Contrary to Western propaganda, China has a much greater degree of market capitalism than the United States (US).
It’s comical, in fact, how so many people get this wrong.
While it’s commonly assumed that China is a communist state, this is a complete misconception.
China is not communist.
Capitalism versus communism
Capitalism, as Murray Rothbard saw it, is about economic and personal freedom.
In other words:
- property rights are crucial,
- all transactions are personal choices, and
- business dealings are free from government control.
In a free market, everyone can own property, make stuff, and provide whatever services they want. Success or failure depends on meeting others’ needs and wants.
The government’s only role is to protect these rights.
Meanwhile, communism, as Karl Marx saw it, is a society without classes; a state where production is owned by everyone (thus, the state).
Karl believed capitalism, with its class conflicts and exploitation, would lead to socialism where workers take over from the bourgeoisie.
This would then become a communist society, where production is for everyone’s benefit, and not private profit.
Simply put, the government controls everthing through centralisation, and private property becomes state property.
The idea is that the results of labour are shared based on need rather than the market.
Which is not at all what China is.
China’s market economy
In reality, only about 25% of China’s GDP is generated by the government, with the remaining 75% coming from the private sector and foreign business.
Which means that a small percentage of the Chinese market is controlled by the government.
This overturns the Anglo-American idea that China’s economic success is due to central planning and slave labour.
The International Monetary Fund’s (IMF) 2023 figures reveal a clear shift in the global economic hierarchy.
If China were communist, then how on Earth would it be a world leader?
China’s industrial engine is now churning out three times the amount of goods as the US.
This isn’t a Mickey Mouse amount. China’s production eclipses the combined output of the US, the EU, and Japan.
Historically, the US held the manufacturing crown for a century.
To understand China’s economic model, it’s essential to dispel some myths that just won’t die.
These myths include:
- the idea that China has a centrally managed economy,
- that it is a communist state, and
- that its government is synonymous with the Communist Party of China (CPC).
Additionally, there are misconceptions about China’s Social Credit System (SCS) and its approach to free speech and Covid™ response, which are often portrayed as more draconian than they actually are (or were).
Social credit score in China
It points out that while the term ‘SCS’ is bandied about in Chinese bureaucratic circles, it has little effect in reality.
The article argues that the SCS, as hyped by Western media, is virtually unknown in China, and the real credit system in play is likely to evolve from private sector initiatives by giants like Alibaba and Tencent, rather than any state-sponsored Big Brother programme.
Basically, social credit scoring in China is much the same as anywhere else.
China is not unique here.
In 2020, China overtook the US as the world’s largest recipient of foreign direct investment, which is a testament to its increasingly liberalised economy since the late 1970s.
‘Scott’ is an American economist who has worked and lived in Shanghai for many years. Our conversation is based on content from the excellent Substack, Austrian China, to which he is a contributor.
Here’s my conversation with him.