A trend of increased-scale economies can be observed through history as city-states have given way to the increased military power of centralized Medieval kingdoms. Many of those expanded into Early Modern kingdoms as advances in military technology make it possible for kings to extend the territory under their control. Even empires have gotten bigger. Modern-day Germany was once considered an empire, as were Switzerland and the Netherlands. Today these polities are states in a modern form of empire, the EU. Similarly, the emergent United Colonies of America was considered to be an empire within the British Empire, with the individual colonies being viewed on both sides of the Atlantic as Early Modern kingdom-level polities on par with the states of the E.U. in the twentieth century. Similarly in China, as kingdoms were added, an old form of empire took shape. Because these enlargements came about gradually over centuries, it has been difficult for the human mind to recalibrate how the modern large empire-scale economies should be designed to take into effect the distinct challenges of the scale. We can see such an adjustment in the case of China as economic centralization came to be replaced by regulated markets, albeit with a sizeable involvement still of the government in the economy.
Communism, for lack of a better word, has somehow morphed into Capitalism in China, as if a genetic mutation had taken hold through mitosis. This reflects an important trend that can be traced back to Deng Xiaoping (1904-1997), who “abandoned many orthodox communist doctrines and attempted to incorporate elements of the free-enterprise system into the Chinese economy” beginning in the late 1970's, according to the Encyclopedia Britannica. Decades later, upon becoming prime minister, Li Keqiang announced in 2013 that the central government would reduce the state’s role in the economy. The Chinese government issued a set of policy proposals to reduce “government intervention in the marketplace” and give “competition among private businesses a bigger role in investment decisions and setting prices.”[1] According to the proposals, a tax on natural resources would be expanded, market forces would play a larger role in determining bank interest rates, and, according to the government, policies would be enacted to “promote the effective entry of private capital into finance, energy, railways, telecommunications and other spheres.”[2] Foreign investors would be given more opportunities to invest in finance, including banking, logistics and healthcare. Foreign exchange controls would also be loosened further.
The proposals were enough for Stephen Green, an economist with Standard Chartered, to remark, “This is radical stuff, really.”[3] Huang Yiping, chief economist at Barclays, pointed to lower growth projections and massive amounts of debt as giving the Chinese government a rather practical motive in continuing the trend of refurbishing communism. Many experts doubted, however, whether the Communist Party would “abandon the state capitalist model, break up huge, state-run oligopolies or privatize major sectors of the economy that the party considers strategic, like banking, energy and telecommunications.”[4] Additionally, corrupt government officials would doubtlessly resist losing what the New York Times called their “secret stakes in companies,” not to mention all the bribes.[5]
Even so, it is astounding that the prime minister, a communist, would say: “If we place excessive reliance on government steering and policy leverage to stimulate growth, that will be difficult to sustain and could even produce new problems and risks. The market is the creator of social wealth and the wellspring of self-sustaining economic development.”[6] Marx and Lenin would hardly recognize the Chinese Communist Party. Because China has over a billion people, the old “command-and-control” economic model based on centralized directives on production quotas and prices had become increasingly difficult to coordinate. Bottlenecks in supply causing shortages on the shelves could eventually occur, with political instability increasingly likely. The sheer scale of China, an empire of former kingdoms, has rendered centralized control highly inefficient.
Communism, for lack of a better word, has somehow morphed into Capitalism in China, as if a genetic mutation had taken hold through mitosis. This reflects an important trend that can be traced back to Deng Xiaoping (1904-1997), who “abandoned many orthodox communist doctrines and attempted to incorporate elements of the free-enterprise system into the Chinese economy” beginning in the late 1970's, according to the Encyclopedia Britannica. Decades later, upon becoming prime minister, Li Keqiang announced in 2013 that the central government would reduce the state’s role in the economy. The Chinese government issued a set of policy proposals to reduce “government intervention in the marketplace” and give “competition among private businesses a bigger role in investment decisions and setting prices.”[1] According to the proposals, a tax on natural resources would be expanded, market forces would play a larger role in determining bank interest rates, and, according to the government, policies would be enacted to “promote the effective entry of private capital into finance, energy, railways, telecommunications and other spheres.”[2] Foreign investors would be given more opportunities to invest in finance, including banking, logistics and healthcare. Foreign exchange controls would also be loosened further.
The proposals were enough for Stephen Green, an economist with Standard Chartered, to remark, “This is radical stuff, really.”[3] Huang Yiping, chief economist at Barclays, pointed to lower growth projections and massive amounts of debt as giving the Chinese government a rather practical motive in continuing the trend of refurbishing communism. Many experts doubted, however, whether the Communist Party would “abandon the state capitalist model, break up huge, state-run oligopolies or privatize major sectors of the economy that the party considers strategic, like banking, energy and telecommunications.”[4] Additionally, corrupt government officials would doubtlessly resist losing what the New York Times called their “secret stakes in companies,” not to mention all the bribes.[5]
Even so, it is astounding that the prime minister, a communist, would say: “If we place excessive reliance on government steering and policy leverage to stimulate growth, that will be difficult to sustain and could even produce new problems and risks. The market is the creator of social wealth and the wellspring of self-sustaining economic development.”[6] Marx and Lenin would hardly recognize the Chinese Communist Party. Because China has over a billion people, the old “command-and-control” economic model based on centralized directives on production quotas and prices had become increasingly difficult to coordinate. Bottlenecks in supply causing shortages on the shelves could eventually occur, with political instability increasingly likely. The sheer scale of China, an empire of former kingdoms, has rendered centralized control highly inefficient.
The Emperor Kangxi of the Qing Dynasty. He ruled for 60 years, greatly expanding the size of the empire. Source: Chinahighlights.com
Interestingly, even as Emperor Kangxi (1654-1722), the second emperor of the Qing Dynasty (1644-1911), expanded the empire by taking over central Asian Muslim kingdoms, he resisted the preceding Ming Dynasty’s laissez-faire policy on internal trade and industry by turning some crucial industries into monopolies. Interestingly, John D. Rockefeller would probably have concurred, based on his own theory that the coordination in a monopoly in a vital industry such as oil could put an end to destructive competition. In any case, Kangxi apparently saw no contradiction between expanding the empire and centralizing some important sectors of the economy. Similarly, Mao saw no internal tension in collectivized consolidation on a large scale. As tempting centralization has been for Chinese dictators seeking increased control and thus power, government regulation of competitive markets is eminently better in empire-scale economies, not only of China, but the E.U., U.S., and Russia as well.
1. David Barboza, “China Plans to Reduce the State’s Role in the Economy,” The New York Times, May 24, 2013.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
