Here’s a letter to a regular, and friendly, correspondent.
Tim:
Thanks for your email. You write:
Leadership in China, regardless of political persuasion, isn’t stupid, so what’s its motive for such a policy? World dependence on its products? To temporarily ramp up production to expand capacity? What?
Leadership in China might not be stupid, but this fact doesn’t mean that it’s intelligent and informed enough to centrally direct the Chinese economy in ways that will steadily improve the lives of the ordinary people of China. The honchos and mandarins in Beijing are just as certain as is leadership in any other country to fail in their attempts to override the market at allocating resources productively.
Like government officials everywhere, the rulers in Beijing have no idea what are the inevitable unintended consequences of their economic interventions. Drunk with power – power that shields them from frank assessments of, and feedback on, their proposals – Pres. Xi’s and his cronies’ industrial policies will make China’s economy weaker and more brittle, even if they do manage to artificially expand a handful of industries and thereby impress economically ignorant and gullible westerners.
As for Xi & Co.’s motives, undoubtedly the overriding one is to retain power. And in pursuit of this goal they might well be unmatched geniuses. But it is their very need to suppress economic and other freedoms in order to cling to power that will ensure that they will never succeed at making China anything close to the highly productive economic colossus that is America.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
