April 28, 2011


Why Isn’t China Democratizing? Because It’s Not Really Capitalist: The presence of markets and economic exchange does not make a country capitalist. (Dan Blumenthal, April 26, 2011, American)

At first glance, the notion that China is not capitalist seems preposterous. Much of China’s economy is organized around market principles and the country is deeply embedded in the international trading and production system. But the presence of markets and economic exchange does not make a country capitalist. The “founding fathers” of capitalism conceived of it as a moral and social order—a way of ordering economic as well as social life.

At base, the capitalist order is supposed to provide its citizens with three things. First, it provides the opportunity for all citizens to become wealthier. Second, capitalism encourages maximum individual liberty. Citizens are free to pursue the work they want and are rewarded based on enterprise and initiative rather than birthright. At the core of this idea is the notion that property rights are sacrosanct. Individuals own what they buy or make, and are then free to invest, save, and give away charity as they please. Third, capitalism is supposed to ennoble public virtues by encouraging free exchange among citizens and opportunities for self-betterment. Capitalism frees individuals to develop the “better angels of their nature”—sympathy, generosity, integrity, self-reliance, and self-restraint. All of these virtues are conducive to a system of political liberty and democracy. That is why democracy theorists and policy makers assume that free markets are a necessary if not sufficient condition of democracy.

But the Chinese system has made good on only one of these promises, albeit on a massive scale. Almost all Chinese citizens are better off since the abandonment of Maoism. This is no small achievement. Since Chinese leaders allowed markets to operate in the Chinese economy, hundreds of millions of Chinese people have been lifted out of poverty. But individual liberty consistent with a capitalist order is severely curtailed. Physical and intellectual property are owned by the state and the Party puts stringent restrictions on where a Chinese citizen can invest and save money or give away acquired wealth. “Private” entrepreneurs are at the whim of the Party for the resources they require to form and run enterprises: financing, land, and the enforcement of contracts. Most remarkably, a Chinese citizen is even told how many children to have. A state that engages in forced family planning is shockingly at variance with capitalism’s core tenets.

The last of capitalism’s promises—the ennobling of virtue—has also been undermined by the Chinese state. Absent freedom of association, freedom of religion, and the protection of individual rights, it is very difficult for citizens to be virtuous. The Chinese state prohibits the formation of organizations that it cannot control, thus suppressing charity. In capitalist societies, virtues such as generosity, public spiritedness, and sympathy are often expressed through religious practice. But the Chinese state has repressed religious institutions as well. Moreover, without the protection of property rights or contracts, it is difficult for a Chinese entrepreneur to maintain integrity. It is therefore no surprise that corruption and cheating are endemic to China. And since the state controls the resources the entrepreneur needs, self-reliance cannot flourish.

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Posted by at April 28, 2011 7:39 AM

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