Sir, – Peter Pallas (August 16th)asks whether the West should pursue the Chinese model of “controlled” capitalism as the neoliberal model in the West has failed miserably. The problem is that the Chinese model has become hugely dependent on the fact that West has become a population of insatiable consumers, living off credit. A significant portion of the Chinese economy is dependent on goods with a low manufacturing cost for which Western consumers are prepared to pay a high margin. Add to this that there is a huge underclass in China, employed in what are no better than work camps to churn out these items.
For 30 years after the last war, the US and the West experienced growth without any serious financial turmoil aside from the oil crisis of the early 1970s. This was mainly down to the application of Keynesian economics originating from FDR’s new deal in the US. During this period the financial sector was a service industry, based on low risk which provided security for the assets of ordinary people and ensured a stable market. Along came Milton Friedman and with his influence Reagan removed regulation from the financial sector. It resulted in a culture whereby the global economy became a game of numbers played by individuals totally cut off from the impact of their hugely risky decision-making. The obsession with wealth accumulation, coupled with the continued privatisation, meant that the institutions became too big to fall and instead the general population has had to pay the price.
Rather than look at China, we should look back to a period when there was no obsession with unsustainable growth. This may produce the equitable and just society that the majority of people want. – Yours, etc,
Sir, – Peter Pallas (August 16th) points to the “seeming success of the Chinese model of capitalism, controlled by, for want of a better description, benign Communism” as an alternative to the West’s model which “got so greedy that it ate the goose that laid the golden egg, choking itself in the process”.
Might I suggest waiting a while until capitalism has had a fair stab at working its magic on the Chinese too? – Yours, etc,