US Financial Crisis/Bailout, China's Role

I have always felt that one of the great myths about China is that the miracle that is the Chinese economy has been the work of the CCP. While the CCP has provided social and political stability, the economic boom has been largely a result of competition in the market place that has been aided in large part by foreign capital and technologies in key industries. The variety of foods and clothing offered at Western style malls that weren't there five years ago isn't a result of some political commissar from the CCP telling the owners to place them there, but rather a function of the invisible hand of the market place at work, the freedom to transact at a price agreeable to both the buyer and the seller.

If we look at the role of the government in this market, it seems to me that there are some serious issues regarding externalities and monopolies. The government controls the countries savings in the three or four big state owned banks. How can one ever expect better risk management practices when rescue is virtually guaranteed in the event of writedowns? Furthermore, in the absence of competition for credit, how can one ever expect the current banking environment of relying on corruption and connects rather than judging by the merit of the business idea and operations to desist? That's just two of the problems associated with financial intermediaries.

Then you have the problem of externalities. The CCP, by the virtue of its monopolistic power to govern, has been able to ignore pollutions that have harmed the general society in exchange for bribes and favors. Not only has it refused to tackle the problem, it refuses to let others tackle the problem. That's a great source of social instability.

Another thing that bothers me is the report of hundreds of billions taken out of the country by thousands of corrupt officials who have fled. If you are going to say that Chinese bureaucrats have had a positive impact on the growth of the economy, I'd like to ask how you can help me get those hard earning money back. Governments are not efficient, have never been efficient and will never been efficient. The inefficiencies created by the CCP has been overlooked because of the tremendous pace of growth, but when things slow down, people are going to take a harder look at just exactly how the CCP is contributing to economic output. And if things are really bad, they are not likely going to have the option of crushing people with tanks at this disposal this time.

I totally agree with Fugitive visions point of view, however an authoritarian government can get projects started and finished much easier than a democratic one.

FugitiveVisions said:

The government controls the countries savings in the three or four big state owned banks. How can one ever expect better risk management practices when rescue is virtually guaranteed in the event of writedowns? Furthermore, in the absence of competition for credit...

Click to expand...

How can one not when the alternative system is doing worst? I wouldn't say the current system is good. What I would say is that your assumption that competition automatically leads to better practices is fundamentally flawed. An example would be the melamine scandal a while back. Everybody tries to undercut others' price so badly that corrupt businesses become even more corrupted.

FugitiveVisions said:

Then you have the problem of externalities. The CCP, by the virtue of its monopolistic power to govern, has been able to ignore pollutions that have harmed the general society in exchange for bribes and favors. Not only has it refused to tackle the problem, it refuses to let others tackle the problem. That's a great source of social instability.

Click to expand...

What proof do you have that it is refusing to tackle the problem? It is one thing to come up with regulations, but an entirely different matter to enforce them, particularily when the people you are dealing with come up with ways to defeat regulations faster than they can begin to contemplate the idea of living with the regulations.

Your alternative non-monopolistic system would only make things worst. The same people who are polluting now would get to legimately represent their interests of polluting without cost in the government.

FugitiveVisions said:

Another thing that bothers me is the report of hundreds of billions taken out of the country by thousands of corrupt officials who have fled. If you are going to say that Chinese bureaucrats have had a positive impact on the growth of the economy, I'd like to ask how you can help me get those hard earning money back. Governments are not efficient, have never been efficient and will never been efficient. The inefficiencies created by the CCP has been overlooked because of the tremendous pace of growth, but when things slow down, people are going to take a harder look at just exactly how the CCP is contributing to economic output. And if things are really bad, they are not likely going to have the option of crushing people with tanks at this disposal this time.

Click to expand...

And the inefficiency of your alternative form of government is also overlooked because everybody expects problems to be automatically solved by the system, and nobody ends up caring.

What is desparately needed in China is proper enforced regulations. Expecting a hidden hand to work its magic is the worst way you can solve the problems.

It's amazing that people are still dictating to China how to run its economy when they are going through the worst financial crisis in decades. China has corruption and so does the US but they call it a multitude of other euphemisms that sound nicer. That's the only difference. Per capita a Westerner still pollutes many fold more than the average person in China. Then there's also the imbalance in use of resources... The people who are worse in waste per capita are dictating to China?

FugitiveVisions said:

I have always felt that one of the great myths about China is that the miracle that is the Chinese economy has been the work of the CCP. While the CCP has provided social and political stability, the economic boom has been largely a result of competition in the market place that has been aided in large part by foreign capital and technologies in key industries. The variety of foods and clothing offered at Western style malls that weren't there five years ago isn't a result of some political commissar from the CCP telling the owners to place them there, but rather a function of the invisible hand of the market place at work, the freedom to transact at a price agreeable to both the buyer and the seller.

If we look at the role of the government in this market, it seems to me that there are some serious issues regarding externalities and monopolies. The government controls the countries savings in the three or four big state owned banks. How can one ever expect better risk management practices when rescue is virtually guaranteed in the event of writedowns? Furthermore, in the absence of competition for credit, how can one ever expect the current banking environment of relying on corruption and connects rather than judging by the merit of the business idea and operations to desist? That's just two of the problems associated with financial intermediaries.

Then you have the problem of externalities. The CCP, by the virtue of its monopolistic power to govern, has been able to ignore pollutions that have harmed the general society in exchange for bribes and favors. Not only has it refused to tackle the problem, it refuses to let others tackle the problem. That's a great source of social instability.

Another thing that bothers me is the report of hundreds of billions taken out of the country by thousands of corrupt officials who have fled. If you are going to say that Chinese bureaucrats have had a positive impact on the growth of the economy, I'd like to ask how you can help me get those hard earning money back. Governments are not efficient, have never been efficient and will never been efficient. The inefficiencies created by the CCP has been overlooked because of the tremendous pace of growth, but when things slow down, people are going to take a harder look at just exactly how the CCP is contributing to economic output. And if things are really bad, they are not likely going to have the option of crushing people with tanks at this disposal this time.

Click to expand...

your proposal will do more harm than good. first of all deffeciencies such as environmental degradation and corruption and inequality is something that all countries go through during the earlier stages of development. there is simply nothing that you can practically replace the CCP with today that would generate a better outcome. yes corruption is a problem, but these corrupted officials are also pushing for economic growth. its very difficult to label corruption as simply a negative characteristic. i can argue that the american bankers on wallstreet are corrputed except they do it in such a way so that it does not (ostensibly) break any laws. but even knowing this fact you cannot get rid of them because they are still a contributor to economic growth and/or social stability. so we have to be realistic here and choose whatever option that would do the most good and least harm. if arresting everyone in wallstreet would help american economy instead of destroying it then bush would have done that already.
as for monopolies, you have to realize that China's economic system is not a pure market economy and thus you cannot judge things by the standard of market economy. i am no expert in this field but from what i see China's system have so far done a far better job then many european states in weathering the current financial crisis.

AssassinsMace said:

It's amazing that people are still dictating to China how to run its economy when they are going through the worst financial crisis in decades. China has corruption and so does the US but they call it a multitude of other euphemisms that sound nicer. That's the only difference. Per capita a Westerner still pollutes many fold more than the average person in China. Then there's also the imbalance in use of resources... The people who are worse in waste per capita are dictating to China?

Click to expand...

yeah that's a good concept to mention. if wealth is calculated per capita then so is resource consumption relative to wealth. in that americans would exceed most of us manyfold. i am no mathmatecian but something tells me that if all 6bn of us consume like these "developed" countries we are all gonna end up starving in like a month lol.

Much of China's prosperity is shared with the same factor you see with Taiwan, Singapore, Hong Kong and overseas Chinese communities---sheer work ethics, sense of rule and education, and a street smart business culture. But CCP still has to share some part of it, and the CCP itself is not above, but rather a part of this cultural and business matrix. Mao, for the most part, an aberration in Chinese history, once he was gotten rid, the nature took its course. For the most part, China would still be as prosperous today whether it is the CCP in charge, or the ROC government like if you envision an alternative history.

Government cannot be separate from a nation's prosperity. India has a people with a strong work and business ethic, but for many years, their government has not been up to the capabilities of its people.

I for the most part, believe authoritarian---I mean meritocratic government can get the job done faster, able to decide in much clearer terms, with less, though not completely without, politics, less consideration of ideology and populism. Unless the leader itself is a populist ideologue, then you have trouble.

Authoritarianism is like rolling dice. As long as the dice is rolled good its gets really good. But the wrong dice, snap, its bad, it can get really bad indeed. When I mean bad, I mean like epic awful. The question remains how long will China rolls the good dice for its leaders. The question for all Chinese people, those in the mainland that is, how to make sure that you will always be able to ensure that you will be select good leaders most of all, decade after decade.

crobato said:

Much of China's prosperity is shared with the same factor you see with Taiwan, Singapore, Hong Kong and overseas Chinese communities---sheer work ethics, sense of rule and education, and a street smart business culture. But CCP still has to share some part of it, and the CCP itself is not above, but rather a part of this cultural and business matrix. Mao, for the most part, an aberration in Chinese history, once he was gotten rid, the nature took its course. For the most part, China would still be as prosperous today whether it is the CCP in charge, or the ROC government like if you envision an alternative history.

Government cannot be separate from a nation's prosperity. India has a people with a strong work and business ethic, but for many years, their government has not been up to the capabilities of its people.

I for the most part, believe authoritarian---I mean meritocratic government can get the job done faster, able to decide in much clearer terms, with less, though not completely without, politics, less consideration of ideology and populism. Unless the leader itself is a populist ideologue, then you have trouble.

Authoritarianism is like rolling dice. As long as the dice is rolled good its gets really good. But the wrong dice, snap, its bad, it can get really bad indeed. When I mean bad, I mean like epic awful. The question remains how long will China rolls the good dice for its leaders. The question for all Chinese people, those in the mainland that is, how to make sure that you will always be able to ensure that you will be select good leaders most of all, decade after decade.

Click to expand...

There's a lot of merit in what you say, and I used to hold those views myself. But it's becoming increasingly clear to me that people got the cause-and-effect relationship all wrong. The economic boom is a result of deregulation of markets and also the society at large. The CCP has played a much lesser role in governing the markets since the late 70s than they had before, and that's why you are seeing businesses blossoming. Deng's genius isn't that he was a great architect of the economy, but rather that he recognized that the government is a horrible architect of the economy, so it had to loosen its grip on the economic freedom of its people to release its potential. In other words, less policy is good policy.

The problem with India is the opposite. The country enjoys civil and political freedom, but does not enjoy economic freedom to the extent that China and the developed world do. Watched an ABC news report on the India a few years ago, and it astounded me that it took months of bureaucratic wrangling just to get a licensed approved to sell tshirts. Imagine if that had happened in China, millions of small shop owners of the variety that you see on the streets and in specialized malls would have never existed, and they would have imposed a tremendous social burden.

Now you take a look back at the Chinese economy. Posters above me have made the argument that without government regulation, the consumers would be less well protected. Well let me turn the table here: it seems to me that behind every one of these consumer safety scandals have been a group of local CCP officials covering up the case because they were either embarrassed that the scandal happened under their jurisdiction or they were flat out bribed. So who's protecting whom here? If the government did not have the kind of monopoly on information that these corrupt officials had, actionable information would surely have disseminated, and lives could have been saved.

And again, that's not even the big problem here. The problem of land grabs, abuse of power, the widespread use of bribes, and flat out criminal mob ties that has been so predominant in the northeast part of the country have levied an invisible, but very heavy burden on the economic and civil freedoms of the Chinese people. The number of lost national product due to transaction costs and political uncertainties imposed by incompetent and criminal mob rule can not be easily estimated. Now we are hearing how the CCP is talking like they are suddenly going to jump in and save the economy with their policies. What they really ought to do is to impose further restrictions on themselves in their ability to curtail business activity.

i agree and disagree with your remarks there.
first of all most Chinese ppl should come to the consensus that although Mao indeed has hindered China's economy to some extent, he nevertheless made great contributions to the economic boom in Deng's era by readjust China's economy and society as a whole from the agriculturally centered system into an industrialized composition. infrastructure were built, scientific development was being emphasized upon (especially on national defence), and if you look at the data China's economy has grown by a significant proportion during Mao's years. Mao (and Zhou) should also be credited for establishing a fairly stable international environment by driving back both superpowers and adopted the policy of detente during the kissinger era. the biggest setback was the cultural revolution. but then again i would call the CR an abberation rather than just superimpose that upon everything that Mao has ever achieved for China. i would go with Deng's assessment: seven to three.

and honestly i doubt the KMT would have done as well as the CCP has. the main problem with KMT is that Chiang lacks the prestige and authority that Mao and Deng enjoyed. there are way too much factionalism going on in the KMT even after 1930. and he certainly did not have the foresight (as Deng did) to establish a sustainable governing structure. Taiwan's economic boom is largely attributed to the KMT takin literally every bit of wealth they can carry from all the mainland provinces onto that one island. so all of China feeding one island if his son doesnt make something happen i am gonna think that this guy is an idiot.

as for the rolling dice analogy, i would agree with you in pre-1997 China. after that the CCP has developed a comprehensive system of leader selection which i personally regard as being actually superior to democratic election (for China) because you dont select the person that just talks big (actually talkin big is considered a vice rather than virtue in Chinese politics. yes there are factional divisions and all that but the general operation of the CCP (at the central level) has been more consultative than confrontational when dealing with state affairs (thank god). though its a whole different story when it comes to power transition and anti-corruption =( but overall i would say in terms of governing capacity very few political parties in the world would be able to match that of the CCP's.

FugitiveVisions said:

And again, that's not even the big problem here. The problem of land grabs, abuse of power, the widespread use of bribes, and flat out criminal mob ties that has been so predominant in the northeast part of the country have levied an invisible, but very heavy burden on the economic and civil freedoms of the Chinese people. The number of lost national product due to transaction costs and political uncertainties imposed by incompetent and criminal mob rule can not be easily estimated. Now we are hearing how the CCP is talking like they are suddenly going to jump in and save the economy with their policies. What they really ought to do is to impose further restrictions on themselves in their ability to curtail business activity.

Click to expand...

yes CCP has all that problems, the fact is nobody is perfect. like i said you cant simply start grabbing ppl from the local government and try them for whatever crime they have committed, though i am sure they all deserve no less. however we are talkin about offering a practical solution here. and the practical solution is that you cannot invoke some policies and just expect it to work out. cuz in reality you gotta ask yourself what if it doesnt? sure limiting one's own power, grabbing all the corrupted officials and shoot them in the head, completely press freedom, they all sound good on paper. but when you put this stuff into practice they are GUARANTEED to produce greater adverse effects than you can imagine. afterall, if its that easy to govern a country or even understand what is going on then i should become president too.
also the last thing you wanna do is to undermine the power of the CCP before China's society matures. not for the sake of CCP but for the sake of China's development. its like raising children, when the kid is young the parents are needed to guide him. and in a more practical sense, China's most prosperous periods has always been that which is highly centralized,one can develop a thousand theories against this claim being applied to today's China but its not gonna convince the decision makers in Beijing that its gonna work out. as far as i can see there will be no alternative to CCP for quite a while.

FugitiveVisions said:

Now you take a look back at the Chinese economy. Posters above me have made the argument that without government regulation, the consumers would be less well protected. Well let me turn the table here: it seems to me that behind every one of these consumer safety scandals have been a group of local CCP officials covering up the case because they were either embarrassed that the scandal happened under their jurisdiction or they were flat out bribed. So who's protecting whom here? If the government did not have the kind of monopoly on information that these corrupt officials had, actionable information would surely have disseminated, and lives could have been saved.

Click to expand...

You are right, local officals try to cover up. They aren't doing it because they felt embarassed, as they clearly know what they are getting themselves into. They cover up to prevent their criminal activites from being found out by the central government.

What you are proposing is to remove the only power that can rein in corruption, and expect the hapless public to remove corrupted officals when the needs arise. Well, if the corrupted officals have enough guts to hide things from the central government, they could certainly deal with the public easily. Your alternative system would literally turn these corrupted officals into feudal lords, and make them more powerful than they are now.

FugitiveVisions said:

And again, that's not even the big problem here. The problem of land grabs, abuse of power, the widespread use of bribes, and flat out criminal mob ties that has been so predominant in the northeast part of the country have levied an invisible, but very heavy burden on the economic and civil freedoms of the Chinese people. The number of lost national product due to transaction costs and political uncertainties imposed by incompetent and criminal mob rule can not be easily estimated.

Click to expand...

The central government have came up with laws to prevent land grabs, abuse of power, bribery, officals' ties to criminals, but are ignored by local officals who continue their business as usual. This highlights enforcement issues. Decentralizing power only makes enforcement more difficult, and wouldn't improve the current situation at all.

Also, here is a news flash for you: the corruption you have described has been going on over the past 3000 years. It is quite unfair to blame it solely on CCP. Unless another Li Shimin rises to power, the situation isn't going to improve much any time soon.