America’s Economy Is Now More Communist Than China


US and China are taking on each others economic policies of free market capitalism and statist communism at an alarming rate.

If you were to look at the economic statistics of various nations without labeling the country responsible for each set of data could you figure out which data sets are from “capitalist” societies and which come from “communist” societies?

How about by looking at some of the nations financial and business regulations?

As remarkably absurd as it may sound, upon examining those differences you may be shocked to find that communist China is more of a free-market capitalist society than the United States and the United States economic policies are far more resemble those of “statist” communist nation than you would have realized.

Two articles below examine some of those differences. First some excerpts from an with Peter Schiff who explains why he believes China’s economic policies are far more like a “free market capitalist” society followed by an article highlighting some of statistics that tend to back up the argument.

What do you think?

Here’s a snippet of Slate’s interview with Peter Schiff.

Excuse Me, But Your Democracy Is Ruining My Capitalism

Why Euro Pacific Capital CEO Peter Schiff will argue that China does economic policy better than the U.S. at the Slate/Intelligence Squared live debate on March 13.

Peter Schiff, a one-time adviser for Ron Paul and the best-selling author of Crash Proof: How to Profit From the Coming Economic Collapse, blames “one man, one vote” democracy for the United States’ waning prosperity. He thinks the Chinese should pull their trillions out of American bonds immediately. And while he has no doubt that free market capitalism is a country’s best recipe for economic success, he turns conventional wisdom on its head by suggesting that Adam Smith’s spirit may have relocated from Washington to Beijing.

Schiff, the CEO and Chief Global Strategist for Euro Pacific Capital, will argue that China does capitalism better than America at the Slate/Intelligence live debate in New York on March 13. We recently spoke about Chinese and American economic policies. The conversation was surprising. Read on for Schiff’s take on U.S. tax codes, Chinese creativity, and why the protests inflaming the Middle Kingdom aren’t so different from Occupy Wall Street.

Slate: You’ll argue on Tuesday in support of the motion that China does capitalism better than America. What do they know that we don’t?

PeterSchiff: First of all, I don’t think either the United States or China does capitalism all that well. America did capitalism a lot better in the 19th century than China does it now, but today, China does it better than we do. Though both countries have far too much government involvement in the economy, we have more. They’re Communists, supposedly, and we’re not, but our government screws up our economy more than the Chinese government screws up its.

Slate: What are we doing wrong?

Schiff: Taxes are significantly lower in China. If you earn money, the Chinese government lets you keep much more of it, particularly if you’re a corporation. In America, the government takes money out of the private sector to spend it. Then, in terms of regulation, we try even harder than the Chinese to micromanage our economy. The Chinese certainly try, too. They do a lot of central planning and there are many businesses the government favors. But we do it on a bigger scale here, with the way we tax and subsidize.

Think about how the government tries to influence behavior through the tax code, so that things happen that wouldn’t happen in a truly free market. When Washington directs capital or labor in certain directions, that’s central planning. It’s stateism. If you start a business in the U.S., not only do you keep a smaller percentage of your income than you would in China, but more of your time is devoted to complying with complex government rules. Even litigation—you’re more likely to be sued frivolously in America and have to spend a fortune defending yourself as a businessman. Don’t get me wrong: Neither the U.S. nor China is a free-market capitalist paradise, but we’ve drifted further away from it than China has.

Slate: Your debate opponent Minxin Pei wrote in Foreign Policy last summer, “Although Asia today may have one of the world’s most dynamic economies, it does not seem to play an equally inspiring role as a thought leader.” Do you agree that China falls short on innovation?

Schiff: No. There’s a lot of creativity coming out of Asia, a lot of patents. The big problem for countries like China and India is that they still subsidize the U.S. They buy our Treasury bonds and lend us all this money so we can keep consuming. That’s a big subsidy and a heavy burden.

Slate: Doesn’t China need to lend us money so we’ll buy Chinese exports?

Schiff: No. They can use their money to develop their own economy, produce better and more abundant products for their own citizens. It’s a farce to think that the only thing China can do with its output and savings is lend it to the U.S. government, especially when we can’t pay it back.

Slate: How would you advise China to proceed with the United States, keeping in mind diplomatic concerns along with economic ones?

Schiff: I would tell it to decouple. Absolutely. Although, the sooner China does that, the sooner we’re going to have to deal with the consequences, which are going to be truly horrific.

We’d have to immediately cut government spending dramatically. Diminish our consumption. We wouldn’t be going to the malls and buying stuff. The whole U.S. economy would have to restructure along the lines of Americans being frugal, saving their money, and working harder. A lot of government workers would have to lose their jobs. Those who didn’t would suffer big cuts in their pay. People who worked in the service sector—in banking, health care, or education—would also struggle if China stopped subsidizing us.

Slate: Do you think that day is coming?

Schiff: It’s definitely coming.

[…]

Source:The Slate

From Peter Schiff’s channel:

Peter Schiff : America more Communist than China

Peter Schiff : This level of taxation puts American corporations at a noticeable disadvantage vis-a-vis companies in the countries against which we are most keenly competing. In China, the slicing of the pie is much more favorable to owners. There, corporations are taxed at a rate of 25% and dividends at 10%. Using these numbers (and the same payout ratio used for the U.S. corporation), the Chinese government gets 51% of distributed corporate profits and shareholders get 49%. In Hong Kong (which is part of Communist China), the situation is even better. There, the corporate tax rate is 16% and the personal dividend rate is zero. If you do the math there, the government gets 33% and the shareholders get 67%. This comparison raises an interesting point. If shareholders in communist China are allowed to keep more of their earnings than shareholders in capitalist America, which nation is more communist and which more capitalist? – in ibtimes.com

From Azizonomics

Who’s the Communist Now?

I’d like to draw readers’ attention to a statistic I flagged up a few weeks ago that I don’t think I emphasised sufficiently. I was writing about America’s current tax burden, its deficit, and the stark choice that Americans — and also the rest of the people of the world — face:

America spends 24% 39% of its GDP as government spending. Other nations spend far more than America, but they also tax more. 52% of French GDP, 37% of Japanese GDP, 47% of British GDP, 18% of Thai GDP, 32% of Swiss GDP, 78% of Cuban GDP, 27% of Indian GDP and 17% of Singaporean GDP is government spending.

Most interesting by far is “communist” China. Only 20% of Chinese GDP is government spending.

Nihao, Capitalists!
That’s right: “communist” China is now less statist — at least in economic terms — than “free” America.

Meanwhile at Davos, the West’s “economic leaders” pillory capitalism as worsening inequality.

From the BBC:

Growing inequality should now be the priority for leaders after the economic crisis, senior economic figures at the World Economic Forum have said.

They insisted that more needed to be done to tackle excessive pay, poverty and unemployment.

The discussion, hosted by BBC World in the Swiss ski resort of Davos, was held as figures showed almost half of young Spanish people are out of work.

Economist Nouriel Roubini warned inequality threatened social stability.

“We are in a very fragile world,” said the economist, dubbed Doctor Doom because of his predictions leading up to the 2008 financial crisis.

“The issue of distorted pay is not being addressed, banks that were deemed too big to fail now becoming even bigger,” he said.

I think there is a very strange psychological trend occurring here, and it’s actually one I recognise in my younger self. I was born in 1987, and grew up in the shadow of the 1990s, long after Deng Xiaoping, long after the “End of History”, long after the end of the “Red Menace” that was the Soviet Union. Long after the West really felt any need to differentiate itself as “capitalist” against a background of growing statism. Instead, the growing statism was in the West, even in spite of the legacy of Reagan and Thatcher — two leaders who both managed to spew a great deal of pro-freedom rhetoric, while at once greatly expanding the scope and shade of government.

This psychological trend can be summed up as the idea that the first recourse for social and economic problems is more government action. Too much inequality? Regulate against it. Too little innovation? Legislate for it. Too little demand? Stimulate it. Too much bad government? Elect a better one, who will do more of the things we “love”, and less of those we “hate”.

The idea, in the simplest terms, is that changes to society should come from the great overhanging monolith, and not from the little individuals on the ground. No, we are just fish swimming in an ocean of dialectical chaos. We are just flecks of paint on the great canvas of humanity. No, let us not agitate or gravitate. Instead, we must “co-ordinate” and “unite” under the aegis of government; the blind painter.

The climax of this bizarre psychological trend was the election of Barack H. Obama. After all the misdeeds of Bush and Cheney, he would be the one to restore government to its “proper” role: “helping the people”, “creating a better America”, “investing in tomorrow”, etc, etc, etc, blah, blah, blah.

This is a licence for more central planning and more government largesse. There are two problems here:

Regulatory Capture: As David Rothkopf has argued: “Geography, pedigree, networking and luck unite a superclass of 6000 individuals that possess unparalleled power over world affairs.” Obama’s top contributors are the same old people. Obama appointed more ex-Wall Street figures to his administration than anyone before him. Ultimately, the people chosen as central planners have a track record of enacting policies that enrich themselves more than everybody else. The people lining up at Davos calling for a new system, i.e. more government, are the same elite who have ruined the old one. As Jonathan Weill writes: “It’s becoming hard not to suspect that the annual gathering in Davos has become a conclave for global elites to promote crony capitalism and state-backed enterprise, ensuring that national coffers remain available to be tapped for private gain.”
Unintended, and Unexpected Consequences: Central planners are often pretty bad at the job. Bernanke and Yellen failed to predict the end of the housing bubble (that their predecessor Alan Greenspan helped create) with terrible consequences. Tim Geithner lashed that there was “no chance of a downgrade” right before S&P downgraded US Treasuries. Angela Merkel demands austerity from a frail and ailing Greek economy suffering from a severe contraction that is only worsened by austerity. The Iraq and Afghani wars created more terrorists than they killed, and added a multi-trillion dollar shackle of debt to the American government. America’s deindustrialisation (in the name of cheaper Chinese goods) has created huge unemployment in America, as well as making the American economy ever more dependent on the fragile flow of trade for components and energy. History is dominated by black swans — and the history of central planning is dominated by unintended consequences. We just don’t understand reality well enough to centrally plan it.
Of course there is a bigger concern here, and one that I have written about before: central planning kills the market mechanism. […]

[…]

Source:Azizonomics

Categories: ECONOMY

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