Why China Will Change Capitalism

Discussion in 'Politics' started by OPTIONAL777, Jan 3, 2011.

  1. Why China Will Change Capitalism

    11:06 AM Tuesday August 17, 2010
    by Chris Meyer & Julia Kirby | Comments (16)

    This week's New York Times brings news of a non-event that is still fit to print: global trade data just out confirm that the size of China's economy now exceeds that of Japan's, making China the largest economy in the world save one. It isn't as though this is a surprise attack. The trend has been undeniable for years, with the only question being in which quarter the crossover would occur. The summer of 2010 is a milestone on an already mapped road.

    It's still a fit occasion, however, to pause and consider what this may mean for the world — especially because the average western business person may be assuming too little in that regard. They might suspect that the change will give more muscle to China-based companies venturing into world markets. They might worry that in their own efforts to tap into China's burgeoning domestic market, they will operate even more at the mercy of bureaucrats permitting only "capitalism with Chinese characteristics."

    What they may not expect is that China's increasing dominance will rewrite the rules of capitalism for everyone. Note that the prevailing form of capitalism at any time is simply the form being practiced by the most capitalists. As the center of gravity of global trade shifts toward China, the western style capitalism, with its heavy emphasis on free markets and private ownership, will no longer hold sway.

    Why isn't this obvious to everyone? In part, because the historical precedent for it is missing. When Japan in its turn surged ahead of so many western economies, it stopped short of changing the game. Perhaps in line with its peculiar proclivity to take the pioneering efforts of others and prosper by emulating them with great discipline — and, of course, post-war rather than pre-war technology — it created an economy that could be called a "release 2.0" of American style capitalism. Indeed, the US itself had a heavy hand in creating that copy, having shaped it in our own image in the aftermath of World War II.

    There are no such circumstances in the 21st century to compel the new number two economy, the challenger economy, to adopt the rules of the dominant one. Japan, we think, was the exception that proves the rule. But its adoption of western ways has lulled many into end-of-history delusions. (We should note that to look only at China understates the case — the rapid growth of India, Brazil, and others where the rules look different just strengthens the argument.)

    Around the same time that multinational executives were realizing that Japan, the economy in their rearview mirror, was larger than it appeared, the American public was also getting nervous about a future dominated by computers. We remember Ray Kurzweil bringing people up short at the time with a chart showing the advance of chess-playing computers versus humans. His simple plotting of numbers of "master points" gained each year by the best in the hardware and wetware camps showed that while humans made steady but tiny progress, the computers, proceeding from a low base, racked up exponential gains. The prediction of the chart was obvious — the computers' progress was headed for a point unreachable by Grandmasters for centuries. But conventional wisdom held firm. "Computers will never best a Kasparov," it was said, "because their mechanistic approach will always fall short of genius." Kurzweil only shook his head and asked "how can you look at these lines and believe that?"

    We are at an analogous point. We read the news, we accept the fact that China is destined to be biggest. Yet most of us are not willing to see this shift as announcing that the rules of capitalism will evolve, ushering in an era of post-Western economics. The upsurging line, you may choose to believe, will merge into the existing curve. But we have news for you: from a "standing on the sun" perspective, it's clear this road is leading us somewhere different.

  2. It is western style of government that will change if China is allowed to dominate with it's Corporatist Communism.

    Because China's gov't can take their people's land whenever they want.
    Because China's corporations backed by a corporatist/totalitarian gov't can produce goods cheaply even if producing them poisons their people's food, water, and air.
    Because China's people have no say in the ruling elite's decisions.
    Because Chinese companies can pay slave wages.

    So the only way for America to compete is to
    Give up all private land rights.
    Stop prosecuting companies that harm people.
    Only allow people to vote for politicians that are pre-selected for them.
    Lower wages to subsistence levels, or even lower.

    Maybe some of these have been done already.
  3. "So the only way for America to compete is to
    Give up all private land rights.
    Stop prosecuting companies that harm people.
    Only allow people to vote for politicians that are pre-selected for them.
    Lower wages to subsistence levels, or even lower."

    Interesting. What you are saying is pretty much the platform of the republican party...let the corporations do whatever they like no matter how much harm comes to the American people, eliminate the unions who bargain collectively for the workers, get workers for slave wages, and have the autocratic Corporations reward their CEO's with power, money, etc.

    Fascinating...perhaps this explains why the right wing is so deadly silent on the way China treats their people, abuses human rights, pollutes for profit, etc.

  4. Bingo!
  5. Really? And other than lending lip service to being against the Chinese-Communization of America, what have Democrats done as they hold out both hands for special interest money?
  6. China's Capital Of Capitalism Weathers Recession

    March 17, 2010

    China's entrepreneurial zeal means it's now second only to the U.S. in the number of billionaires, according to Forbes magazine, which says China's billionaires have doubled over the past year to 64.

    Nowhere is China's private sector more apparent than in the city of Wenzhou, 300 miles south of Shanghai, which produces 70 percent of the world's cigarette lighters and 60 percent of its buttons.

    But in the cradle of China's capitalist revolution, the past year has not been good for China's entrepreneurs.

    Capitalist Number One

    China's economic miracle started with one woman: Zhang Huamei, a trendily dressed 49-year-old whose husky voice hints at the past three decades she's spent hawking her wares. She was the country's first officially approved self-employed private entrepreneur after the Cultural Revolution — or "Capitalist Number One," as one newspaper called her. Back in 1979, it's hard to imagine how different life was.

    "We weren't allowed to do business, so we did it secretly," Zhang says. "I put up a little table in front of my house and sold stuff like toys. I was very scared, but I had to make a living. Most people inherited their parents' jobs after they retired, but I was the youngest of seven kids, so I'd never inherit a job. So I thought I might as well try business."

    Zhang decided to go legit at the first opportunity and applied for a private entrepreneur's license — China's first — in November 1979. It still hangs on the wall of her small button shop in the center of Wenzhou. Though she is still in business, Zhang is not proud of her place in history.

    "I'm ashamed that after three decades, I'm still a small entrepreneur," she says ruefully. "There are so many Wenzhou people who went into business after me who developed huge companies and became the bosses of big factories. I'm not satisfied with myself."

    Zhang says she is ashamed that she's still a small-scale businesswoman, and not the boss of a huge conglomerate. Here, buttons from her shop.

    Capital Of Capitalism

    Hemmed in by mountains and the sea, Wenzhou's land shortage forced its inhabitants into trade. Now, it's China's capital of capitalism. Ninety-nine percent of all business in the city is private sector, according to Wenzhou government statistics.

    And those entrepreneurs have been phenomenally successful: Last year, one in every three Chinese tourists overseas was from Wenzhou and one-tenth of China's luxury cars ended up in this city of 8 million.

    Nowhere is the Wenzhou love of making money — and flaunting it — more apparent than the city's only Louis Vuitton store. As soft Muzak chimes in the background, brand-conscious shoppers finger the $300 key rings and ogle the leather bags.

    "We all like LV (Louis Vuitton) for bags, since everyone knows this brand," says a man who identifies himself as Mr. Wu. He does a quick inventory of his wardrobe: bag by Louis Vuitton, shoes by Gucci, stripy cotton sweater by Paul & Shark with a $600 price tag. "Very expensive, but it's worth it," he adds, beaming in a self-satisfied manner.

    Chen Wenda started a lighter-parts factory at age 18. Two decades later, the millionaire owns a shoe factory, a wine business, real estate interests and a soccer team. He started the wine business to appeal to the brash, high-rolling millionaires of Wenzhou, where Chen says people like to flaunt their wealth more than in any other place in China.

    Diversify, Diversify, Diversify

    One 30-something millionaire, Chen Wenda, is aiming to cash in on the famed Wenzhou flashiness with his wine cellar stuffed full of Chateau Lafite and Petrus.

    His trajectory follows a typical Wenzhou path. In 1988, at age 18, he started a lighter-part factory. Then he diversified. Now he has a shoe factory, an import-export business, a wine business, real-estate interests, and for the past two years, his own personal soccer team, which costs him half-a-million dollars a year. He describes the Wenzhou way of making money.

    "I set up businesses and drop those that don't make money, like the lighter-part factory. No one puts their eggs in one basket," he explains.

    "In Wenzhou, every single person does real estate. Everyone is pushing up the prices of buildings. We dare to do stuff. We're not scared. And everyone wants to be their own boss," he says.

    These days, one in every ten bottles of wine drunk in China is guzzled in Wenzhou, as an accompaniment to deal-making. But Chen says the businessmen here are too busy making money to bother with the niceties of wine drinking.

    "If they think that wine is too sour, they might add Coke to make it go down smoothly. If that's what they want to do, that's fine," he adds. "I don't see the need to emphasize European wine culture. Wenzhou people are too busy to do all of that. They have to meet people and do business."

    Tough Times

    Despite the bravado, the last couple of years have been painful for Wenzhou's entrepreneurs. The financial crisis pummeled its export machine, causing almost 40 percent of business to stop operations in 2008, according to Zhou Dewen from Wenzhou's Small and Medium Business Development Association. Wenzhou's foreign trade plummeted 35 percent.

    Then, just as things were starting to turn around last year, the private sector found itself under attack. A huge lending binge by state-owned banks funneled money almost exclusively to state-owned enterprises, while private ownership rights were infringed in some cases.

    "2009 was the worst year for Wenzhou since economic reforms started," says Zhou. "The phenomenon of theguojin mintui (state advancing as the private sector retreats) was very obvious, in the reform of coal mines and other infrastructural investments, including real estate."

    Zhou is referring to the re-nationalization of coal mines in Shanxi province in the name of improving safety. He estimates Wenzhou businessmen lost about $4 billion, or half their investment, when many smaller, privately owned coal mines were shut down or forcibly sold to state conglomerates. This hit the city hard: In the first half of last year, its economic growth — normally in double digits — was just 4.5 percent.

    America, Beware

    But no one is panicking yet. Back in her button shop, China's first officially approved entrepreneur remarks that the success of Wenzhou's people is due to their ability to chi ku, or "eat hardship." Given how far the city has come, Zhang is confident of its future.

    "So much has changed in the past 30 years. Chinese people are getting strong. We ordinary people have lots of money in our pockets. We want to send our kids to school in the U.S.; we want to travel there," she says. "You should open up to us. If you don't, your America will be slowly swallowed up by us."

    Such brashness is typical in Wenzhou. The city epitomizes the vitality of China's private sector. And its loud, confident business community will be hoping that China's reform process isn't turning against them.