Call it the China Syndrome. An American visits Rising China and is immediately gobsmacked by the place. Giant airport terminals, speedy bullet trains, ubiquitous construction cranes, the Shanghai skyline. Everywhere you look, Stuff is Happening. And it’s all shiny new. Compared to China and its seemingly perpetual 10-percent annual growth rate, New Normal America just doesn’t rate. Then the gobsmacked American comes to a realization: America Must Become More Like China. Free-market capitalism is out, state-managed capitalism in. I have seen the future and it works!
I give you Andy Stern, former president of the Service Employees International Union (via the WSJ):
The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic. …
While we debate, Team China rolls on. Our delegation witnessed China’s people-oriented development in Chongqing, a city of 32 million in Western China, which is led by an aggressive and popular Communist Party leader—Bo Xilai. A skyline of cranes are building roughly 1.5 million square feet of usable floor space daily—including, our delegation was told, 700,000 units of public housing annually.
1. Last time, I checked, the U.S. is 6-10 times as wealthy as China on a per capita GDP basis. On a purchasing power parity basis, China sits between Bosnia and Herzegovina and Albania.
2. Playing economic catch up from a low level is a lot easier than leading the pack. Indeed, developing nations often never close the gap with advanced economies, especially those with a rapidly aging population, low levels of consumption, and undervalued currency — like China.
3. Building infrastructure is easy and doesn’t take brilliant bureaucrats to do. Innovating is hard, and something government has shown precious little ability to do. How’s industrial policy working for the EU?
4. Stern wants government to intervene more in the market. Yet America’s problem in the 2000s was government interfering in the market and creating incentives that favored a chosen industry, housing. What America needs is more Schumpeterian, creative destruction sans government’s thumb on the scale.
5. As Warren Buffett puts it, ”It’s only when the tide goes out that you know who’s been swimming naked.” When China does slow, we’ll see just how efficient a capital allocator Beijing has been. The Chinese Miracle is stuffed to the gill with bad loans. State capitalism is really Crony Capitalism.
6. Maybe we need more “economic teams” like, say, public employee unions and government. American students are sure benefiting from such teamwork.
7. I think what folks like Stern really envy is the lack of democracy and accountability where technocratic elites can make all the decisions without pesky tea parties sticking their nose in.
More to come ….