (deeply flawed economic policies, moral and cultural bankruptcy) one of the major drivers of the collapse was external pressures due to the collaborative leadership of Ronald Reagan, Maggie Thatcher and Pope John Paul II. As the Soviet Union headed to the “ash heap of history,” the Communist regime of China had to find a path forward that would enable them to retain power and survive pressures for regime change.
When the Communist regime gained control of China in 1949, its first initiatives in state planning were centralized, top down driven efforts designed to take a largely agrarian economy and build industrial capacity. The regime introduced collective farming, spent 20+ years forcing peasants to stop growing crops on private land. The policy was a total disaster, with an estimated 40 million lives lost due to famine. In the 1980’s, the regime abandoned collective farming and allowed private farming, which today accounts for almost all food production in China.
In the 1970s and 80’s, the regime sought to create and grow state owned enterprises (SOEs) that could engage in market based activities and retain profits. In addition, economic zones were created that could operate with little to no control by government, with the intent to empower such efforts to create jobs, produce products for China and world markets. Under this umbrella, private farming, township and village enterprises and private businesses emerged in the spaces between government run operations. In the 1990’s, private sector entrepreneurs started companies outside of the state run businesses, growing and expanding rapidly to market and sell to the global marketplace. Many “mom and pop” businesses have become the lifeblood of society in China.
So where is the economy of China today?
- Private farming (plots of land assigned to families) was authorized by the regime in 1982. It has steadily grown into the primary source of food resources for the country, now accounting for almost all food production. Today, 300 million workers produce food for a population of 1.3 billion
- In 1990, there were no Chinese households that qualify as middle class (incomes above subsistence, with disposable spending for travel, culture, education). Today over 60MM households qualify as middle class in China, on a par with living standards of the US or EU. In the 1980’s, 64% of the population lived on a $1 a day, today 10% do so, a massive reduction in poverty rates.
- In 2015, China had 54 million self-employed enterprises, which created 163M jobs and 19 million private companies, which created 116M jobs
- In the cities of China, almost all of the job growth since 1978, an estimated 250 million jobs, has been generated in the private sector. For example, in 1978 almost 99% of the urban work-force we’re employed by SOEs, but by 2011 only 18%. Today, the workforce of China is about 900M, with about 25% working for the SOEs, the rest in the private sector.
- With regard to exports, state run enterprises accounted for 65% of exports in 1995. As of 2014, state run enterprises (SOEs) accounted for 8% of China’s exports, versus 92% from the private sector . In 2014, China accounted for 18% of all global exports, with about 90% of products from the private sector.
- As of mid-2017, the private sector contributed 60% of the growth in GDP and created 80% of the jobs
To recap the options of forms of government:
- Socialism is ownership of the means of production and abolition of private property
- Communism is ownership of the means of production and abolition of private property
- Fascism is control of the means of production, with ownership in private hands
- Capitalism is private ownership of the means of production
The regime in China owns the “property,” the land that is farmed by the people, but allows them to reap the benefits of their work, so they virtually act as “owners” of the land. Is this still communism?
The private sector of enterprises, small businesses and “mom and pop” operations, representing about 80% of the economy, own their “means of production” such as equipment, retail store sites, and more, and can manage such resources in behalf of their enterprises. Is this still communism?
The Communist regime of China, by enabling the growth of the private sector, now oversees a farm sector that functions as if in “private hands,’ and an overall economy that is 75-80% in private hands, has survived! Is it time for the regime to do a “high five” to Capitalism? No “ash heap of history” in sight for the regime, thanks to total abandonment of Communism!
The workings of the Free Market hasn’t been taught in our schools for generations. That being the case, many (most?) Americans lack the background to understand just what the Free Market is capable of achieving – or even understanding that what the US Economy is, is not a Free Market Economy in the true sense.
Lip service is paid, with various socialist economists saying such foolish things as, “We have a mixed economy – a partnership between the private and the public sector.” But in reality, when one partner has the ability to control the activity of the other, then it’s not really a partnership – it’s a command economy.
One problem for most Americans may be summed up in a statement I’ve heard several times: “If the government didn’t do such and such, it just wouldn’t get done. Nobody else has the strength of purpose and the resources to do that function.”
So, let’s imagine for a moment that all the computer gear in the United States – all the CPUs, the screens, the routers and modems – everything, was made by a single manufacturer, and that organization was owned and run by the US government. Prices might be the same as today, with the higher costs being subsidized by taxpayers. I expect that the wide variety of choices simply would never have been created, and the technology would advance little or not at all.
If some “nutcase” were to suggest privatizing this business, he would be laughed off the stage. “It’s too complex for private companies to do.” “There would be duplication of effort on a massive scale.” “Nobody could afford the capital investment.” “Prices would skyrocket since taxpayer subsidies also would end.” “The profit motive will hurt consumers as greedy owners will put out stripped down products at exorbitant prices.”
Does all that sound familiar?
As we know with the benefit of what actually has happened in the computer industry, it not only is possible – is has offered amazing innovation at a breakneck speed. Not every company has survived, which is another way of saying that the best have survived.
Could there be improvements? Of course. They’re happening all the time. If today’s leader doesn’t make those improvements, then it won’t be tomorrow’s leader.
Is innovation in the product or service, in the cost to provide it, and in developing alternatives, something which exists today only in the computer business? I suggest that this is exactly what the Free Market does if the government – the senior partner – will just step out of the way.
I’ve posted on getting rid of the US Department of Education recently. But how about just privatizing education completely? Could the Free Market do better than a couple of generations worth of a stagnant or falling level of educational achievement – and that poor performance at five times the real cost of a couple of generations ago?
“Greedy managers won’t care about the kids.” “They’ll provide one size fits all education.” “They won’t cater to the disadvantaged, the gifted, or the challenged students.”
These are the same fallacious arguments, using somewhat different words, that we heard when we looked at the computer industry. However, on closer inspection, we see that these arguments apply more to today’s dysfunctional education system than to the dynamic – if seemingly chaotic – choices which a Free Market would provide at lower cost.
I chose to look at privatizing education because this is where the workings of Free Markets – of Free Enterprise – are being hidden from our children.
Without an appreciation of the economic system which has provided the riches we now enjoy – riches which our leaders are squandering – the US will just continue down the road to being just another socialist, third world country.