Today’s China offers us a useful counterfactual to this storyline. The world’s second biggest economy is headed down the collectivist road once again, under the new slogan of a “common prosperity”. The mantra may be contemporary, but the outcomes are the same old ones: A crackdown on technology, education, and entertainment firms was the departure point.
In an online conversation last week, a friend described the nub of our discussion most pithily. “Leftist ideas kill more people every day than all the world’s armies do in 10 years”, he posted in response to an earlier comment of mine. It was immediately clear that he exaggerated a teeny-weeny bit. But I was left in no doubt that the idea that “Government knows best” is a most pernicious one, because of the well-meaning cloaks it wears. The idea has many innocuous sounding descriptions: statism, dirigisme, etc. Although extreme examples of it involve the expropriation of established businesses supposedly in the interest of the people, far more common is the imposition by the state of burdensome arrangements on the private sector, which in turn help transfer resources to the exchequer.
“Big government” is often advertised as an economic response. Almost invariably, though, it ends up as barely disguised reach for more power by bureaucrats and their political masters. It is in this sense, as effective, in the economic case in removing popular alternatives to incumbent governments, as is the accompanying emasculation of the press in the public space. The tools with which the goal of economic disempowerment is realised hardly differ too. They are often anchored on total disregard for the rules of economics. Or rather, are bruited about as a replacement of “bourgeois economics” with a “people’s” variant. Flushed down the water closet in this reckoning is the relationship between the demand for and supply of goods and services, and the prices of the latter.
This follows from the thinking that the state (at this point, already all-knowing) is better positioned to produce all goods and services, as it rests on the conviction that the state, again, knows best what the people should consume (or eschew). In the end, the argument is simple. Take North Korea, for instance. Cut off from the anarchic boom and bust economic cycles of capitalism, a regulated economy is better able to allocate resources, or so the argument goes. Besides, is not all property theft? And are the fluctuations of prices under capitalism nothing but a thin mask put up by a rapacious elite over the depredatory activities of Soviet-type “Kulaks”?
It doesn’t matter that this arrangement denies choice to certain groups in society ― if not to all groups. To the extent that the state represents the people (irrespective of how the instruments of representation are transmitted), majoritarian rule may exclude a minority whose conduct could hurt the people. In this context, the point about the state monopolising the ability to authoritatively allocate values is that the state reserves to itself the ability to rein in the resulting process. It matters even less, therefore, that a state that has emasculated domestic competences with such policies then struggles to finance itself. What is the whole point of the original insurrection against bourgeois economics if it is not to overthrow the strictures with which it continues to hold humanity down?
So the left-leaning state at some point begins printing money to pursue its pet projects. If you remember that an increase in demand, with supply remaining the same, drives prices up only when representatives of the people are not in government, then you will understand that the notion of inflation as the result of too much money chasing after relatively few goods or services is but another malign bourgeois construct. And so, through time, successive attempts to collectivise the state, under the benign instructions of an authoritarian ruler, bite the dust.
Today’s China offers us a useful counterfactual to this storyline. The world’s second biggest economy is headed down the collectivist road once again, under the new slogan of a “common prosperity”. The mantra may be contemporary, but the outcomes are the same old ones: A crackdown on technology, education, and entertainment firms was the departure point. Comrade Xi Jinping did argue earlier this year at the World Economic Forum ‘s (WEF) annual meeting that “The common prosperity” that China desires “is not egalitarianism”. His government’s plan is to “first make the pie bigger and then divide it properly through reasonable institutional arrangements. As a rising tide lifts all boats, everyone will get a fair share from development, and development gains will benefit all our people in a more substantial and equitable way”.
Whatever its merits, the most visible result yet of the search for common prosperity in China are two-fold. First, previously larger-than-life private sector leaders have been pruned to size ― no longer visible as China heads towards the Chinese Communist Party’s (CCP) 20th National Party Congress in October. At that event, it is expected that Mr Xi will receive the party’s affirmation for a third term, unprecedented in recent history. Second, a de-risking on China has driven large outflows out of its stock markets (and the economy) all through this year. In other words, a self-declared socialist state continues to strengthen its leverage of authority at the expense of the economy.
Capitalism and its cycles do leave people behind. But this is not the crisis that authoritarian governments see and from there proceed to jump on the train that sees capitalist democracy in decline. It is instead an opportunity for new reform initiatives. How to strengthen market responses by addressing the concentrations in sectors of the economy that the ICT revolution seems to have supported. And how best to construct safety nets anew, especially where (as in the U.S.), current provisions are patchy, or mend the holes in existing ones.
Ironic then that authoritarian China remains the most recent example of what needs be done if an economy is minded to significantly reduce the ranks of its poor.
Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.
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