Saturday , October 16 2021
Home / Project Syndicate / Do Free Markets Still Beat Central Planning?

Do Free Markets Still Beat Central Planning?

Summary:
Institutional arrangements are complex systems, shaped by history, geography, and culture. The objective should not be to identify a one-size-fits-all approach, but rather to devise the combination of characteristics that would deliver the greatest good for the greatest number of people, with the right checks and balances. HONG KONG – In 1944, Friedrich A. Hayek suggested that the spontaneous order of markets was inherently superior to the supposedly dynamism-draining totalitarian order of communist or fascist regimes. The ensuing decades – when free-market economies thrived, and the Soviet Union’s centrally planned economy imploded – seemed to vindicate him. Then along came China. How Not to Launch a

Topics:
Andrew Sheng considers the following as important:

This could be interesting, too:

Menzie Chinn writes Velocity Is Not Stable

Paul Krugman writes The Fed Shouldn’t Make a Call on Inflation Yet

FT Alphaville writes Italy’s ill-fated dalliance with techno-democracy

conversableeconomist writes Reduced Wage Inequality Since the Pandemic

Institutional arrangements are complex systems, shaped by history, geography, and culture. The objective should not be to identify a one-size-fits-all approach, but rather to devise the combination of characteristics that would deliver the greatest good for the greatest number of people, with the right checks and balances.

HONG KONG – In 1944, Friedrich A. Hayek suggested that the spontaneous order of markets was inherently superior to the supposedly dynamism-draining totalitarian order of communist or fascist regimes. The ensuing decades – when free-market economies thrived, and the Soviet Union’s centrally planned economy imploded – seemed to vindicate him. Then along came China.

The metrics of China’s phenomenal economic rise are well known: three decades of double-digit GDP growth; some 700 million people lifted out of poverty; an infrastructure boom; the emergence of innovative tech giants; and a comprehensive blueprint for continued (sustainable) growth and development.

China’s success has eroded the belief that free markets represent the best development strategy for everyone, to the point that even the International Monetary Fund – long a leading champion of free-market ideology – has been rethinking its own orthodoxy. Yet Chinese-style central planning is still viewed with disdain in the West, where observers disparage it for its supposed opacity and repressiveness.

But is China’s system really diametrically opposed to that of, say, the United States? In a word: no.

Despite its vocal support for free markets, the US government’s spending has risen steadily since 1970. In 2019, it stood at 35.7% of GDP, compared to 34.8% of GDP in China.

The COVID-19 crisis has accelerated this trend. Indeed, America owes its economic recovery largely to massive government intervention. Moreover, President Joe Biden’s administration is now pushing forward legislation – the American Jobs Plan and the American Families Plan – that would...

Leave a Reply

Your email address will not be published. Required fields are marked *