By Matthew Yglesias
Something that emerges quite quickly and a bit unexpectedly from being taken around on an economics-focused tour of China is that the Chinese economic miracle is really a great deal less of a “free market” miracle than the conventional understanding in the United States would suggest.
What’s more, it’s not simply a case of “industrial policy” à la Japan, though that’s certainly an element. Rather, the really striking facts are things like the one highlighted by Tyler Cowen that “Of the 22 Chinese corporations listed on the Fortune Global 500, 21 are controlled by China’s central government or state-run banks.” The closest analogy it seems to me is probably to France, which I think is the western country to have been least-impacted by the neoliberal turn away from state ownership of firms. And somewhat like in France, the Chinese speak specifically about the idea that over the past thirty years their development has been enhanced by the creation of a better-educated better-trained bureaucracy and their aspirations to continue doing this in the future.
By the lights of the American conventional wisdom, this whole situation seems mostly like a warning sign—beware! you’re violating the terms of The Washington Consensus!—but nobody can doubt that they’ve had a great run for the past 20 years. What’s more, though the prevailing policy consensus in the United States would lead you to believe that a country with France’s policies would necessarily be a basketcase, France is itself a very successful and prosperous nation and society. A crucial difference, however, is that the French economy takes place against the backdrop of the kind of social welfare provision that you see in all different kinds of European countries, something that’s overwhelmingly lacking in China.