When it was clear that China would take control over all of Hong Kong in 1997 and not just the “New Territories” which Britain in 1898 leased for a 99-year period, there were many who worried that China wouldn’t respect its pledge that Hong Kong would remain de facto independent under the formula “one country-two systems” until at least 2047. Hong Kong have for long been the freest economy in the world while China previously was communist and still are so albeit in name only. Hong Kong, they feared, would become more like China.
But as it turns out, China have instead become more and more like Hong Kong and have in fact worked to preserve Hong Kong’s relatively free economy. When the last British governor of Hong Kong, Chris Patten, in 1994 wanted to introduce a government pension system similar to Social Security in America, the Chinese government protested heavily and denounced Patten for trying to ruin Hong Kong’s capitalist character just a few years before the handover by implementing a “costly Euro-socialist” scheme in Hong Kong. It should be noted that Chris Patten belongs to the British Conservative Party yet he was denounced by “communists” for being too socialist! This says a lot of both how socialist Western conservatives have become and how market-oriented the Chinese Communist Party have become.
And in recent years we have seen more and more examples of this as representatives of “the free world” attack”the communists” for not being socialist enough.
The Economist which by many is regarded as free market oriented, attacked the Chinese communist party in its August 21 2004 issue for not spending enough taxpayers money on health care. Allegedly, China’s mostly free market health care system have lead to all sorts of evils including lower life expectancy and higher infant mortality (Interestingly, it was recently reported that infant mortality in Beijing is only half of that in Washington D.C.) which can only be solved by going back to Mao Zedong’s communist health care system which The Economist actually praised. The article ended with the line: “Slowly and reluctantly as it maybe, China is beginning to discover that market forces alone cannot produce good health care.”
In a display of economic ignorance amazing for a magazine that calls itself “The Economist,” they claimed that one of the evils of a free market health care system was that it encourages thrift. As the Chinese don’t get their medical bills paid by the state, they feel a need to save a lot so that they can be sure to afford their medical bills if they get sick or injured. As The Economist put it: “Public anxiety over the collapse of affordable health care is reflected in China’s high savings rate…Worries about the fast-rising costs of health care and education…is restraining consumer demand and thereby imperiling China’s long-term economic growth.” That the high savings rate is what has made China’s high investment rate possible and that it is this high investment rate which have made China the fastest growing economy in the world for the last two decades is completely overlooked.
And now the OECD, a club for rich countries (although it includes the two not particularly rich countries Mexico and Turkey), expresses agreement with The Economist and calls for the Chinese government to spend more money on health care and education. While the OECD thinks the development towards a increasing share of output coming from privately owned companies is good and should continue they express disapproval that the cradle to grave welfare system of the Mao era and that few particularly in rural areas have formal health coverage and they therefore call for the Chinese government to increase spending on education and health care.
Of course, one should not delude oneself into thinking from these euro-socialist attacks on China that China is some kind of pure laissez faire economy or that they can even be regarded as free as their “Special Administrative Region” Hong Kong in economic issues (much less non-economic ones). The Chinese government like all governments have a habit of violating people’s rights at will. But China certainly is in the important aspect of welfare statism much less socialist than the west and this is an important explanation for why the Chinese economy is so successful and will remain so unless they start listening to the euro-socialist advice that “the free world” gives them.
September 21, 2005