How 'Communist' China Prospered

Posted: Oct 19, 2018 12:03 PM
How 'Communist' China Prospered

China continues to grow as an economic powerhouse, which has many people baffled, because it is still officially a communist country, and communist countries are not supposed to grow and succeed. Without doubt, there is still repression there. Government still maintains state-owned enterprises, and rural people are expropriated from their homes and given vouchers for housing in urban complexes. Throughout the country, massive ghost cities were built with no inhabitants, an indication of misallocation and waste of resources that should be a burden slowing the economy. These and many other factors make it difficult to fathom China’s rapid ascent among world economies and the rise of a billion people out of dire poverty over the last few decades.

Some observers see it as fake development, true only on paper. In building those vast, empty cities, some in the middle of nowhere, the country used fifty percent more concrete in three years than that used in the United States during the entire twentieth century. That type of activity adds to recorded gross domestic product but does not necessarily add to the well-being of the people.

There is, however, a lot more going on than ghost cities. Though officially still communist with some central planning, the leadership has embraced a lot of the economic policies that have “made America great.” The nation is evolving and has been successfully experimenting with free zones, reflecting Hong Kong, the highly prosperous island that was returned to China twenty years ago. Tiny Hong Kong, the most economically free sovereign entity in the world before reintegration with China, is, in effect, taking over mainland China. Private property, private companies, profits, and economic freedom have been greatly enhanced. Private enterprise is now outstripping state-owned enterprise.

It is bitter irony that as China becomes more like free America, and is reaping benefits from it, that free America becomes more like the unfree China. The American economy is being strangled by continually increasing regulatory burden and taxes, profitable companies are expected to apologize for being profitable, and entrepreneurship and business ownership is no longer held in high regard. Government spending in nominally communist China is almost ten points lower than in the U.S. as a percentage of GDP. The number of initial public stock offerings is almost double in China, as is the total money raised. China is catching up to the United States because it is doing those things that this country used to do. Economic freedom is expanding while America is dropping down the list on the economic freedom indexes.

It is troubling that the Chinese government is developing a program of social credit, where people’s lives are intertwined with a score given to them by the government, based on things they do and say, especially as it relates to the government. The score will affect visa applications, employment, and other opportunities. China has installed millions of public surveillance cameras with facial recognition software to track citizens, with many more on the way. Access to the internet is being restricted so the government can control the content that people see. What is as troubling is that American companies like Google, a so-called “socially conscious company,” are helping them to bring their plan to life. So all is not well in China, and in time, that social control is bound to end in conflict and dampen progress.

In spite of all of the political and human rights difficulties, though, China’s rise accompanies its increasing embrace of economic policies that bring prosperity. If we are to continue to prosper in the future, the lesson is not that China is an economic threat, but rather that we should stop being like they used to be and again start holding freedom in highest regard.