“Since the end of the Cold War,” The Wall Street Journal wrote recently, “the world’s powers have generally agreed on the wisdom of letting market competition – more than government planning – shape economic outcomes. China’s national economic strategy is challenging this consensus.”
Indeed it does. It has confounded the world by the success of its combination of capitalism and authoritarian one-party rule and has shattered Francis Fukuyama’s reassuring illusion, conveyed in The End of History after the Berlin Wall came down, that liberal democracy is the only system compatible with modernity.
The fact is that the free-market model that Russia, China and other fast-growing nations are supposedly supplanting has never actually existed. The closer you look at how England and the U.S. became prosperous, the less you see of laissez-faire and the more you see of government intervention, beginning with Edward III in the fourteenth century banning the import of woolen cloths from Belgium and continuing through the half century after Lincoln’s presidency when the business-backed Republicans were in power most of the time, with tariffs at forty to fifty percent, the highest levels anywhere. Even after Woodrow Wilson elevated free trade in his Fourteen Points to a goal of U.S. policy, hefty tariffs remained in place. The fact is that none of today’s economic powers practised free trade during its developmental stage.
Today, in the U.S., the Pentagon, by paying for many research and development projects that private enterprise would be reluctant to fund, has helped to create three of the biggest export industries: commercial aircraft, military aircraft and computers. And everybody knows about the role of the state bailing out troubled components of the financial sector in the U.S. and elsewhere.
To quote Stephen D. King, the chief economist of HSBC: “Western governments have used the methods of state capitalism for hundreds of years in a bid to shape the world around them…. The idea that market forces alone led to the West’s success is nonsense.”
Source: John Cassidy in The New Yorker, December 13