A second important lesson from the Chinese, and one that helps to explain why their growth rate is higher than ours, is that we are drowning in debt while they are awash in savings.
Before we jump to the conclusion that China’s economic model is the way of the future, we should remember that we have heard similar projections before. In the late 1980s, commentators raved about the Japanese economic model. Predictions abounded that the Japanese economy was so powerful and unstoppable that it would soon surpass our own and be the wealthiest in the world. Like the Chinese state today, the Japanese government worked closely with businesses to forge an industrial policy that (allegedly) would prove far superior to a free-market model. Then the wheels fell off and the bubble burst. Since then, Japan has struggled with economic stagnation and malaise.
China, of course, has a much larger population than Japan, and it certainly is possible that it eventually will have the largest GDP in the world, but to the extent that the Chinese government calls the economic shots and tries to pick winners and losers, China runs the risk of ending up like every other country (including our own) that has squelched free markets—broke and stagnant.
It is ironic that the former head of a major American labor union is enamored with a political system and economic model in which workers earn low wages and are not represented by independent labor unions. The precarious state of individual rights and liberty in China doesn’t seem a great concern to Andy Stern. Instead, he is eager to sign on to a system which (according to Professor Ralph Reiland in an Investor’s Business Daily commentary) enables the sons of China’s top Communist Party leaders to buy $400,000 Ferraris and $32-million mansions.
China’s hard-working people and high savings rate are impelling China’s rapid economic development, and for that China deserves our respect. But the political system of crony capitalism run by the Chinese politburo is antidemocratic and elitist to the core. For Andy Stern to claim that such a model is superior to freedom and free enterprise … well, you can draw your own conclusions.