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Andy Stern's Chinese Lantern 2

Naked capitalism has made China richer.

By Will Offensicht  |  December 16, 2011

The first article in this series discussed Andy Stern's report of his trip to China during which he realized that the Chinese are outperforming us economically.  That's not news; anyone who visits China comes home impressed with their dynamism and economic optimism.

What's remarkable is that Mr. Stern gave us the proper solution to our economic problems:

America needs to embrace a plan for growth and innovation, with a streamlined government as a partner with the private sector.  [emphasis added]

He was impressed that in a single city, China is building 1.5 million square feet of usable floor space every day, including 700,000 units of public housing annually.  This burgeoning economic activity would lead anyone to wonder why we can't emulate the Chinese economic model.

As President of the Service Employees International Union (SEIU), Mr. Stern used every means at his command to increase government employment, cost, and inefficiency at all levels.  The more government employees there were, the more dues-paying union members he had.  The more dues, the more money he could throw into the political process to help elect people who'd offer government employees yet more money and hire even more of them - in a word, Democrats.

We've written that it's nearly impossible for our modern American elites to confess to error.  For Mr. Stern to admit that his lifelong career of encouraging "bloated, morbidly obese" government is wrong and for him to admit that only a streamlined government can successfully partner with the private sector, even in a somewhat cloaked and sideways fashion, is truly remarkable.  One wonders if he realizes what he's said.

Government Is The Problem

Our economic problems today are not caused by the private sector; private businesses make egregious errors all the time.  Bankruptcy is the usual penalty, but that's not supposed to take down the whole economy.  No, our problem is with government.

We have enough unemployed construction workers that we could build 700,000 units of public housing annually, but the government won't get out of the way and let them do it.  Government-run subsidized housing programs produce vastly overpriced "housing" units that are essentially uninhabitable.

High taxes and burdensome regulations in Democrat-run cities drive out productive workers and attract welfare recipients.  This disaster cycle has bankrupted major American cities.

It's possible for government to be too streamlined.  The Chinese government didn't impose environmental or safety regulations when building the Beijing Olympics.  As you'd expect, there were many more deaths among the construction crews than there would be in the US.

Economic activity there  was, and national growth, but at a high cost in human lives.  Is that the sort of economic activity that Mr. Stern desires, and is he arguing for an end to burdensome regulations and red tape?

We understand the concept of special enterprise zones as well as the Chinese:

Meanwhile, the Chinese government can boast that it has established in Western China an economic zone for cloud computing and automotive and aerospace production resulting in 12.5% annual growth and 49% growth in annual tax revenue, with wages rising more than 10% a year.  [emphasis added]

The most important characteristic of an "economic zone" is that it's a place where government regulations don't apply.  Even Chinese regulation is too heavy for maximum growth, so they've set up special places where the private sector can go pedal to the metal.

Mr. Stern Gets It - Sort Of

After singing the praises of "streamlined government," Mr. Stern demonstrated his clear understanding of our economic problem when he said:

The current debates about China's currency, the trade imbalance, our debt and China's excessive use of pirated American intellectual property are evidence that the Global Revolution—coupled with Deng Xiaoping's government-led, growth-oriented reforms—has created the planet's second-largest economy. It's on a clear trajectory to knock America off its perch [as the world's largest, most advanced economy] by 2025.  [emphasis added]

What does Mr. Stern say has guided China's spectacular economic growth?  Deng Xiaoping's government-led, growth-oriented reforms!

Let's take a quick peek at Chinese history to properly understand those reforms:

Just what exactly were Mr. Xiaoping's reforms?  What is "Socialism with Chinese characteristics?"  It's market-driven capitalism, pure and simple.

Under the concealing blanket of Communist-party domination, the Chinese government created 19th-century-style economic Darwinism, red in tooth and claw.

It's backed by government power, compliant courts, a 5,000 year tradition of officials being on the take, and people having no more rights than they can enforce through personal connections to the powerful.  Not too attractive when looking up from the bottom of the social structure, but the trains do run on time.  Public works are constructed on time and on budget or else, just as once was so in America and Western Europe.

As Mr. Stern says, we have much to learn from the Red Chinese, but it's not their Redness insofar as there is much remaining.  We'll consider exactly what we should learn from the Chinese in the next article in this series.