China Understands Capitalism Better Than America Does

China Understands Capitalism Better Than America Does

Chinese tech shares slipped to start the new week, as the latest news from Beijing's regulatory crackdown and accompanying societal overhaul weighed on the heavyweights. Late last week, The Ministry of Human Resources and Social Security ordered platform operators to conduct reviews of working conditions for gig economy workers whose rights must be ensured and whose safety must be guaranteed. The statement followed a meeting between multiple regulators and at least 10 platforms, including Meitu
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9 thoughts on “China Understands Capitalism Better Than America Does

  1. Minor quibble, but by inferring that Americans are unaware of the dynamic you so succinctly describe I think you have to be specfic. I think a large-ish majority of the working class certainly understand it, as do the policy-makers that buttress these burgeoning monopolies, and the court system that refuses/has refused to pursue action against the really big fish in tech and communications for anti-trust violations, FCC violations, FISA violations (which were de-criminalized post facto – if only marijuana-related charges were so easy to dodge!). How do you think we arrived at such an ugly place, politically? Awareness, without the ability to act – no, I think it is well understood by most of those that struggle under the weight of the thing. It is the top 10% that remains willfully, and blissfully, ignorant.

    1. Thanks for your comment, Mr. G. I own a share of resentment for that top 10%. But the Chinese actions lately and H’s column today remind me of utterances from Biden late last year, some references he made to monopolies and reviewing the anti-trust laws.

      Biden is a busy guy, but I wonder to what extent he may still has these questions in his back pocket. Even more, though, I wonder how he would leverage anti-trust law to benefit him politically for 2024. This is obviously a known issue with a broad swath of blue constituents. If I were Joe, I would certainly look closely at the option of confronting our economic Goliaths. Furthermore he could manage the timing and the exercise as a potential winner politically. If he even provided some form of perceived, meaningful impact in regard to the monopoly power by just placing certain business in check, he could symbolically (at the very least) magnify the power of not only the presidency and, more importantly, the law.

      And I must say, Amazon and Jeff Bezos would be an absolutely superb Guinea pig.

  2. There shall be no monopolies in China other than The Party, and it shall be supreme.

    The rest of the players, deprived of walled gardens, proprietary customer data, or low cost labor, shall subsist at the zero marginal gross profit line.

    The S&P 500 minus the FANGMANs is a sorry chart, trailing even the sclerotic Eurozone and the shambolic LatAm – uninvestable really. Why would global equity investors send capital to such a stock market?

    China’s debt is excessive, opaque, and subsists on government support. With the primary source of investable debt – property development – in the “common prosperity” crosshairs, bond investors should fear the experience of their equity counterparts. Why would global bond investors send . . . ?

    Perhaps this is the lasting China credit impulse risk: that the price of Xi’s political control is the redirection of foreign capital flows.

  3. “Crucially, the notion that it works best when markets are totally “open and fair” is a patent falsehood.” My dissertation chair and I argued about this point constantly. I’m lucky I managed to graduate. What you say is right on. “One way to kill “free market” capitalism is simply to make the market totally free.”

    It used to be fashionable to study something called “industrial organization” in Economics. Michael Porter, the great Harvard strategy maven was a devotee of this subject field. In that sub-discipline we identified four ways of organizing an industry (defined as a group of companies producing products or services that are close substitutes for one another: technology, for example, is NOT an industry). The modes of organization ranged from Monopoly, one firm controlling an industry and able to extract excess profits from its customers; to Oligopoly, a few firms controlling most of an industry (most of the US economy is controlled by large oligopolies in food, autos, industrial goods, defense, etc.); Monopolistic Competition, a bit of a fringe mode; and lastly, Pure Competition. What most people don’t realize is that when an industry is organized as purely competitive, it contains huge numbers of firms which can easily enter and leave and which enjoy little or no sustainable competitive advantage in the market. As a result no one in such industries can actually make what is known as an excess economic profit. Most of the participants in a purely competitive industry make little or no profit above sustenance. Historically, the US economy was built by monopolists who could build and serve huge basic markets and who could, because of their large profits, create the capital base to support the growth necessary to meet consumer and industrial demand. Through innovation many monopolistic industries eventually see new entrants and become oligopolies, a generally self controlled, efficient form of industry organization. Sadly, it’s no longer fashionable to speak of such things and because the US lacks any real form of industrial policy, politics alone will increasingly rule our economy, strictly for the benefit of those in power, most of whom, regardless of part affiliation, are now or soon will become multi-millionaires.

  4. I see it as a great political and economic experiment. A large country in one hemisphere with government controlled by corporations juxtaposed with a large country in the other hemisphere with corporations controlled by the government. It’s very interesting to watch this one play out but difficult to separate facts from propaganda.

      1. Per Wikipedia: “The earliest known written records of the history of China date from as early as 1250 BC”. That would be 3,271 years back. But they also note that “What is now China was inhabited by Homo erectus more than a million years ago.” and “the Lithic stage (12,340–10,800 BCE) was the earliest period of human occupation in the Americas…”. So, you are right – no comparison. Thanks for enlightening me.

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