Reading this interview with Dr. Walter Williams, a man I respect and enjoy listening to, I was struck by this passage, regarding the financial miracle of China:
Daily Bell: Is the Chinese miracle real, or is it built in a sense on state planning and, like the USSR, doomed to fail?
Walter Williams: The Chinese are a true success story, and the country is moving toward freer markets and toward a more open system of capitalism. It is not a true capitalist country yet, but you do find that 300 million people, 400 or 500 hundred million people perhaps, have been lifted out of poverty without any government subsidies. It’s just the free market helping them out of poverty, and I hope the people in China continue in the same direction.
Does anyone else see the obvious error here?
I think this sums up the failure of the traditional conservative and libertarian views, IE, that they only see government subsidies within the framework of legislation, and miss the structural subsidies like artificially low interest rates and even the very existence of a central bank and fiat money.
300 million people, 400 or 500 hundred million people perhaps, have been lifted out of poverty without any government subsidies.
China, like the US, is flooding its economy with fiat money, loans are produced by quasi-governmental agencies. The only real subject for debate is who is ultimately in control, and I think in the USA it is clear that it is Big Business that is firmly in charge, while in China, it is the government that is mostly in charge.
The ascent of China is by no means a triumph of socialism, but rather an escape from it. However, the existence of a Chinese Central Bank, actively intervening in the economy with directed loans at low interest rates, sometimes hitting the mark, sometimes creating asininities such as the creepy Ghost Mall, plays a strong hand, with the broad parameters of growth laying between a patchwork of local political power and money and gunmen, and the higher echelons of power within the central government itself.
Speaking of the mainstream conservatives and even libertarians who are allowed access to the public eye, it as if one of the automatic assumptions is to consider subsidy only in the context of traditional governmental policy, and utterly ignoring the role of fiat or central banking on the economy.
Brother Yarling, you’re looking at this Chinese thing the wrong way. The machinations of the Chinese economy are WAY too involved for a poor hillbilly such as myself to speak on in any depth. But it’s fair to say that, yes they have a lot of government domination in their economy.
But the economy of China has clearly been growing by leaps and bounds, and it’s surely not because of but despite continuing government domination. But the government now is obviously quite a bit less domineering than when they were real communists. The difference between complete communism and a quasi-free market would appear to be the source of the boom.
A really seriously government dominated economy will be likely to benefit greatly from even partial free market reform.
The whole point, Al, was that Walter Williams said, and I quoted, that no gov’t subsidies were involved in China’s economic ascent.
The Chinese gov’t is flooding the economy with yuans, in a massive shell game based around borrowing US dollars to keep the American economy artificially afloat.
This is part of what I meant by structural subsidies. WW being well familiar with the Austrian school, and an all around smart guy, should know this.
Also, China is on the verge of a big crack up, as gov’t interventions, whether direct or indirect, ALWAYS cause malinvestment. Now, their crackup is not nearly as ours is likely to be, but nonetheless, a recession is in the cards for China. They too are in a classic fed created bubble.