If you kindly allow me just once to personify society, I would say that the featured image of this post represents how America should feel when seeing itself in the Chinese mirror.
The Economist tells us that Chinese president Xi Jinping and his Communist Party “pressed high-income enterprises to ‘return more to society.’” (“Business This Week,” August 28, 2021. See also the accompanying article, “Xi Jinping’s talk of ‘common prosperity’ spooks the prosperous.”) He is using a Western platitude that is actually nonsense in anything resembling a free society. A free business benefits consumers by benefiting its owners and employees; there is nobody else to whom it should be forced to “return” anything. In an exploitative regime like in China, on the contrary, the state and its crony corporations should return everything, including Mr. Xi’s remuneration and perks, to the taxpayers who have been forced to pay for it.
Look at the phenomenon in another, more general, way. The legendary Martian (not very philosophically astute) landing on Earth might think that the Chinese state is rapidly converging to the Western world’s freedom. The Chinese state is doing things like boosting its antitrust laws, expanding regulation, and attacking high-tech companies, all of that, it seems, in the name of competition. It even adopted what is said to be one of the world’s strictest data-privacy laws. It would appear to our Martian that Western-style laws and regulations are being introduced in China. This illusion is very misleading.
Chinese rulers and apparatchiks do not use the concept of “law” or “constitution” in the theoretical sense it has here or at least in the ideal sense it had in the Western classical-liberal tradition. Legal concepts were closely related to the “rule of law,” a system of general and abstract rules that allowed individuals to interact, trade, and arrange their own affairs without ad hoc bans or orders from the government. The power of government was equally bound by the rule of law. Two classic treatments of these issues, at the frontier of law and economics, are due to Friedrich Hayek: Law, Legislation and Liberty, especially vol. 1: Rules and Order (University of Chicago Press, 1973); and his The Constitution of Liberty (University of Chicago Press, 1960). On the contrary, what they mean by “law” in China is just the form in which the government issues its arbitrary orders and bans.
When the Chinese political authorities imitate Western governments’ interventions, they imitate precisely what has, over a century or so, most undermined the rule of law: antitrust laws, attacks on industries that the state doesn’t like (or whose executives it doesn’t like), mercantilism, investment and trade controls, government surveillance, etc. The Chinese privacy laws are meant to constrain independent businesses, not government agencies.
China has become a deforming mirror of the West, where the state is using corrupted Western ideals to become a worse Leviathan. It remains to be seen whether the US government and other Western governments, as well as the public, will be repulsed by what they see in the Chinese mirror and will rediscover classical-liberal values, or whether they will be led to look more and more like the deformed image they see in the mirror. Thus far, the latter seems to be happening. Another example: the US government and other governments in the West are expanding industrial policy, which has long been proved inefficient and been gradually (if only formally) abandoned, but is now rekindled for the illusory goal of competing with a planned economy under a tyrannical state.
READER COMMENTS
Monte
Aug 28 2021 at 4:53pm
Like Shakespeare’s Richard II, Uncle Sam should shatter this mirror on the ground and thus relinquish his title as leader of the free world.
Phil H
Aug 28 2021 at 8:20pm
Whence the starry-eyed idealism about the nature of law in Europe and North America?
For me, this piece completely inverts history. Law in Europe was always the way you are describing it in China. Europe happened to turn its abusive power outwards for a couple of centuries, so the colonies felt the brunt of its cynical applications of these “general and abstract rules”. But I see little evidence that governments were bound by the rule of law.
The Chinese government uses the apparatus of law cynically. That’s infinitely better than using force cynically, so long may it continue.
Pierre Lemieux
Aug 29 2021 at 2:04pm
Phil H: So the rule of law is cynical force and the cynical rule of law is peace? That looks to me like Orwell’s “freedom is slavery” and “war is peace.” Reading Hayek (see the citations in my post) is useful.
Phil H
Aug 30 2021 at 1:46am
“So the rule of law is cynical force” – Yeah, it certainly has been. I’d argue that European colonialism is the classic example. When we observe China using the rule of law cynically against its own population, it looks like nothing more than the way European countries used it on their colonies (I’m British, so I’m thinking specifically of the British Empire – I know that some other colonial powers made less pretence of using the rule of law, but we certainly did).
Nonetheless, rule of law is still the best thing ever. I’m with you on that. And it emerged through an open liberal (classical liberal) consensus in Europe – I think we agree on all this stuff. I just don’t think that European governments have been angelic. They’re on a better path, because more openness and democracy leads to more openness and democracy. But its… one stable equilibrium among many. China has found a different stable equilibrium for the moment.
“the cynical rule of law is peace” – Yes. Bad rule of law is better than anything except good rule of law. If we can’t have perfection, and we rarely can, then I’ll take the second best option (bad/cynical rule of law) any day of the week.
Don
Sep 5 2021 at 12:54pm
All governments exist using a moral monopoly, a right to rule by force, threats, fraud. This means is anti-reason, anti-justice, inhuman. It becomes more coercive over time, if the populace allows. The young are forced into govt. indoctrination where they are conditioned to obey authority, worship majority consensus, and generally defer mentally to all who project leadership.
This contradicts conscience, the ability to think, to be moral, to be independent. It undermines our ability to be happy. But it makes psychopaths happy because the can exploit the cognitively disabled.
Orlovsky
Aug 28 2021 at 10:46pm
How can you write this nonsense after 4 years of the Trump administration and Western governments prolific use of sanctions and disrespecting multilateral institutions to govern things like world trade?
Most Western and Japanese businesses that are in China still want to stay in and expand in China, I guess their problem is they didn’t read enough Hayek?
Monte
Aug 30 2021 at 7:32pm
Most Western and Japanese businesses that are in China still want to stay in and expand in China, I guess their problem is they didn’t read enough Hayek.
Nope. They’ve chosen to follow after a greater paragon of virtue: Gordon
Gecko. Greed is good.
Pierre Lemieux
Aug 31 2021 at 12:09pm
In response to your first question: Because I try to be analytical and respectful of the truth.
Lizard Man
Aug 29 2021 at 11:21pm
So, if China develops into the world’s leading maker of semi-conductors, they will be able to cause a government toppling recession in the other developed economies anytime they wish.
That would also hurt their economy, but their government can probably weather that storm, so long as they they only use that power for things that are quite important and to China.
They could also do something like what the US does, and try to limit the export of advanced technology to countries who do things that they don’t like.
So if you want a world of free trade, and a rules based international order, you essentially have to limit the power of the PRC to shape the global order. Which does mean that you cannot let it become the linchpin of essential industries. The alternative to industrial policy in free word is a global economy run by China’s elite.
Pierre Lemieux
Aug 30 2021 at 7:39am
This is an error, both theoretical (economic) and historical. From an economic viewpoint, economic dirigisme is not more efficient than economic freedom. On the historical aspect, see Walter Scheidel’s recent book Escape from Rome. See also Joel Mokyr’s A Culture of Growth. As an introduction, you may want to read my reviews, respectively “Let’s Travel That Road Again,” Regulation 43:1 (Spring 2020), pp. 59-61; and “From the Republic of Letters to the Great Enrichment,” Regulation 41:2 (Summer 2018), pp. 57-60.
Lizard Man
Aug 31 2021 at 9:11am
I looked at all of those, and none of them has changed my view that the PRC, or any other country with a large enough economy, can become the OPEC of semiconductors if they want to do so.
Doing so would certainly not be efficient. However, given that advanced semiconductor foundries cost tens of billions of dollars, and require specialized labor, it is an industry that has huge agglomeration effects. So if the PRC wanted to tax its people to offer subsidies to semiconductor manufacturers, they could, over time, become the world’s leading agglomeration of semiconductor fabrication. All the best chips would be made in the PRC, all the best semiconductor jobs would be there, and companies located in other countries wouldn’t be able to make a profit because they wouldn’t have massive subsidies like the PRC’s semiconductor manufacturers.
Also, please note that semiconductors are a special case, an exception to the rule. The reason to subsidize their production isn’t efficiency or growth, but rather due to their unique indispensability as an input to production, large agglomeration effects in their manufacture, and geopolitical rivalry which means that control over their production will be used as a tool to achieve geopolitical goals (ie allocation of scarce resources aren’t going to be determined by markets, but rather by apparatchiks).
Pierre Lemieux
Aug 31 2021 at 11:15am
Lizard Man: It is certainly not the first time a would-be central planner determines that there is a “special case” that will increase its state’s power over the world. In the 1960s, Charles de Gaulle thought that computers were the future and launched the “Plan Calcul” to turn France into a computer behemoth. Mao Zedong thought (at one point) that steel was a special case, and he created a famine in the process (farmers had to build steel furnaces in their backyards). Compare with Hong Kong. Today, remarkably, the Chinese government is likewise focused on manufacturing (like Trump was). In the 1960s, the Soviet government must have thought that space travel was a special case. Jean-Baptiste Colbert (the Finance Minister of Louis XIV) thought that the balance of trade was a special “agglomeration” factor (although he did not use the term); he encouraged the construction of a merchant fleet and increased tariffs on imports. (One reason was to counter free-minded Dutch merchants.) One of the Chinese emperors also thought that international trade was a special agglomeration case, but in the opposite sense, and forbade the building and operation of sea-going ships. Examples of “industrial policy” are numerous. The successes (at least from the viewpoint of the welfare of the common people) are rare.
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