How the West wants China to self-destruct

How can the West stop post-communist China from challenging the global hegemony of the US, and from further demolishing the  productive capacity of Europe’s economies? Reform proposals urged on China’s leaders in the current edition of The Economist (the influential London economics magazine) provides the master plan for causing China to self-destruct.

The Economist is not a mouthpiece of the CIA. It is not playing geopolitics. It sincerely believes its advice, blazoned on the cover: “Go on, bet the farm”. This is the key reform urged on Xi Jinping, the President who has convened a plenary session of the governing party which begins in Beijing on November 9.

Ignoring how the Western economy remains crippled because of the real estate gambles that caused the seizure of banks in 2008, The Economist urges China’s leaders to turn their economy into a casino, in which they would “bet the farm”….i.e., gamble with people’s lives, creating the fiscal incentives that promote the buying and selling of land, so that some people can make fortunes while others are impoverished.

The rural sector is in need of reform. The sole model for achieving change, according to orthodox economic doctrines, is based on turning land into a tradable asset. According to this logic, the rent of land – as opposed to the income from capital improvements on the land – should be privatised. The Economist is not distracted by economic efficiency or the fairness issues that are at stake. It settles for recommending the introduction of a “property tax” to claw back some of the income that it wants the government to give away!

This is the property tax which has fallen into disrepute in the West. It is described by Rob Perrins, the managing director of the Berkeley Group, one of the UK’s largest construction companies, as being “fundamentally flawed”. He calls on the British government “to develop a clear and fairer system of property tax” (Daily Telegraph, November 4).

Post-Soviet Russia – again

We are witnessing, all over again, a re-run of what happened when Mikhail Gorbachev revealed his wish to reform the Soviet Union. Pressure from the West was directed at creating a carbon copy of its economic model – the one that most recently delivered a global depression. Under Boris Yeltsin, the first President of a post-communist Russia, the population collapsed; and is only recovering, now, through huge net in-migration, which is stirring deep social divisions.

Will China replay the Soviet scenario? Current advisers to President Xi include Liu He, who is described as a “thoughtful, reform-minded policy adviser [to Xi Jinping] who was educated at Harvard”. It remains to be seen whether his time at Harvard has corrupted him in favour of western economic theology.

China does need a market-based mechanism for reallocating the distribution and use of rural land. But that can be accomplished without giving away the rents that are cooperatively created by the people. For the best evidence of how it can be done, consult Britain’s aristocracy. They have been doing it for centuries: reallocating the land of their estates between private users, and collecting the rents….

Usurping State Power

The mix of property rights and fiscal policy urged on China by The Economist substitutes private individuals for the state. This is achieved by transferring the power to private entities that ought to be the exclusive preserve of public authorities that are democratically accountable to the people.

One knock-on effect of this financial regime is that, because the socially-created stream of rent revenue is placed in private pockets instead of the public purse, the weakened sovereign is forced to introduce taxes on labour incomes. Those taxes are of the kind which The Economist then criticises as subverting the productive economy!

We live in a world that has become a lunatic asylum.

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