… is from page 253 of Samuel Gregg’s superb 2022 book, The Next American Economy: Nation, State, and Markets in an Uncertain World (footnotes deleted):
It takes particular skills to bolster free trade in ways cognizant of these national security concerns. But one dimension of such economic statesmanship involves recognizing how much Beijing’s accelerated embrace of its version of state capitalism is likely to undermine China’s economic growth. Between 2002 and 2019, publicly listed Chinese state-owned enterprises persistently showed far less productivity than publicly listed firms in which Beijing has no ownership stake. It follows that if China continues to shift its economy in the direction of state enterprises, the decline in productivity will accelerate. Likewise the increasing uncertainty in the legal environment generated by growing state authoritarianism will make China an increasingly risky place for Americans and others to invest and do business.
DBx: Indeed so.
Whenever the state overrides the market-guided allocation of resources with a state-dictated allocation of resources, the state weakens the economy. The economy becomes less productive, less robust, and more brittle. Corruption infects it. It ages more and reinvigorates itself less. The cancer of poorly allocated resources metastasizes. Ordinary people wind up being poorer than they would have been otherwise, and eventually the quantity of resources available for the state to use for its own purposes is also made lower.
For the U.S. government to respond in kind to Beijing’s experiments with industrial policy is for the U.S. government to inject its economy with the same deadly cancer that Beijing superstitiously and stupidly believes will transform the Chinese economy into a global Hercules.