Skip to comments.Why China Clings to State Capitalism (Excellent summary of China problem)
Posted on 01/12/2019 5:44:23 AM PST by RoosterRedux
American officials traveled to China this week in an effort to end the bitter trade war between the two countries. The main obstacle to a settlement is natural rivalry: The United States is trying to protect its position as the most important superpower; and China is serving notice that it covets that status for itself.
What further complicates matters is a clash of economic systems. China practices state capitalism; the government owns many large firms and decides which industries will receive subsidies, protected markets and favorable loans. In the United States, private markets and firms mostly determine which companies grow or shrink.
In 1978, when Deng Xiaoping launched China's present economic reform, state-owned firms dominated the economy. Now, according to Lardy's estimates, private firms account for roughly 70 percent of the country's output (gross domestic product).
The reversal came after Xi Jinping assumed leadership of the Communist Party in 2012 and, later, the presidency. He changed course, favoring state-owned firms, as Lardy shows by citing loans to businesses.
In 2013, 57 percent of loans went to private firms and 35 percent to state-controlled firms. By 2016, there had been a stunning reversal; state firms received 83 percent of loans, compared with 11 percent for private firms. Much of this lending came from state-owned banks.
(Excerpt) Read more at realclearpolitics.com ...
Capitalism means "free markets" and "state capitalism" means the markets are not free in that companies do not exist in an environment of "open competition." State owned companies meet market demand the way the Party tells them to meet it.
This means that market demand is essentially disregarded by state controlled companies in favor of production determined by the Party.
This is tantamount to meeting the consumer hunger for say 100 rail cars of toilet paper with an equal number of rail cars filled with Ex-Lax because the Party honchos believe that diarrhea followed by a sponge bath is more efficient than toilet paper.
The State knows best...and who is going to tell the State it is wrong when it controls every aspect of your life.
They are commies.
I read it...I’m sure PDJT knows which buttons to push knowing this economic history.
The reversal came after Xi Jinping assumed leadership of the Communist Party in 2012 and, later, the presidency. He changed course, favoring state-owned firm
Even private corporations can reach a size where theyre too big to maximize the efficiency of their effort. Too much staff contributing too little to the overall effort, because theyre engaged in activities that are peripheral or tangential to the profitability of the business.
They can even be too big to fail! Then youre in REAL trouble! :-D
private firms = Chicaps
Essentially, China has moved from an international, Soviet style system to a nationalist, Fascist style system.
Another huge problem is the lack of security in property. There is no independent judiciary in China. If you become very big and powerful, and the State desires your property, they arrest you, force you to confess to some vague "crime" like anti-party actions, and take your property.
That just happened in Saudi Arabia.
Something not far from it happened to General Flynn.
But in China, it means, when you become wealthy, you look to put some of that wealth where it cannot be seized by the State.
You put it in London, or Australia, or the United States, or Canada. You buy houses there. You send a pregnant wife or daughter to the U.S. to get citizenship.
That moves assets out of China to a safer place.
Fascists. They went from full commie to full on fascist. And it is the model that the NWO would like to shackle the rest of the world to - only with unelected bureaucrats from Brussels running things instead of the politburo.
I think you are correct. Trump now knows the deeper truths about this battle with China.
“The United States is trying to protect its position as the most important superpower...”
That right there is a stupid statement which makes me question the rest of this author’s analysis. The USA has never TRIED to be a superpower. It simply came about because of FREEDOM. Now we’re simply trying to protect our property rights against those who steal them, & who truly are a menace to the rest of the Free World.
Now I’ll go read the rest of the article.
Why can’t the USA slap an across the board 20% tariff on everything coming in and be done with it? The world needs our market but we don’t need them. It’s an interconnected world but the connection is like a check valve that only flows one way.
You would know all about fascism.
Despite all its' alleged flaws, capitalism works to raise the vast majority out of poverty.
In this case at the expense of the average Americans standard of living. Global capitalism sucks. It's better to keep the capitol and production here in the good old USA. I am a proud nationalist, may here are not (nor are they patriots).
I think we should just quit trading with them altogether. We got along better without them, and with quality stuff.
Free markets means the invisible hand allocates resources. When state capitalism means party apparatchiks allocate resources, the end result over and over is shortages, famine and death. Anyone with a basic understanding of 20th Century history should know this, and the 21st Century example of Venezuela should make it obvious to even the most obtuse.
Few are knowledgeable of Adam Smith and the “invisible hand” The following is not the best but a start:
The philosophy is not favored because we cannot not control it. And if economics cannot be controlled, what do we need politicians for?
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