Global Selloff Not Time to Panic, but Teachable Moment
When the stock market opened this morning at 9:30 am Eastern, the Dow was down over 1000 points, otherwise known as dollars. Why? Short answer: China. For all the talk about China embracing capitalism, it is a state-controlled economy, and the sort of collapse there that we are witnessing was very predictable. This Bloomberg piece by David Pauly from 2010 captures it nicely. Mr. Pauly writes:
The biggest obstacle to China becoming the world’s No. 1 economy is China.
The communist nation’s determination to keep as tight a rein on its economy as it has on its citizens will lead to failure — just as it has for other countries that embraced central planning schemes.
China is reversing its flirtation with a type of quasi-capitalism that allowed entrepreneurs to thrive and propelled the economy forward at an annual rate of about 10 percent.
The Chinese now follow the so-called Beijing consensus, a belief that concentrating more control of industry in government hands will avoid the financial debacles caused by free markets.
The nation’s state-owned companies are buying up independent businesses in the auto, steel and energy industries. A government-run company even plans its own Internet search business to compete with Baidu Inc., whose shares trade on stock exchanges.
Monopolies in China might appeal to investors who think merged companies can cut costs and maximize profits. Though huge Chinese companies may be well run today, they will die from the inefficiencies, cronyism and corruption that often plague state-controlled enterprises.…
China won’t collapse tomorrow. Its exports continue to flood the globe, earning it money to make major investments — and amass political clout — abroad. But don’t let so-called experts fool you into thinking China has discovered a new and better way to organize an economy. State-run capitalism is an oxymoron.
The Left has always admired China. Remember when dimwitted New York Times columnist Thomas Friedman wished that we could be China for a day? Barack Obama has been trying to emulate China, and as a result, our economy has also suffered from the inefficiencies, cronyism and corruption that Mr. Pauly mentions. The anemic “growth” we’ve been experiencing is not a coincidence.
Government interference is the problem.