It’s an old Wall Street adage, you can’t time the market. However, the market meltdown in China is teaching once again to the world that governments can’t manage an economy. You would think that after the spectacular failure of communism in the Soviet Union and elsewhere during the late 20th century, the world would have gotten the message; but alas, it hasn’t.
For two decades the pundits glorified the “managed capitalism” of the Chinese growth explosion. As they also say on Wall Street, “Everyone’s a genius in a bull market.” But in reality, this spectacular growth was built on a devalued currency to win in the export market. China became the low-cost factory for the world. That is, until it no longer was. Today there are cheaper and environmentally cleaner places in the world to make things.
China also kept its growth high and its masses employed by building cities to nowhere. Massive overspending and misallocation of capital led to the infamous ghost cities scattered about the Chinese landscape. That didn’t stop liberal talking heads from gloating about the amazing success of the Chinese miracle. They apologized for these Chinese mistakes by offering that the Chinese were simply more forward looking than us, and claimed the Chinese were smarter than the average American free marketeer. Why not make the same deal with the devil Chinese have, they asked. An exchange of giving up political freedom for economic success makes sense doesn’t it?
Let the wise old communists decide where to allocate capital and we’ll all be happier, or so the theory goes.
This is exactly what the Democrat Party is now preaching and suggesting. The hard Left and many millennials are swallowing it hook and sinker. The Marxist education they have received in college is furthering this trend. However, the coming brutal recession due to the Chinese slowdown and government overreach in the American economy may dissuade them from the wisdom of this notion. Millennials already can’t get a job. It can get a lot worse.
The simple fact is that socialism, communism, managed capitalism, wealth redistribution, or the new buzz-word, investment, simply doesn’t work in the long run. It never has. It never will. As Margaret Thatcher said, “The problem with socialism is eventually you run out of other people’s money.”
A politburo can’t manage an economy efficiently, nor can the American Executive Branch. Capital is misallocated. It’s an inefficient, bloated, wasteful system.
Now the Chinese are paying the piper. They have no more bullets left in their gun. (And neither does our Fed, by the way.) They’ve tried infrastructure “stimulus” out the wazoo. They’ve tried laying off bad loans into the equity markets. Now that this market is crashing, wiping out trillions of dollars in wealth, they are putting sellers in jail and intervening with their central bank to buy shares. They can’t do this forever. Now nothing is working.
A massive Chinese economic readjustment is coming. The only thing that is going to save the world economy now is a healthy, American free market that makes decisions based on where people put their money — good old capitalism.
In other sad examples of Chinese poor decision making, men can’t find a wife and the environment is so poor that people can’t breath. But, at least they are enjoying communism.
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