'One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century.'The above was not written by the speaker of China's Communist Party; it was not published on China Daily or the Global Times. It was written by Thomas Friedman and appeared in yesterday's New York Times. Friedman is so in love with central-planning, that he is willing to give up his so-called liberal ideology and dismiss China's ruthless and violent control mechanism - which holds 20% of the world's population under considerable oppression - as a system with some "drawbacks", led by "enlightened people".
PRC 2009 = USSR 1929?
Just to recap, Friedman is talking about a country in which people do not have the freedom to decide how many kids to have, which city to live in, where to spend their holidays, or which web sites to visit. They are also denied the right to voice their opinion on a variety of issues, and are required to register with the authorities if they wish to publish a blog, leaflet, or spend 30 minutes in an internet cafe.
It is a country that puts people in jail for publishing an unlicensed web site and executes between 1,700 to 5,000 of its own citizens each year. A country that denies its citizens the freedom to protest, congregate, or have a religious affiliation. China is definitely making some progress, but it is not exactly an ideal of 'enlightened' government, and its moral failures are far from being simple 'drawbacks'.
Unfortunately, Friedman is not alone. As Ian Buruma points out in a recent article, 'China's economic success is convincing too many leaders that citizens... want to be treated like children'. This ideological shift is already showing itself in the calls for increased government planning in the US, as well as the shift of geopolitical power towards China. Taiwan, for example, recently announced that it will not apply for a UN seat this year, for the first time in 17 years. We can expect to see more and more political and ideological deferral to Chinese interests as we progress deeper into the crisis.
All this has happened before. In 1929, American pundits were mourning the failure of capitalism and listing the achievements of central planning in other countries. Back then, commentators were impressed by the Soviet Union's high employment rate, and its incredible environmental and infrastructure initiatives. These included the Dnieprostroy hydroelectric plant (the largest of its kind in Europe), the 950 mile Siberian-Turkestan railway, and the Volga-Don water canal. Other achievements of that period included Nazi Germany's 100% employment rate, Hitler's autobahn (highway) projects, and Fascist Italy's train system and efficient cooperation between government and business.
As you may remember, this type of talk and deferral to Soviet and Nazi interests facilitated the survival of two of the most monstrous dictatorships in human history.
Another important thing to keep in mind is that once you look beyond the superficial indicators, China's model - just like the models of its predecessors in this ideological battle - is not really working that well. It is wasteful, inefficient, and channels huge amount of capital to all the wrong places. This too is not new. As John Tamny points out on Real Clear Markets, during the Cold War, 'the Soviets [and Chinese] weren't so much lying about economic growth' but 'output was and is only part of the equation'. and so while the two countries 'produced a great deal of "stuff" during the Cold War years... they did so in incredibly wasteful ways'. This incredible waste ultimately led to the collapse of the Soviet Union.
The bottom line is that wealth is still a factor of production: A given society is only as wealthy as it is productive. Now, China might be doing a lot of production, but, compared to the US, it is far from being productive. Unfortunately, the US is also not as productive as it appears to be - or as it appeared to be until not long ago - since a big chunk of its economic growth during the past thirty years is made of rising asset and stock prices, driven by constant and aggressive expansion of the monetary base (more on this here, here, and here).
How big is the gap between America's current GDP and it's real productive capacity? This is the 9 trillion dollar question, and one that I do not have an answer for. Furthermore, America currently seems to work hard to expand this gap instead letting the business cycle take its course and cut things down to size.
So, on the ideological front, the PRC is the new USSR. But is America still America? I sure hope so.