Rosenkranz Remarks

The Blog of Robert Rosenkranz

Debate: China Does Capitalism Better Than America

by robertrosenkranz on July 22, 2016

Debate Overview

Despite decades of prosperity, recent trends have indicated that China’s economy may be weakening. Evidence that the world’s second-largest economy is slowing include decreased factory output, fixed-asset investments, auto sales, and imports, and this trend has fueled widespread concern among investors in the United States. It has also caused many to ask a question posed by Intelligence Squared US (IQ2US) back in 2011: How does China’s unique brand of capitalism stack up against America’s?

IQ2US chairman Robert Rosenkranz introduced the topic to a live audience on March 13, 2011, presenting a debate on the motion, “China Does Capitalism Better Than America.” He began, “Capitalism is the polar opposite of communism, so how can communist China be said to do capitalism better than America? It’s because China is communist in name only. In most of the ways that matter, the Chinese economy is a model of capitalism. Firms and individuals are largely free to buy the labor, technology, and raw materials they need to produce the products they want in open competition with others and to sell them at whatever prices the market will bear. If you include government-controlled firms, goods produced in a market system account for a substantially larger share of China’s output than they do in America. Capitalism requires capital to invest, and over the past 30 years, China has saved nearly half of its total output and has invested most of those savings in capital assets—plants, machinery, infrastructure, and the like.”

“In contrast, the American savings rates have been puny, only recently reaching 6 percent of total production. And the promise of capitalism is that by allowing individuals and firms the freedom to act, resources will be allocated efficiently and the wealth and consumption of most people in the society will grow. China has done a phenomenal job of keeping that promise. Over the past 30 years, its economy has grown approximately tenfold while America’s has barely doubled. In what respects, then, does America do capitalism better?”

“Clearly, the rule of law is much more developed here. Property rights are more secure, and we encourage innovation by protecting intellectual property. As a result, the American economy is far more innovative. The Googles and Facebooks and Apples of the world are American companies. Nothing comparable has come from China. We permit individuals to move freely in search of jobs and opportunities. For hundreds of millions of rural Chinese, there is no such freedom. Corruption and abuse of power by government officials is far more prevalent in China. And crony capitalism, which is certainly an aspect of American life, is absolutely rife in China. As usual, there is a lot to be said on both sides. And in the final analysis, this debate is not just about economics but about which system, American democratic capitalism or Chinese state capitalism, will be the model that developing countries around the world admire and seek to emulate.”

In September 2015, China launched an overhaul of the state-owned business sector. The result of this redevelopment with regards to the nation’s economy remains to be seen, but you can still weigh in on the matter on the IQ2US online poll: china-does-capitalism-better- than-america&tab=2

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