Tuesday, April 28, 2009

Neither Left Nor Right

In the US, I always found it interesting that there are people from both the leftist camp and the rightist camp who idealize China.

Some people from the left admire China's big government, and assume it means more regulation of the free market and more welfare and equality for the public. But in reality, the state-owned companies in China enjoy most freedom in exploiting labor or environment, and private companies might enjoy the same freedom if they form the right alliance with government officials. China's spending on welfare, in terms of percentage of government income, is one of the lowest in the world. It's inequality in living standard is one of the highest in the world according to UN surveys. Not to mention its unions are also much weaker than those of most capitalist countries.

Some people from the right admire China's lack of union and loose regulation on labor rights and environment, they think that's good for business. But in reality, if you want to do business and you don't have the right connections with government officials, not only the tax will be high, you will also face many obstacles set by all kinds of government regulatory institutions. No law can fully protect your contract or property rights. There is no free competition, only unlimited previledge for those who have both money and political power.

That unique model of "big government-low welfare-low freedom" is the reason why the Chinese government is much richer than the US government (which is actually in huge debt) although the US's GDP is 4 times bigger than that of China. And it's the reason why Chinese factories have much lower labor cost than countries with high welfare and strong unions. But this model now face its demise because the economic crisis has destroyed the export market of Chinese goods, while most Chinese people cannot afford all those things produced in China. That's why China can only recover from the crisis if the government starts to give the wealth back to the people and reduce the obstacles that prevent people from making a living with their abilities, in other words, smaller government-higher welfare-more freedom. (It needs to be more environment friendly too, that's another complicated issue.)

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