An article which caught my eye, and clearly caught the eye of many other economists on the blogosphere, late last week profiled Mr Zhang Weiying, an economist at Peking University who could be best described as “China’s Mises.”
Mr Zhang was, and remains, something of a lone voice in the policy wilderness questioning the efficacy of Chinese fiscal stimulus during the 2008-09 “global financial crisis,” and subsequent policy attempts by fiscal and monetary authorities there to hold back slowing growth in industrial production and economic activity more generally. In 2009 he presented a paper at the Forum of Chinese Entrepreneurs with the uncompromising title “Bury Keynesianism” (an English translation of the paper can be found here).
In another piece, published in The Wall Street Journal earlier this year, Zhang systematically pulled apart the internal contradictions at the heart of Chinese economic policy making – i.e., the impetus towards liberalisation since the late 1970s, juxtaposed with continuing interventions in key aspects of the economy which distort economic processes and breed political corruption.
When you read Zhang’s piece, one is instantly reminded of Mises’ writings concerning the impossibility of the “third way” mixed economy. Showing that socialism, in the end, isn’t coloured by national or cultural differences, he argues for Chinese reforms that eerily sound exactly like those required in Australia:
we can imagine a better way. If we open up the healthcare market and free private capital, we would find that difficulty and expense of purchasing healthcare services would diminish. If we allow capital to invest in our schools and to found new universities, the level of education in China would rise. If we create a constitutional government and establish the absolute authority of the law, then the power of the government would be put under the rule of law. We would thus see fewer cases of the theft and demolition of private property by local governments that lead to hundreds of thousands of protests a year.
In the latest piece, referred to at the commencement of this post, Zhang provides us with a profound statement that crystallises the distinctions between the pro-social benefits provided by free markets and the anti-social costs wrought by government intervention:
“We human beings always seek happiness,” says Mr. Zhang. “Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that’s the logic of the market. Which way do you prefer?”
Government interference in healthcare and education works. In the market it does not. US healthcare or education is not substantially better than European or Canadian style healthcare or education. The biggest problem of China is not privatization but the one party system. That is not addressed here.
Yet the concept of authoritarian capitalism, as exemplified by China, is widely praised and admired by others. From Friedman who wishes America could be China for just one day, to those who gaze longingly at the PRC’s ability to simply ‘get things done’ without all the hassles involved in the rule of law.
The Chinese experiment is not yet played out.
No time to read it all as I am in a booth in a boomtown in Tamil Nadu (long story), but does he mention the Iron Rice Bowl? 20 yrs ago when I was studying ‘Intro to China’s Econ Policy’ at uni, the need to dismantle the cradle-to-grave ‘bowl’ system was the main topic of discussion. A lot of this stuff is very familiar territory, it’s just that the news cycle likes to treat things as if the world came into existence about 10 years ago, and/or during the 60′s of legend.
During the last crisis, 4 years ago, the SMH seemed to think China’s experiment with ‘capitalism’ was just a recent thing, no one has heard of Deng Xiao Ping.
I happen to think ancient peasant ‘capitalism’ needs to be studied more (I’m in India after all), and that it will survive a collapse of the modern techno-economies.