24 August 2015
The bull (in the China) market
Is Mao laughing? From all appearances it looks like the Chinese are making all the same mistakes in the stock market that capitalists make. Their markets are tanking despite government efforts to prop it up, and in our globalized economy that means markets everywhere suffer. If anyone had an idea that, as an authoritarian government, the Chinese Communists (should they be called CINOs?) would ignore hysteria and take wise steps to right a listing economy, recent developments make that idea look silly. In a desperate looking effort to get more money into the market, the Chinese are now allowing pension funds to buy into the market. They're also encouraging individuals to invest and speculate more. Americans could have told them these are not really the ways to stabilize a turbulent market. Nor has the advice of Marx, Lenin, Mao or Deng kept the Chinese from pumping up a bubble that now seems to have burst. I know that Deng set China on a path of creating wealth before creating socialism, but I would have thought that there'd be more caution on that path and a lot less recklessness. But the Chinese seem to have gone full capitalist on the assumption that greed is good during at least one necessary stage in history. They've gone to the opposite extreme from Mao's insistence on imposing collectivization and industrial production on an unprepared populace, and to be fair to the current generation we most likely won't see the sort of mass starvation that Mao's policies caused. But objective observers would have expected China to seek a middle ground, having experienced Mao's excesses yet remaining conscious, as Communists, of capitalist excesses. But despite what they may think of themselves as Communists or as Chinese, they are only human and some temptations, it seems, were too great for them. They also face the same problem as the rest of the world: they need consumers more than they need workers in an increasingly automated economy, but people need work, or else government subsidies, in order to consume. Developed nations everywhere have more people than their economies can use -- as their economies are now arranged -- and in persistently underdeveloped countries the situation is worse. Booms and bubbles inevitably fail because consumption has limits, some natural, some artificially imposed. Ideally an economy will neither boom nor bust when its first priority is providing for everyone's needs, not rewarding the greediest. You're not going to see such an economy under capitalism or under any kind of Communism we currently see on earth. But as progressives say, another world should be possible in which investments in real progress aren't crapshoots and success means everyone wins. Just don't depend on someone to give you that world. Ordinary people have to make it themselves.