People so often fail to realize why free-market capitalism is so much more productive than any system where economic decisions are made by top down decisions by the government. When the government makes all the decisions for any type of economic activity it does so in a monopolistic setting. Decisions made in a monopolistic framework can’t hold a candle to decisions made in a level playing field competitive environment where economic activity is conducted under a regime with a sound legal system. The reason competition works so much better than monopoly is because whoever has the best idea and puts it into practice soon gets ahead and then everybody else in that activity copies that good idea until somebody else comes up with a better one and the whole process repeats itself. We are seeing this displayed dramatically now with what has been going on in the past few decades. Other grocery companies copied Walmart’s inventory control and purchasing power and now Amazon with its purchase of Whole Foods is revolutionizing the industry again. The grocery store chains keep outdoing each other, copying best practices whenever new ones are developed. The same thing is going on in high tech, health care, transportation, and in every type of business activity, and the improvements and changes are getting faster and faster as the quality and speed of communications improves. The genius of the founders created our system of federalism whereby the states could compete with each other by experimenting in developing the best forms of government practices – one of the great strengths of the American form of government.
The economic miracle that we’ve seen in much of the world since World War II and increasingly near the end of the 20th century and into the 21st has occurred as many of the developing countries moved away from socialism and increasingly adopted relatively free market systems. They were able to produce such remarkable results for a number of reasons and some of the more important were their populations’ high savings rates, developing their export economies, improving their legal and educational systems, and most importantly copying the technological improvements and business practices of the most developed economies, particularly the US. The competition principle’s extraordinary value in producing economic prosperity is revealed when you look at the record of these countries that have had such phenomenally rapid success in improving their economies by copying the technologies of those countries who have been the pioneers. It is so much easier to copy than to invent something from scratch. Opening their markets to free trade gives a tremendous boost to the economies of less developed countries because they have to learn to improve their business practices and products to compete in the world market.
China’s rise has been truly extraordinary. Most of the other Asian economic miracles have been small countries. Once Deng reversed Mao’s horrific and disastrous economic and governing policies and opened up the economy growth took off and hasn’t stopped. The US has been dangerously shortsighted in allowing the Chinese government and Chinese companies (with their government’s assistance) to borrow and steal American technology. Our government was grossly negligent in allowing American high-tech companies to acquiesce to Chinese insistence that they share their technology with their Chinese partners as a requirement of doing business in China.
China is clearly the world leader in future threats to American and world stability and if present trends continue will be more powerful than American in less than two decades. This may not happen if the US follows sound economic, defense and alliance strategies and if China’s growth slows because of too much power in the hands of one man at the top and because of excessive government control over business and the economy.