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Source link: http://archive.mises.org/8269/the-peoples-republic-of-capitalism/

The People’s Republic of Capitalism

July 9, 2008 by

The NY Times is reporting about a new four-part series airing today on the Discovery Channel. Hosted by Ted Koppel, it explores the economic growth that brought 300 million people out of subsistence.

Among other quotes, one nugget that sticks out:

“In 1973 when I asked, ‘What do you want to be?’ the answers were political,” Mr. Koppel said. “People said, ‘I’d do whatever the motherland needs of me.’ This was a time when intellectuals were being shipped out to the countryside by the millions, and you could not express any personal ambition, because it could cost you your life.

“Today people say, ‘Hey, I want to get rich, I want to make money.’”

And once they drop their peg, float their currency and stop accumulating USD reserves, they will become even richer (at least in terms of purchasing power).

Addendum: I just received an email from an employee of 360i who pointed to several short promotional videos for the program: 1 2 3

{ 17 comments }

Jeremy July 9, 2008 at 6:06 pm

Few people yet realize just how economically free China has become after three decades of reforms.

This, in combination with a lack of understanding about how low taxes & high savings are the two greatest drivers of growth, shows why there is still the perception that China’s growth is balanced on the tip of a pin.

Sure, a part of China’s growth can be attributed to inflationary monetary policy which has led to some significant malinvestment. However, the real (as in long after any artificial boom is over) growth being driven by basic economic freedoms is quite extraordinary.

a Duoist July 9, 2008 at 6:52 pm

This summer, China’s foreign reserves will hit 2 trillion dollars. By next spring, they will reach 3 trillion dollars, the largest fortune in world history.

Currently, China earns in excess of 60 billion dollars in interest per month on its reserves; the overwhelming percentage is from American taxpayers. On a daily basis, China purchases one billion dollars of US government debt, because Americans no longer save their money in order to purchase Chinese-made goods.

How official socialism will survive in China with such an enormous fortune is the question of the century. If slowly increasing freedom over the past twenty-five years and resulting economic growth rates continue, China emerges from ‘impoverished’ status by 2011, jumps from ‘lower’ to ‘upper’ middle income by 2024, and finally achieves ‘prosperous’ levels by 2029, at the latest.

What form of governance China uses to achieve such explosive economic growth will become the world-wide model for the next five hundred years, whether it is some form of ‘modified’ Marxism or ‘controlled’ capitalism. The key–as always–is the Chinese peasant. If the peasant is Included, or is continued to be Excluded (property rights given in the 2004 amendment to the Chinese Constitution were not given to China’s 850 million rural peasants), will determine whether China becomes the wealtiest nation on the planet as a free people, or as ‘controlled’ authoritarians.

David C July 9, 2008 at 11:49 pm

While I agree that the US economy is in deep trouble, I have serious reservations about the rise of China and the decline of the US. Last I checked China expanded their money supply by over 20%, and had corporate and personal taxes over 35%. Not that much better than the US, accept for that the economic liberties index in the USA sill blows China away. Also, it’s true that China has 3 trillion in reserves, but it’s also true that it is controlled by the government sector and not the market sector. They will probably spend it on wasteful military and social projects. Name one government that hasn’t. Also, is China becoming more free because of pressures from within, or are they doing it because of external pressures like the rise of the West. If it’s not internal, it won’t last when the USA hits the wall.

In sum, both the USA and China have grossly distorted markets with their high taxes and fiat money. The difference being China piped the printed up money into factories while the US pumped it into houses. Bad for US, good for them. However, it seems to me after it hits the fan, the US will be able to readjust a lot faster because of the relative freedoms. Contrary to myth, free markets do not revolve around capital they revolve around freedom – and capital tends to seek that out. Where’s the freedom? That is the real question.

Jeremy July 10, 2008 at 1:33 am

Hi David,

The economic freedom in lower taxes is seen by China & America’s total taxes and spending vs gdp. China’s tax burden (15.8%) is a little more than half than the US (26.8%), and total government spending is half (36.8% vs 18.5%), relative terms of course.

See the index of economic freedom for America and China for more.

That in combination with very high savings rates is what is driving China’s growth. The amount of massive growth that has occured in China over the last several decades didn’t come from printing money out of thin air. Sure, there is a bunch of malinvestment out there b/c of the rapid inflation of the money supply over the years, but China has grown at incredible rates for three decades, and most of that growth is real, not artificial growth.

Though recent growth rates are almost certainly unsustainable,

And I agree 100% that capital markets revolve around freedom. China is far from a free market – but in some respects it is more free than the US. Especially when it comes to the size of government, appearances in the media to the contrary notwithstanding (see the percentages above again if you doubt this).

I don’t see how the US will adjust more rapidly due to more economic freedoms. The size of government has gotten completely out of hand, we have enormous unfunded liabilities, and a huge amount of debt. And no matter who wins the election, government spending seems set to continue to grow.

Contrast this with China – far lower tax rates, no debt (a surplus of dollars that will no doubt decrease in value, but still no debt), and no unfunded ‘promises’.

The pressure to grow is coming from within China, not without. Here’s hoping they keep walking down the path toward freedom (though recent labor reforms have been a step back), and that we reverse the course of walking toward fascism and/or socialism.

adam smith July 10, 2008 at 8:26 am

Largely agree with David C. All of these projections are based on China continuing to grow for 9% a year for decades. Not going to happen. Furthermore, with a lack of political freedoms, when the masses get disgruntled, they need to blow off steam. If there is no safety valve of free and fair elections like we have in the West, they tend to revolt and radically disrupt the social/political/economic disorder. The day of reckoning between China’s increasingly capitalist economic model and stll repressive political model will eventually come. I find it hard to believe that it will go off without a hitch.

Nat July 10, 2008 at 9:08 am

David C:

They will spend it on the military. They currently have a sixty million boy surplus. The big loser will be Russia. I do not expect that country to even exist fifty years from now.

I expect the Chicoms to annex Siberia in about twenty years or so.

mikey July 10, 2008 at 4:16 pm

So the overseers in China have cottoned on to the fact that there will be a lot more wealth to confiscate if they give their slaves some economic freedom.What geniuses, it only took 45 years, it took the Soviets 70 to figure it out.

Meanwhile our own Einsteins have us going the opposite direction.I wonder if Rossetta Stone makes a cd for Mandarin/Cantonese?

roy moss point ms usa July 10, 2008 at 10:30 pm

i read an artical n sfo magazine that showed that china will get old b4 it get 2 powerful.when the average age of a country gets 48 yrs old,they tend 2 stop spending a lot of money n start saving 4 retirement.i dont remember xactly how old the r but its quite a lot older than us. india on the other hand seems 2 have the population,youth,and family size 2 rule this century.plus their educated class all speak english,the true language of money

roy moss point ms usa July 10, 2008 at 10:30 pm

i read an artical n sfo magazine that showed that china will get old b4 it get 2 powerful.when the average age of a country gets 48 yrs old,they tend 2 stop spending a lot of money n start saving 4 retirement.i dont remember xactly how old the r but its quite a lot older than us. india on the other hand seems 2 have the population,youth,and family size 2 rule this century.plus their educated class all speak english,the true language of money

roy moss point ms usa July 10, 2008 at 10:31 pm

i read an artical n sfo magazine that showed that china will get old b4 it get 2 powerful.when the average age of a country gets 48 yrs old,they tend 2 stop spending a lot of money n start saving 4 retirement.i dont remember xactly how old the r but its quite a lot older than us. india on the other hand seems 2 have the population,youth,and family size 2 rule this century.plus their educated class all speak english,the true language of money

roy moss point ms usa July 10, 2008 at 10:35 pm

sorry i hit the submit buttion 2 many times

bob July 11, 2008 at 9:42 am

there was a daily article on here not too long ago about how China’s GDP figures were “made up”. I don’t remember the specifics but those who are astonished by the rapid growth might want to check that out.

also, part of China’s economy is in ignoring the intellectual property rights of products from the west. Theft relies on external production. The decline of the west could wipe out some of their productive economy, as well as (of course) most of their subsidized buyers.

Curt Howland July 11, 2008 at 10:05 am

I taped show 1, missed show 2.

I’m disappointed. Koppel goes to great, slow, lengthy demonstrations about “Chinese are working for so little, there are millions just waiting who would work for that little, when you have so much human labor available cheap you can recycle the rebar from a fallen building, chip the morter off of bricks, etc etc etc.”

Then, the sentence “Chinese wages are increasing” is stated quickly and thrown away, never revisited.

Also the North Carolina cotton/tobacco farmer stated clearly that the Mexican migrant workers work hard, do good work, and no American will work for the wages he’s able to pay. But then we go straight back into lengthy tracts of “Oh woe is me, I lost my job I thought I’d have forever, I can’t get work, oh woe is me.”

Also, what Koppel repeatedly proclaims as the “Chinese middle class” is nothing of the sort! Those in the gated communities, wearing French handbags and driving German cars are the blazingly wealthy! They are getting paid Ted Koppel level wages! Oh sure, the numeric dollar amounts compared to Koppel’s make them “middle class”, but it’s Koppel who is confused about it, because his perspective is that only people like Bill Gates are “rich” because they top even Koppel. Well, Ted, get a clue. You and your circle of friends are _not_ middle class Americans.

I worried a little when I saw that a very limosine-liberal American media personality was going to “investigate” Chinese capitalism. After all, he doesn’t understand what “capitalism” is to start with.

Mike Schneider July 14, 2008 at 3:43 am

> On a daily basis, China purchases one billion dollars of US government debt…

Those people are fucking idiots — do they *actually* think they’re going to end up owning America (instead of getting stuck holding worthless toilet-paper a few decades from now, if that)?

Mike Schneider July 15, 2008 at 1:34 pm

While we’ve had a bit of fun here regarding the over-blown China speculations, there are a couple of factors that we shouldn’t forget:

1) The amount of liberty (and, subsequently, financial freedom) one can personally enjoy isn’t totally dependent upon government edict, but on one’s ability to routinely *evade* it. In the US, virtually everything is regulated and taxed multiple times before it gets into your hands, and virtually the entire economy and banking are computerized and subject to immediate government seizure or curtailment at its instant whim. In China, where the economy is less computerized and the government less sophisticated (albeit more brutal overall), it is arguably easier for an enterprising individual to accumulate a nest-egg and keep it hidden until its grown to the point that the individual can begin influencing government with it at his discretion. China actually still has a “frontier”, must like 19th century America.

The time will eventually come when Chinese industry buys its way into government and displaces the senile octogenarian revolutionary leadership. At that point, China’s government will be largely similar to other oligopolies (e.g., Putin’s Russia) despite its origin.

2) Even if Shanghai and surrounding environs are a subsidized village consisting of only 10% of China’s population while the rest wallow in misery — ten percent of China is still larger than most other countries.

3) China is one of the few places, in the upcoming decades, which either isn’t going to have to deal with Islamic fanaticism, or which at least has the inclination to simply kill the buggers, world opinion be damned. (And it won’t be writing fat checks to the governments of Saudi Arabia and Afghanistan.)

Marvin July 29, 2008 at 2:23 am

Actually Ted Koppel doesn’t cover much geographic ground in the people’s republic of capitalism, his four-part look at change in China on the Discovery Channel, but he seems a bit like a traveler who has lost his Fodor’s.
—————————
Marvin

Wide Circles

ebinezer August 29, 2008 at 1:27 pm

Discovery is doing an excellent job. It’s focus on the stage of the economic condition. As the criteria has change no one in interested in any thing else to become rich.

ebinezer
widecircles

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