The West gets it wrong again on China

China Daily European Weekly - - COMMENT -

Re­mark­able eco­nomic achieve­ments are at­trib­ut­able to the so­cial­ist mar­ket econ­omy and have noth­ing to do with ‘state cap­i­tal­ism’

to biotech­nol­ogy and even shale gas devel­op­ment. Af­ter the out­break of the 2008 global fi­nan­cial cri­sis, the US once again re­sorted to state in­ter­ven­tion­ism, and in­tro­duced huge fi­nan­cial res­cue and fis­cal stim­u­lus pack­ages to sta­bi­lize its econ­omy.

Since tak­ing of­fice, Pres­i­dent Don­ald Trump and his ad­min­is­tra­tion have been us­ing in­ter­ven­tion­ist poli­cies, such as pro­tec­tion­ism and im­mi­gra­tion con­trol mea­sures, to re­al­ize their “Amer­ica first” goal at the ex­pense of the in­ter­ests of peo­ple around the world. Which shows the “pure” free mar­ket econ­omy and “true” lais­sez-faire that the US bandies about have never ex­isted. In­stead, cap­i­tal­ism as we see it to­day is closely re­lated to “state cap­i­tal­ism”. So to la­bel China’s so­cial­ist mar­ket econ­omy as “state cap­i­tal­ism” is to con­fuse one thing with an­other.

Af­ter the global fi­nan­cial cri­sis, some de­vel­oped economies, such as the US and some Euro­pean coun­tries, faced se­vere eco­nomic dif­fi­cul­ties, while China and many other emerg­ing economies main­tained rel­a­tively strong growth. The re­sul­tant rise and fall in the rel­a­tive strengths of China and the US made the con­tra­dic­tions among the de­vel­oped economies, and those be­tween the de­vel­oped world and emerg­ing economies, such as China, in­creas­ingly prom­i­nent.

Some politi­cians can­not ac­cept China’s rapid but peace­ful rise un­der the lead­er­ship of the Com­mu­nist Party of China, so they use terms such as “state cap­i­tal­ism” to crit­i­cize it. The in­ten­tion of such peo­ple is clear: to de­fend cap­i­tal­ism by pit­ting “state cap­i­tal­ism” against “lib­eral cap­i­tal­ism” and cre­at­ing an at­mos­phere that would curb the devel­op­ment of de­vel­op­ing and emerg­ing mar­ket economies, es­pe­cially China.

On the one hand, such ob­servers try to di­vert and cover up peo­ple’s dis­con­tent with the pro­found de­fects of the cap­i­tal­ist sys­tem, and claim free mar­ket cap­i­tal­ism is fac­ing a cri­sis be­cause of the threat posed by “state cap­i­tal­ism”. On the other hand, they try to find fault with so­cial­ism with Chi­nese char­ac­ter­is­tics, so as to dis­tort the at­tributes of so­cial­ist mar­ket econ­omy with the aim of shak­ing peo­ple’s con­fi­dence in the so­cial­ist mar­ket sys­tem, and forc­ing China to aban­don its devel­op­ment path. Their ul­ti­mate goal is to con­tain China’s rise.

Such peo­ple al­ways use dou­ble stan­dards when it comes de­scrib­ing the at­tributes of “state cap­i­tal­ism”. When West­ern economies need state sup­port for cap­i­tal ac­cu­mu­la­tion, these peo­ple ad­vo­cate pro­tec­tion­ism and state in­ter­ven­tion. But when West­ern economies en­joy com­pet­i­tive ad­van­tage, they forcibly pro­mote free trade and re­quire other coun­tries to un­con­di­tion­ally open up their mar­kets, so as to ben­e­fit from it. And when the West­ern economies’ com­pet­i­tive ad­van­tages fade out due to com­pe­ti­tion from other economies, in­clud­ing late­com­ers such as China, they go back to prac­tic­ing pro­tec­tion­ism.

Many ob­servers and politi­cians have at­tempted to in­clude China into the cap­i­tal­ist spec­trum or as­sumed that, by ad­her­ing to the rules of mar­ket econ­omy, China will au­to­mat­i­cally em­brace the cap­i­tal­ist sys­tem. But when they re­al­ize so­cial­ism with Chi­nese char­ac­ter­is­tics, com­pared with cap­i­tal­ism, is yield­ing bet­ter re­sults, some of them start iden­ti­fy­ing China’s so­cial­ist mar­ket econ­omy with “state cap­i­tal­ism”, in­stead of ad­mit­ting that so­cial­ism with Chi­nese char­ac­ter­is­tics and so­cial­ist mar­ket econ­omy have achieved suc­cess be­yond their wildest dreams. This is the essence of their “state cap­i­tal­ism” ar­gu­ment.

West­ern coun­tries have al­ways re­garded mar­ket econ­omy as their ex­clu­sive eco­nomic sys­tem, as is ev­i­denced from West­ern eco­nomic the­o­ries. But mar­ket econ­omy and cap­i­tal­ism are two dif­fer­ent things, the for­mer be­ing a means to al­lo­cate re­sources, which can be com­bined ei­ther with the cap­i­tal­ist or so­cial­ist sys­tem.

Cap­i­tal­ist mar­ket econ­omy and so­cial­ist mar­ket econ­omy share com­mon fea­tures in terms of re­source al­lo­ca­tion and com­mod­ity re­la­tions. For ex­am­ple, both have clear prop­erty rights re­la­tions and re­quire mar­ket play­ers to main­tain equal and fair com­pe­ti­tion. And both al­low the mar­ket to play a de­ci­sive role in re­source al­lo­ca­tion.

The macro-reg­u­la­tory poli­cies im­ple­mented by China con­form to the laws of mar­ket econ­omy and the rules of the World Trade Or­ga­ni­za­tion. Yet mar­ket econ­omy is a so­cial and his­tor­i­cal con­cept with dif­fer­ent char­ac­ter­is­tics un­der dif­fer­ent so­cial sys­tems and stages of devel­op­ment. So­cial­ist mar­ket econ­omy is a new type of mar­ket econ­omy which, de­spite hav­ing the gen­eral char­ac­ter­is­tics of mar­ket econ­omy, is fun­da­men­tally dif­fer­ent from cap­i­tal­ist mar­ket econ­omy in terms of own­er­ship struc­ture, distri­bu­tion sys­tem and in­sti­tu­tional mech­a­nism. So it is er­ro­neous to iden­tify the Chi­nese econ­omy as “state cap­i­tal­ism” just be­cause China has State-owned en­ter­prises and its gov­ern­ment plays a role in some eco­nomic ac­tiv­i­ties.

More­over, it is grossly er­ro­neous to equate State-owned en­ter­prises with “state cap­i­tal­ism”, as SOEs are just a means to en­sure largescale pro­duc­tion through mod­ern meth­ods. In fact, state-owned en­ter­prises first ap­peared in West­ern cap­i­tal­ist coun­tries.

In the post­war pe­riod, some cap­i­tal­ist coun­tries na­tion­al­ized en­ter­prises on a large scale, and es­tab­lished a large num­ber of SOEs in many sec­tors. Even when the wave of pri­va­ti­za­tion was at its peak, many West­ern coun­tries re­tained a siz­able num­ber of state-owned en­ter­prises. In fact, even af­ter the out­break of


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