Different Kinds of Capitalism
How much does Chinese capitalism resemble U.S. capitalism?
In a New Yorker article, journalist John Cassidy suggests that China’s combination of authoritarianism and capitalism is somewhat similar to our own history. Reminding us of our government’s economic intervention during the past several centuries, Cassidy cites free trade, Pentagon spending, and the bailout. In 1791, for example, Alexander Hamilton’s “Report on the Subject of Manufactures” recommended protective tariffs and subsidies to encourage domestic industry. As for the bailout, you know about the 2009 Recovery Act and TARP. Cassidy even suggests that “market authoritarianism” might be a transitional state for the Chinese and Russian economies, with democracy not that far behind. There is a good New Yorker podcast on this article.
I have difficulty agreeing with John Cassidy. Yes, we might mislead ourselves if we claim the past was entirely laissez-faire. However, the Heritage Foundation/WSJ’s Index of Economic Freedom and the World Bank’s Doing Business index reveal a huge divide between contemporary China and where a past U.S would have ranked.
The Economic Lesson
Ever since Hamilton and Jefferson, we have been debating more or less central government. Always though, the decision has not been one or the other. We have had to decide how much. You might look back on this post about David Brooks and Paul Krugman for a perfect recent example of the debate. Also, this Hayek/Keynes rap is excellent.