CHINA NEEDS LESS, NOT MORE, GOVERNMENT,

Xinhua  News Agency (28 May) reports HERE 

http://www.wantinews.com/news-8511534-Xi-Jinping:-the-invisible-hand-and-the-visible-hand-to-be-used-for-good.html

“Xi Jinping stressed in the Politburo collective study 'Invisible hand' and the 'visible hand' to be used for good

According to Xinhua News Agency, Beijing, [State managed news agency] Politburo (26 May) … the market play a decisive role in the allocation of resources and better play the role of government conduct collective study of the Fifteenth CPC Central Committee. General Secretary Xi Jinping hosted learning. [He] stressed, … the market from a decisive role in allocating resources, better play the role of government, is not only a major theoretical proposition, but also a significant practical proposition. scientific understanding of this proposition, accurately grasp its meaning, to comprehensively deepen reforms and promote social market economy healthy and orderly development of great significance in the market on the issue of the role … of government, talk about dialectics, Two Points, the 'invisible hand' and the 'visible hand' to be used for good, and strive to create the role of markets and the government of organic unity, mutual complement, mutual coordination and promotion of the pattern, and promote the sustained and healthy development of economy and society. …

Xi Jinping presided over the study gave a speech noting that scientific macro-control, effective governance, is to play the advantages of the socialist market economic system, the inherent requirement. Better play the role of government, it is necessary to effectively transform government functions and deepening administrative system reform, innovation management style, a sound macro-control system, strengthen market supervision activities to strengthen and optimize public services, promote social justice and social stability and promote common prosperity (http://www.wantinews.com/). governments at all levels must strictly according to law, and effectively perform their duties, the tube what it should do well, tube in place, the place must be put right foot, put in position resolutely overcome the dislocation of government functions, offside, the absence of the phenomenon.”

Comment

A not very clear exposition of what the Central Commitee intends to happen in the Chinese econony.  As far back as the mid-1930s, Oscar Lange a US/Polish economist, wrote from Chicago University, on the “Economics of Socialism”’ and opined the view that ‘neo-classical’ markets could be improved if they were supported by state bureaucrats, who had drawn up national plan for Poland, instead of leaving it to the “invisible hand”. 

This was fairly early exposition of the myth of the “invisible hand’, long before Paul Samuelson, then an undergraduate at Chicago  University, who ten years later was to be the decisive influence that spread the “invisible hand” myth in his spectacular (in sales terms) undergraduate textbook, “Economics: an introductory analysis”, 1948, McGraw-Hill, New York.  (See  Kennedy, G. “Paul Samuelson and the Invention of the Modern Economics of the Invisible hand”, Journal of the History of Economic Ideas, 2010).

The idea that markets which were led by a mysterious entity known as “an invisible Hand”, and linked to Adam Smith’s use of the metaphor in Wealth Of Nations (WN IV. ii.9: 456) was thought to be a challenge to those seeking political power to replace capitalism with rationally-planned economies. Of course, such utopian dreams failed, and in Poland’s case before they could get started - the Stalinist planners removed idealists like Lange and imposed communist dictatorships instead.  There was no “invisible hand” miraculously in markets and no replacement for anarchistic markets in state planning.  Moreover, Adam Smith never said anything like Lange, Samuelson, and most modern economists ascribed to him.

Apparently, the myth that state planning is workable in modern complex market economies or that government political planners should continue to try their hand at running markets has become the guiding myth of the Chinese Communist government: “Better play the role of government, it is necessary to effectively transform government functions and deepening administrative system reform, innovation management style, a sound macro-control system, strengthen market supervision activities to strengthen and optimize public services, promote social justice and social stability and promote common prosperity (http://www.wantinews.com/). governments at all levels must strictly according to law, and effectively perform their duties” with the rest of the barely readable sentence lost in translation, viz: “must be put right foot, put in position resolutely overcome the dislocation of government functions, offside, the absence of the phenomenon”.

The likelihood of these aspirations ever working in China as intended is remote.  Hayek long ago dismissed such aspirations for replacing markets with calculated planning.  You can undermine markets, bleed them dry, regulate them to death, and impose political mandates at will.  But legislate them to work to some pre-prescribed social directives? Never! You cannot design social orders, you cannot pre-design innovation, you cannot plan the market’s future and continuing ‘creative destruction’, the dispersed entrepreneurial imperatives, the next technological leap, or the necessary rise in per capita incomes to levels undreampt of by our grandparents or sought for by our grandchildren.

Xi Jinping’s ambitions, for all of his undoubted political powers, inevitably will be frustrated, perhaps at high social cost like Mao’s before him. Undoubtedly he intends well for China and its people.  However, everything depends on the extent to which his government aims to inculcate into China’s political culture the ethos of ‘markets where possible; state where necessary’, with the balance in China’s case shifted in favour of markets and the politics of China reformed around Liberty, not CCP monopoly.