We're All State Capitalists Now

For Bremmer, state capitalism poses a grave "threat" not only to the free market model, but also to democracy in the developing world.

Although applicable to states all over the globe, at root this is an argument about China. Bremmer himself writes that "China holds the key." But is it in fact correct to ascribe China's success to the state rather than the market? The answer depends on where you go in China. In Shanghai or Chongqing, for example, the central government does indeed loom very large. In Wenzhou, by comparison, the economy is as vigorously entrepreneurial and market-driven as anywhere I have ever been.

True, China's economy continues to be managed on the basis of a five-year plan, an authoritarian tradition that goes all the way back to Josef Stalin. As I write, however, the Chinese authorities are grappling with a problem that owes more to market forces than to the plan: the aftermath of an urban real estate bubble caused by the massive 2009-2010 credit expansion. Among China experts, the hot topic of the moment is the new shadow banking system in cities such as Wenzhou, which last year enabled developers and investors to carry on building and selling apartment blocks even as the People's Bank of China sought to restrict lending by raising rates and bank reserve requirements.

Talk to some eminent Chinese economists, and you could be forgiven for concluding that the ultimate aim of policy is to get rid of state capitalism altogether. "We need to privatize all the state-owned enterprises," one leading economist told me over dinner in Beijing a year ago. "We even need to privatize the Great Hall of the People." He also claimed to have said this to President Hu Jintao. "Hu couldn't tell if I was serious or if I was joking," he told me proudly.

Ultimately, it is an unhelpful oversimplification to divide the world into "market capitalist" and "state capitalist" camps. The reality is that most countries are arranged along a spectrum where both the intent and the extent of state intervention in the economy vary. Only extreme libertarians argue that the state has no role whatsoever to play in the economy. As a devotee of Adam Smith, I accept without qualification his argument in The Wealth of Nations that the benefits of free trade and the division of labor will be enjoyed only in countries with rational laws and institutions. I also agree with Silicon Valley visionary Peter Thiel that, under the right circumstances (e.g., in time of war), governments are capable of forcing the direction and pace of technological change: Think the Manhattan Project.

But the question today is not whether the state or the market should be in charge. The real question is which countries' laws and institutions are best, not only at achieving rapid economic growth but also, equally importantly, at distributing the fruits of growth in a way that citizens deem to be just.

Let us begin by asking a simple question that can be answered with empirical data: Where in the world is the role of the state greatest in economic life, and where is it smallest? The answer lies in data the IMF publishes on "general government total expenditure" as a percentage of GDP. At one extreme are countries like East Timor and Iraq, where government expenditure exceeds GDP; at the other end are countries like Bangladesh, Guatemala, and Myanmar, where it is an absurdly low share of total output.

Beyond these outliers we have China, whose spending represents 23 percent of GDP, down from around 28 percent three decades ago. By this measure, China ranks 147th out of 183 countries for which data are available. Germany ranks 24th, with government spending accounting for 48 percent of GDP. The United States, meanwhile, is 44th with 44 percent of GDP. By this measure, state capitalism is a European, not an Asian, phenomenon: Austria, Belgium, Denmark, Finland, France, Greece, Hungary, Italy, the Netherlands, Portugal, and Sweden all have higher government spending relative to GDP than Germany. The Danish figure is 58 percent, more than twice that of the Chinese.

The results are similar if one focuses on government consumption -- the share of GDP accounted for by government purchases of goods and services, as opposed to transfers or investment. Again, ignoring the outliers, it is Europe whose states play the biggest role in the economy as buyers: Denmark (27 percent) is far ahead of Germany (18 percent), while the United States is at 17 percent. China? 13 percent. For Hong Kong, the figure is 8 percent. For Macao, 7 percent.

Where China does lead the West is in the enormous share of gross fixed capital formation (jargon for investment in hard assets) accounted for by the public sector. According to World Bank data, this amounted to 21 percent of China's GDP in 2008, among the highest figures in the world, reflecting the still-leading role that government plays in infrastructure investment. The equivalent figures for developed Western countries are vanishingly small; in the West the state is a spendthrift, not an investor, borrowing money to pay for goods and services. On the other hand, the public sector's share of Chinese investment has been falling steeply during the past 10 years. Here too the Chinese trend is away from state capitalism.

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NICKGP

8:23 PM ET

February 9, 2012

just like china

No doubt about it, the chinese capitalist model is the one our capitalists want to emulate and long for. It is the perfect model, no unions, no voice for or by the workers, everyone will live in the workers cubicles or barracks, the comradery would be good for their spirits. On multi-story buildings, nets will be placed outside to catch the slackers who might think that suicide would be better and as for wages, not to worry, it would be only pennies not even worth a mention.

FLOATINGPOINT

12:35 AM ET

February 10, 2012

The suicides

The incidents that attracted much attention happened at factories of Foxconn, a Taiwanese company. The Chinese government actually useed these incidents to press Foxconn raise wages and move some of its factories to inner-land cities with higher unemployment rates. Go figure.

12:45 AM ET

A relative of mine works for Foxconn. He really looks down on these Chinese laborers. He often says they have "dirty hands," a term referring to their stealing. It happened before that truckloads of electronic parts went "missing". In his opinion, military-style management is absolutely necessary to turn these peasants into disciplined pipeline workers. I feel sorry for him to think that way, and I feel sorry in general for Taiwanese people of whom many think it's a proper way to treat Chinese laborers.

BING520

12:09 PM ET

The focus of labor management at Foxconn is never about prevention of theft. It is about maximization of labor efficiency. Foxconn manages its workforce with high-degree of precision that is almost inhumane. Workers move in a fashion of military maneuver and parade along the colored lined routes on the factory floors. Foxconn makes about $6.00 on each iPad we buy at Apple Stores. Apple's gross profi margin is 31% while Foxconn operates at merely 3% margin. Too many Chinese factories are similar to Foxconn. That's why I am very skeptical that China will soon emerge as a world-class economy.

Theft happens at every factory around the world and in reality is a extremely small problem at Foxconn which employs almost one million people. Foxconn is known for its total conntrol. We don't see iPhone or iPad being smuggled out and sold in the market. Apple executives are very pleased with Foxconn in this respect.

Our business executives are known for brazen theft and embezzlement. Our retailers suffer enormously from shoplifting. I have a theory about why Foxconn managers look down upon their Chinese factory workers. They treat the workers so bad they feel compelled to justify in a way not much different from slave masters hardly have a good thing to say about slaves.

COSSACK

11:53 PM ET

haha... State capitalism is a

haha... State capitalism is a joke, and China will be a prime example of it in a few years

MPETAN

2:51 AM ET

Much ado about nothing

While I think that China's economy will grow, I do not think that it will surpass that of the US...many made the same prediction of Japan in the 80s and 90s...their economy was suppose to be bigger than ours by 2000...but it never happened. You cannot accurately make such predictions when there are hundreds, even thousands, of unknown factors.

PEDROHASA

10:46 AM ET

Capitalism with Asian values

I suggest taking a look on the fantastic Talk to Al Jazeera's post "Slavoj Zizek: Capitalism with Asian values".

I find it particularly interesting when Zizek says: "What I'm afraid of is with this capitalism with Asian values, we get a capitalism much more efficient and dynamic than our western capitalism. But I don't share the hope of my liberal friends - give them ten years, [and there will be] another Tiananmen Square demonstration - no, the marriage between capitalism and democracy is over."

WILL TURNER

11:33 AM ET

State & Market Capitalism are Both Wrong

I believe the metric that best describes the differences are public-private relationships. Obviously the below is in the context of Professor Ferguson's appropriate view that countries fall to certain degrees on the State to Market Capitalism spectrum--in fact differences exist by industry within countries as well.

State Capitalism - Gov't is the boss of the market. Private companies and individuals ultimately only have as much room as is accorded to them. Private actors in China that wield notably autonomous power only do so by having strong connections within the government (particularly at local levels).

Market Capitalism - Gov't and private sector are enemies. In this view you're either pro-government or pro-market. It's a zero-sum approach that in the US, especially from the right, has turned to demonizing all government action as anti-capitalism. Likewise, the left views businessmen as unsavory characters bent on corrupting America at the expense of other citizens.

Both of these approaches are bad. Teams win when they work together and respect each other as equals. The public and private sectors must find ways to cooperate to promote economic growth more broadly. Yes, there will be disagreements when government regulates, but this is part of government's solemn duty along with creating the right conditions for economic growth. The best approach is:

Partnership Capitalism - Gov't and private sector have collegial relationship. Both recognize and respect their disagreements, but do not let this get in the way of their ability to achieve shared economic goals together. See Make It in America by Andrew Liveris and The Next American Economy by William Holstein for some good primers of what I'm getting at.

CHIEFSURFER

3:35 PM ET

Yours is the more

Yours is the more conventional interpretation of what state capitalism is while the author's is an interesting alternative perspective. Both of you point to the same conclusion, that the age of unfettered market has ended, and the state and market must work together to guarantee future prosperity.

SWEINBERG

6:29 PM ET

February 11, 2012

Idealism vs Human Nature

Clearly this is grade school idealogical thinking. Partnership Capitalism simply does not exist. Growth of Government (Western or Eastern) always gravitates towards more power. Growth of Business always gravitates towards more profit. Temptation is too great in human nature to see the forest for the trees. It is precisely this kind of thinking that created the global economic crisis in 2008. Let us not forget that the very derivative investments bought and sold by the institutional investors of Wall Street (and European Banks) were packaged and graded by US Government Institutions Fannie Mae and Freddie Mac. The underlying weaknesses of these financial instruments were hidden by both the US Government attempting to assert regulatory power as well the financial institutions attempting to maximize profits. There is zero accountability within the US Government for their intervention. This was precisely the brilliant partnership that resulted in such a fiasco. Since when do we put so much faith in elected officials and high paid executives to collectively know what's best for the working people? Better they spend less time working to improve their golf games, and more time working for the very people the purport to represent. The presumption that a government has any ability to create the right economic conditions for growth is absurd, and history is not on your side. Governments can only impede the velocity of capital. To the extent that an economic system can withstand such intervention is directly proportional to the volume of available resources to be exploited - measured both in human terms, natural resources, or third world nations. China is enjoying some prosperity more as a result of it's willingness and ability to exploit all of its resources - people, natural, as well manipulate the currency - to artificially tilt the economic favor in its own direction. None of this is sustainable. At some point, the resources are exhausted, and the flow of economic cannibalism will, like water, find lower ground, and seek out those nations, those peoples, and those political systems willing enough to allow themselves to be exploited, in the desperate hope that they will achieve some measure of prosperity. It is a cycle that consumes the humanity from the people.

11:39 PM ET

February 13, 2012

Response to Sweinberg

With respect to your confrontational criticisms, I’d like to address those related to partnership capitalism, government’s role in economic growth, and your cynical view of mankind.

1. PARTNERSHIP CAPITALISM – Those trends you identified in government and business do exist, but they aren’t universal and it’s inappropriate to paint any group of individuals with so broad and simplistic a brushstroke. There are numerous public-private partnerships where both sides cooperate to accomplish shared and personal goals. One of the best examples was the Apollo Program: Businesses made money while supporting the research and production needs for NASA to put a man on the moon. America did it together. My argument is for more collegial interactions like this.

A. Profit & Power – Born with poor vision, I’m glad others wanted to make money by providing me glasses, contacts, and finally Lasik surgery. My 20/15 vision when I wake up every morning is proof that markets can make lives better, and there is nothing wrong with getting paid to make a difference. Every system, however, should be designed with the worst potentials of people in mind (i.e. checks & balances). Ethical businessmen exist, but they will be pressured to compromise their principles if no barriers are placed on the unethical. This is why a degree of regulatory power will always be necessary--for men are not angels. But government must balance this within appropriate boundaries to not unduly hinder the benefits of markets.

The financial derivatives that brought on the crisis exemplify the failures of market capitalism, not partnership. While pursuing profit, Wall Street was helping make homes more affordable. I doubt all investment bankers looked in the mirror every morning and said, “I’m going to screw someone over today.” Those who did were not kept in check because of the view that government “is the problem” and “should keep off the backs of business.” There was no balanced relationship to ensure Wall Street’s innovations would benefit consumers in a safe and sustainable way.

B. The “Private Sector” – High paid executives is too limited a definition of the private sector. America is bigger than its government, politics, and corporations. We’re all private sector actors and have a role in working together to succeed. Everyone who bares the title “American” should take moral responsibility for the health of the US economy. If elected officials and corporate executives aren’t getting things done, we can still move the country forward without them.

2. GOV’T & GROWTH – What do you mean history is not on my side? 1) Rule of law – Government enforced contracts and patents support business confidence. 2) Infrastructure – Governments pushed canals, telegraph lines, railroads, electric wires, & highways that provided new opportunities to private businesses--and accelerated—opposite of impeded—the velocity of capital. 3) Technological Development – Government provided targeted R&D funding to develop airplanes, computers, and the Internet—all foundations for later private innovations. These few examples from US history all show that government can play an active and integral role in economic growth.

3. HUMAN NATURE – Yes, selfishness exists, but so too does a sense of community. Most of us are combinations of both—recognizing our needs to first have food & shelter and then balancing to various degrees our right to earn the things we want with appreciation that we are part of something larger.

I’m a hard-nosed optimist. I recognize the world for what it is—a naturally savage and unforgiving place. Overcoming its challenges is why men first “signed” social contracts and built communities. Our accomplishments to date give me confidence in our ability to improve the world around us. Doing so is never easy and requires great effort, but anything that matters usually does. Where you see a half-empty glass, I see a challenge to find more water.

1:53 AM ET

February 14, 2012

Partnership Capitalism does exist

Other than China, many countries in Asia, directly or through their banks, are involved in wealth creation part of the equation to varying degrees. For example, Japan is famous for its government directed industrial policies. South Korea actively skews its policies to promote its chaebols to the detriment of its smaller businesses. Singapore's government owns quite a few corporations itself, and through its sovereign funds, invests in many companies in the city-state.

In the United States, government activism ran to dead end in the 70s of the last century. Subsequent retreat and massive deregulation did lead to economic revival but soon, its price became apparent. Financial markets became highly volatile and resulted in many crises, such as the Asian Financial Crisis, the Russian Debt Crisis, the Dotcom Crash and finally the Financial Tsunami of 2008. This series of events have already discredited mindless deregulation and laissez-faire economic. It's not inconceivable that a sensible way forward is Partnership Capitalism, or whatever we choose to call state-market co-operation.

JFAIR

1:23 PM ET

China is their own worst

China is their own worst enemy. Whatever economic gains that can be made by this rising superpower is hindered by the fact that corruption is rampant and and speech is not free. How great is China really, when government buildings built with tofu skin collapse on the heads of it's own people. How great is China really, when its scientific research cannot be seriously relied upon. How great is China really, when industrial giants pollute the landscape to the point where life is barely livable in urban areas and the Yellow river has run dry. How great is China really, when the state imprisons the greatest artist in the world preventing its own culture from influencing people all over the world. China is on course to become the most powerful country on earth, the only thing keeping them from becoming the greatest country on earth is themselves.

LEEBAILEY

2:16 PM ET

State Capitalism

What a complete load of Hooey.

I read Statist propaganda in this rag all the time.. but this is the most blatant in a long while. Let's recall that this is a HISTORY PUDDEN-HEAD, not an actual ECONOMIST who might have a clue. Someone who hasn't seen the inside of the real world since he MAYBE work-studied in undergrad years.

The same sort who announced that the US was toast and Japan was the New Economic, Governmental, and Social Order of the day back in 1981. We were all going to be Japan Inc. serfs and learn to love the 'group/team'.

ROT. Japan is imploding, an economic fried egg with a population-flat-line that surpasses the flat-line in Norway and Northern Italy. Their much bally-hooed worker's model has led to a dead-end and was the root-cause of their Nuke Crisis.

Statist People like this author, that flit from fad to fad in a vain hope SOMEBODY will finally prove that Central Planning by people like themselves CAN WORK SOMEWHERE OVER THE NEXT RAINBOW.. should simply be ignored.. like weather-forecasters who can't get the next hour right to save their souls..... Proven Nincompoops.

PHILBEST

11:35 PM ET

Urban development markets matter if u are comparing systems.

You're quite right about Japan, and China is going the same way. A property price bubble did Japan's economy in, and China has the same problem right now.

If you really want to compare real market capitalism and China's "state capitalism", compare the price of identical new apartment blocks in Houston or Beijing.

Because Houston's urban land market is probably the closest to a genuine free market anywhere in the world, the apartment block is much cheaper in Houston, even in nominal terms before one starts comparing income levels. Hence you will never get a property price bubble in Houston.

In fact, approx 200 out of 260 US cities covered in the Demographia Survey, had no property price bubbles at all, because they have something close to a true free market in urban development. Strict urban plans and lengthy permission processes have identical outcomes to an actual corrupt racket in urban development like in China.

People who talk about the death of market capitalism have failed to notice that "freedom to build" made most US cities irrelevant to the rent seeking rackets in Californian mortgages (and mortgages from a few cities outside California with rackets in development land) that caused the crisis on Wall Street.

OBJECTIVIST

3:07 PM ET

Contradiction

"State Capitalism" is a contradiction in terms. The author clearly doesn't understand the definition or concept of what Capitalism is. Capitalism is the system where the initiation of force is legally banned from society (therefore men are left to act as traders, rather than looters from one another or slaves and slave masters like all collectivist systems create). Thus, it is the system that protects individual rights. Capitalism deals with much more than just economics. However, it protects individual rights, and as a result leaves men free in terms of economics as well. There is only one type of Capitalism. Any example of an INITIATION of force by government is anti-capitalist and creates a mixed economy.

3:46 PM ET

Well, my Macroeconomic 101

Well, my Macroeconomic 101 taught me that almost every country's economy was a mixed economy, including that of the United States. By your logic, Capitalism hardly exists then.....

5:35 PM ET

So, according to your points,

So, according to your points, the only "true" capitalist model is anarcho-capitalism.

8:40 PM ET

That's correct...

True Capitalism has never existed. The closest we have come was the early period in the American North. (The south with slavery, of course, was not Capitalist).

And no, i do not advocate "anarcho-capitalism". I advocate for a strong government, that does only one thing.... ban the initiation of force in society. I would never for a second advocate having no government. I just don't want it to initiate force in any way on its citizens as that would be a violation of rights.

ALANCHRISTOPHER

5:02 PM ET

Economic Changes

The author omits the rapid US failures that brought its economy to this point. In this century, the US has destroyed US computers, digital cameras, cell phones, and fertilizer, the basic components of smart munitions. The US has destroyed US ground and air vehicles. The US has burned billions of gallons of US gasoline, diesel fuel, and aviation fuel. The US has wasted billions of man hours in unproductive activities. Before 9-11, 60% of US scientists, engineers, and technicians came from Asia. Since 9-11, Homeland Security has denied visas to many Asians, so these people, who were qualified to work in the US, set up companies in Asia that competed against US firms. Increasingly, US companies moved to Asia because they could not be certain that Homeland Security would permit the scientific talent that they needed to enter the US.

The author also omits the US failure in education. 13% of US students major in the sciences compared to 50% in China. Based on population differences, China produces 17 times as many scientific students as the US. In a recent international test Chinese students in Shanghai scored 1st in math and 1st in science while US students scored 31st in math and 23rd in science. Hong Kong students scored 3rd in math and 3rd in science. 60% of all new research and development facilities in the world have been built in China compared to 2.5% in the US. The US cuts spending on education while China raises educational spending. The US is falling in rankings of universities while Chinese universities rise according to the British.

In economic terms, the US has been falling steadily since 2000 in economic competitiveness while China has been rising according to the Swiss-based World Economic Forum. In the latest survey, the US continued to fall while China rose, and China beat the US in two categories. Hong Kong beat the US in 14 out of 15 categories. There is worse news. Twice in the first decade of the 21st century, in the 2002-2003 Accounting Scandal and the Financial Scandal of 2008 to the present, US corporate leaders and financial leaders proved to the entire world that US economic leaders are liars, thieves, and criminals. Twice, American corporate and financial criminals cheated NATO, Europe, the Middle East, India, Asia, the Pacific, Latin America, and the US. In addition, the US does not prosecute corporate criminals with the same vigor that it reserves for poor criminals, although corporate criminals destroy more lives than poor criminals.

In the US, private businessmen set up companies, hire people to make products, and sell the goods, generating paychecks and taxes for workers and creating profits and taxes for the company. Three types of business exist in China: state owned, state-private partnerships, and privately owned firms. State-owned firms make profits, and it gives taxes from workers to the state. State-private partnerships yield part of the profits, tax part of the profits, and give taxes from salaries and paychecks to the state. In private companies, the state receives taxes from company profits and taxes from salaries and paychecks. The Chinese model offers more revenue streams for the state to finance development programs that have insulated most of China from the economic and financial crimes of the US. China has budget and trade surplusses that it invests for more profits. China also provides greater oversight to prevent the crimes of the US because Chinese regulators know more about economics and business than Americans and can discover the crimes that Americans cannot find.

Adam Smith claimed that enlightened economic self-interest would make the system work, but he was to blind to the temptations of excessive greed.
The Chinese system will dominate the remainder of the century because the US and its allies have destroyed themselves in endless wars and because they do not properly regulate the corporate and financial criminals who can be as greedy as the most evil criminals.

5:36 PM ET

Deletion and Addition

I would delete the last sentence of the 4th paragraph because China has the potential for better regulation, but there are not enough regulators, and they can be as greedy as others.

I would add at the end: China will lead the world because their system gives officials more revenue streams to balance their budgets and finance needed projects.

1:35 PM ET

Additional Evidence

Supporting the 2nd half of paragraph 1, on Friday, 2-10-2011, "USA Today" published an article, "Analysis: Denials of work visas to U.S. rise." Homeland Security denied visas to "Indian-born professionals and researchers," "employees with specialized knowledge," and "executives, managers, other professionals" at rising rates from 2007 to 2011. Denial rates for specialized knowledge applicants rose from 7% in 2007 to 27% in 2011. Homeland Security requests for supporting information rose from 17% in 2007 to 63% in 2011 and resulted in visa delays or denials for 90% of applicants. India is a democracy that the US often claims to want as a partner. Fortunately, Homeland Security helps to insure that these denied Indians will create companies to compete against the US, and it protects the US from US competitiveness, US innovation, US business growth, and US jobs. Thank you, Homeland Security.

KOKOMAN

That's very odd in this day and age - a far-right politician adv

That's very odd in this day and age - a far-right politician advocating imposing trade barriers. That's neither libertarian nor neoconservative ideology and is unusual, to say the least, among modern far-right politicians in the West.
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DR. SARDONICUS

7:27 PM ET

Please call a spade a spade, for once

Market capitalism, state capitalism…

What we are really witnessing is the global takeover of civilization by National-Capitalism. It differs from Fascist National-Socialism and Stalin/Maoist National-Communism only in that its corporate/military special interest groups need not bother with worker’s rights.

Otherwise, constitutional decay at the hands of its sworn defenders, elite corruption, prison metastasis (more Americans in prison than any Russian Gulag), educational decay, mass media for propaganda purposes only, the militarization of police and civil functions, the accumulation of wealth and power by a shrinking, encysted cadre of true believers at the expense of the People, and the military-police persecution of an expanding series of select minorities, all under anti-democratic corporate dominance, are prevailing here in the USA, over in China, and everywhere else for that matter.

A self-recruiting corps of more than less anarchic, more or less competent sociopaths and psychopaths is responsible for this political devolution. They promote themselves based on ruthless ambition, ambiguous morality and little else. They eventually replace the conscience-driven entirely; these last unskilled at and unwilling to direct this kind of mass tyranny, yet too morally lax and cowardly to confront the sociopaths and put them in their well-deserved place.

Meanwhile, blather on about "state versus market capitalism," as if those things mattered, were predictive or offered any relief from their landslide of abuse.

AND REW

10:24 PM ET

There is no true free-market

I believe Niall Ferguson is right in saying that we are all state-capitalists. We should accept that our choice has never been between regulation or no regulation. Our choice has always lied in what TYPE of regulation. In that lies our problem, and hopefully to recover from it we merely have to change these regulation--not necessarily our whole philosophy with regards to capitalism.

It is a fact of our contemporary history that narrow special interests rigged the laws of the land, from financial to litigation to corporate governance, under the banner of free-market. No, they merely replaced efficient, fair laws with those regulation that favored them.

If we rein in Wall Street risk taking, for instance, we are not less capitalistic than we were before. The case when that holds true is when the government decides to become the financial sector, which is not even close to the point of contention here in the US and in Europe.

MARTY MARTEL

8:40 AM ET

China has U. S. tiger by the tail, thanks to Nixon-Kissinger

Unlike Russia, China has made Communism work successfully, courtesy of Nixon-Kissinger.

Had it not been for that Nixon embrace in 1972, China’s rise to super power status would have been far more slower with all the US, West European and East Asian markets closed to cheap Chinese products. Had it not been for that Nixon embrace, China’s technological progress would have been far slower in the absence of West’s technology transfers. Had it not been for that Nixon embrace, China’s military progress would have been far slower in the absence of huge forex reserves that China accumulated from the massive exports of cheap Chinese products and China used those forex reserves to acquire latest military technology.

Now China has US by the tail - US businesses are hooked to huge profits that cheap Chinese products generate for them as a walk through any Walmart, Home Depot, Sears and Macy’s filled with Chinese goods prove and US government is hooked to huge investments that China makes in US governmental securities from the sales of cheap Chinese products to US businesses.

China’s power is multiplying day by day and now there is NO power on earth capable to stop China, least of all U. S.

Little could Mao or Deng have imagined that by wearing a capitalist mask, their followers will beat capitalists at their own game. Lenin used to say that ’capitalists will sell us the ropes with which we will hang them’. With West selling such proverbial ropes in the form of technology transfers, Chinese Communists have proven that Lenin saying quite prophetic.

The second cold war has already started, this time between US and China . And if US had upper hand against Soviet Union in the first cold war, then creditor China has upper hand against debtor US in this second cold war.

China’s rise to super power status to challenge US is a fitting monument to the much-celebrated far-sightedness of Nixon-Kissinger to embrace China to counter Soviet Union in 1972 just as 9/11 attacks is a fitting monument to Reagan embrace of Islamic fundamentalists to counter Soviet Union in 1980s Afghanistan.

It behooves China to erect the statue of anti-Communist Nixon right next to die-hard Communist Mao in Beijing for speeding up China’s rise to super power status.

PEARPANDAS

11:21 AM ET

Interesting

This is pretty fascinating - state capitalism is a more interesting form of capitalism than market capitalism. I live in Sweden, and the state looks after people here. If the government were to do this and direct the money to the people (which I imagine would feed into the political growth of the party) this could be an excellent system and one in which everyone's quality of life would go up. I don't want to be too quick with either praise or fear of the way China will run the world, but I think that seeing another way to go about capitalism is unavoidable and will probably do good in the world.

Foreign Policy Magazine

Inside National Security

The debate about whether America or China will ultimately triumph is a red herring that distracts us from the real contest of our time.

BY NIALL FERGUSON | FEBRUARY 9, 2012

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