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July 15, 2005

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"New left" interview

An interview with Professor Wang Hui, a leader of China's new left movement (via TPD). As I said at TPD, the idea of Jiang Zemin as a Reaganite has kept me smiling all day. There's also some dangerous hog-wash in the interview:

I know this is the popular economic theory — that private ownership is the best incentive. Well, capitalists can also free ride. The reality is that owners are always looting their own businesses. Look at Enron. This is (Nobel-prize-winning economist George) Akerlof's theory.

It's a myth that capitalists will not steal from their own enterprise, because they don't own their whole enterprise. The idea is very simple. The owner of a firm is only interested in the net assets, the part that can be redistributed to owners. But the firm has total assets over and beyond net assets. These are debt to banks and also implicit debt to workers — like pensions and benefits. Under certain conditions an owner can loot both the implicit and explicit debt of the firm.

Ironically Bernie Ebbers of Worldcom just got 25 years jail for his "looting". The problem with this theory is in capitalism such looting has consequences. Capitalists who steal get punished. The problem in China is rule of law isn't properly applied, thus allowing some owners to get away with ripping off banks/workers/companies. Economics are about incentives, and if there is little to deter such negative behaviour, it's going to happen. So the professor must only be referring to Chinese capitalists, and only some of them at that.

The professor agrees the European social democratic system is his model. This is the same model that currently has over 10% unemployment in both France and Germany compared to 5% or so in the UK and US. Luckily the professor sees a way to avoid Germany's problems. Instead of using high taxes to redistribute (loot?) he's proposing the distribution be "fair from the start". Which completely contradicts his hypothesis that China needs a new system because of its current inequity.

The overall thesis seems to be that workers should be grabbing a share of the spoils. In other words, socialism. Let's recall how many people socialism managed to drag out of poverty and improve living standards...

Previous posts on the topic

China's new left
China's New Right (my response on to the new left)

 posted by Simon on 07.15.05 at 03:12 PM in the




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Comments:

> The problem with this theory is in
> capitalism such looting has consequences

I agree in principle, but there since "capitalism" is an abstraction, the devil is in the details. In theory private property rights make this stealing, but of course rights need a functional governing institution to enforce them. Here in the US the Supreme Court just radically reinterpreted the takings clause of the Constitution, basically allowing one capitalist to use the government to in effect steal from another with the blessing of the institutions that are supposed to enforce private property rights.

 posted by: Derek Scruggs on 07.16.05 at 12:45 AM [permalink]




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