Terence Corcoran: Trump versus Xi — Who is the most or least capitalist?

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeFP CommentTerence Corcoran: Trump versus Xi — Who is the most or least capitalist?The bigger question: Is China capitalist or socialist?Last updated 11 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.U.S. President Donald Trump and Chinese President Xi Jinping attend a welcome ceremony at the Great Hall of the People on May 14 in Beijing, China. Photo by Alex Wong/Getty ImagesDetermining the cause of the dramatic rise of China’s annual GDP per capita to US$14,000 today from less than US$1,000 in 2000 has long been a topic of heated economic and political debate — one that hovered in the background in the past few weeks leading up to Wednesday’s summit meeting between U.S. President Donald Trump and Chinese leader Xi Jinping.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountOne could reduce the issue down to the question: Which of the two leaders is the most or least capitalist? If it had been Ronald Reagan meeting Xi, the answer would have been clear cut. Between Trump and Xi, it looks to be more of a toss-up.The Trump-Xi proposition, however, is not the real question at hand. The heart of the issue was importantly and accurately posed recently by a couple of writers holding contradictory ideological positions, one on the socialist left, the other on the free-market right — a sign that resolving the debate will be one of the most important determinants of the future of global economic structures.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe question became even more relevant as Trump and Xi acted as if the two sparring global hegemons — who can resist using that term? — embraced in Beijing. “The great rejuvenation of the Chinese nation and making America great again can go hand in hand,” said Trump.On the left: Writing in the left-oriented Canadian Dimension magazine late last month, Owen Schalk asked the important question: Is China capitalist or socialist? According to Schalk, “few questions pose more confusion — and sharper disagreement — on the left today than whether China is capitalist or socialist.” Schalk’s conclusion, however, is that China is socialist, despite a declining social development regime that has left hundreds of millions of people in poverty amid “rampant inequality.”On the right: On April 1, almost a month before Schalk’s comments, veteran American free-market economist David Friedman wrote a commentary titled “How China Went Capitalist.” The title says it all, as Friedman reviewed the findings and conclusions in a 2012 book written primarily by economist Ronald Coase titled How China Became Capitalist.Coase, a Nobel economist, meticulously plotted the evolution of China out of Mao Zedong’s totalitarian socialism toward an economic regime that gradually allowed, and even encouraged, forms of capitalism to emerge, including the development of private enterprise, some individual freedom, and other reforms.In the views of Coase, Friedman, and many others, it is the capitalism aspect of China’s still omni-powerful Communist state that has served as the country’s springboard to economic growth. Friedman’s summary of Coase’s conclusions is that China has been transitioning to capitalism “under the banner of socialism.” Along with the export boom, China’s first stock exchange opened in 1990 in Shanghai, which now lists more than 2,300 companies and the largest market capitalism in the world.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Back on the left, Schalk concludes it is the socialist side of China that is responsible for the country’s achievements. “Despite sweeping marketization, China today retains a form of socialism. These socialist features help explain why China’s economy has grown at a pace far exceeding that of western capitalist countries, and why the Chinese state has been able to steadily improve living standards while much of the capitalist world stagnates.”Looks like a classic causation versus correlation debate, but those of us on the Adam Smith side of the argument would find it impossible to accept that continued extreme government control of much of the political and economic system is the reason China has grown into a global economic power.Although there certainly are causal questions to be explored. For example, The Wall Street Journal reported this week that China’s furniture makers — bed frames, for example — are in crisis after sales to U.S. buyers such as Walmart and Home Depot dropped in the wake of Trump’s 25 per cent furniture tariffs. The journal’s story portrayed China’s furniture makers as entrepreneurial capitalists constantly inventing new products and making location decisions — some moving production out of China to Southeast Asia due to U.S. tariffs on China. The capitalist nature of the furniture industry is indisputable.Missing in the journal story was the role of China’s government in supporting the capitalists owning and running China’s giant furniture industry, which is said to account for 30 per cent of global furniture trade. Papers from the International Monetary Fund and the U.S. Federal Reserve Bank (FED) say China’s furniture industry received major government support over the years.The Federal Reserve paper “China’s Trade Dominance and the Role of Industrial Policies” concludes that China’s industrial support and subsidy regimes “appear to channel resources toward investment in tradable sectors, effectively incentivizing firms to expand production capacity.” But does than mean that China’s economy is socialist? Or does it mean that China is a capitalist hot house filled with inventive, creative and savvy entrepreneurs who are able to compete globally?The latter is more likely. The FED paper adds that the industrial strategy regime allocates resources “at the expense of domestic-demand–supporting channels, such as social spending or measures that would reduce households’ need to save” and help them be part of a dynamic national economy.Conclusion: It is capitalism that has allowed China to grow, but it’s a system that sends excessive resources and grants freedom to capitalists at the expense of a majority of China’s 1.4 billion citizens who do not have the same freedoms.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.