Is China’s system of capitalism better than that of the United States? That depends — do pigs fly? While I have no question in my mind that the U.S. is still the paragon of success when it comes to the capitalist system, lately a strange coalition of think-tankers, investors and politicians have been advancing the idea that China is eating our lunch when it comes to deploying capitalism.
More specifically, this bunch claims that China’s unique brand of centrally planned capitalism is working better than the U.S.’s overregulated, bloated, inefficient and slow-growing economy. They say that our capitalism has been so bogged down by our developed-nation cost structure that we’ll never again be a competitive center of investment for the great global pools of money in search of a safe investment out of which to make a parking spot.
China has indeed grown by leaps and bounds over the past decade. That’s a huge credit to a country that has modernized and industrialized on a previously unseen scale. And because of its 1.3 billion citizens, China has quite a bit of growth (read: catching up) still to come. China’s style of governance leaves the country light on regulation. However, it’s also light on rule of law, transparency, freedom of speech and several other key features that make the U.S. economy go ’round. Just because the Chinese government can move a village and build a road without holding a single hearing doesn’t mean the free market has taken hold. Indeed, it shows the opposite: China’s economy is largely state-planned, state-owned and state-run. The government uses capitalism only as a tool to reach its ends, not as a true expression of a free market.
Worse, where the Chinese government compromises the free market, it does so to fulfill its own desires of effective control over the entire country. It’s capitalism of the state, by the state and for the state, where the state is the principal economic actor. That’s in marked contrast to where the U.S. compromises on “pure” capitalism, adding things like the social safety net, worker safety, product safety, health insurance and retirement planning.
While China has a lot more growth to go, there’s another problem with its unique system of capitalism: Its outputs are far more volatile, and far less predictable, than our own. Consider where the Chinese central bank chooses to park its own money — in U.S. Treasuries, perhaps the safest investment that can be made in large enough quantities. If the Chinese could find a better place for their cash reserves, they would surely try it, but they really can’t. And if other Asian countries thought China had it all figured out, why would they all — even the reclusive Myanmar — have warmly welcomed the U.S.’s recently announced plans to solidify its presence in the Asian sphere?