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JLeslie's avatar

Are you sure big government stifles economic growth?

Asked by JLeslie (47245 points ) November 2nd, 2011

My parents just returned from China recently and my dad wrote me an email with an overview about the trip. They had a wonderful time there.

Part of the email talked about China’s growth, At 9 percent growth, an economy quadruples in 10 years. China has had 9 percent growth for 20 years. So it’s quadrupled and quadrupled again.

Further in his note he wrote Government, by the way, has it’s hand in every major business in China. That is, it owns a part of every major and many lesser ones, and many it owns completely. Every place we stopped to shop on tour, by the way, was owned by the government and all the employees at these sites worked for the government. You would not know it unless you asked. These places looked like ordinary, well-run, attractive business places.

Then continued later about the government, many here in the U.S. think that only small government and ever lower taxes can work. Yet China has chosen the exact opposite policy option and they are thriving. This should be impossible, shouldn’t it? After all, we all know that government doesn’t work. Or does it?

Know that my father was a Republican for 40 years until recently. His main reason for changing parties was what he says was the basic takeover of the Republican party by the religious right. So, when he questions size of government it is truly something he is trying to analyze, he is not lock step with either party poltically really.

What is your opinion about the growth in China?

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16 Answers

Adirondackwannabe's avatar

Completely different culture and history in China as compared to the US so that factors in when you try to look at the two societies. What works here wouldn’t necessarily work there. But it’s an excellent question because it makes us think and look at the underpinnings of government policy.
(I’m still thinking on the size of government thing, to address your question)

wonderingwhy's avatar

I’d say it has less to do with the size of government and more to do with the governments motives, how policy is crafted and applied, and how it is received by the people.

zenvelo's avatar

Given the state of the Chinese Economy in the 60s and 70s, they had plenty of room for growth just in building infrastructure and industrializing. During the Great Leap Forward, everyone was to have a steel foundry in the back yard.

So they’ve had plenty of growth, but the governmental presence is totalitarian, not big government capitalism as in the U.S.

Qingu's avatar

Sometimes it stifles economic growth; I’m as liberal as they come but I’m certainly willing to admit that heavy-handed regulations and high taxes can limit consumer demand and supply-side investment, and you need both to have economic growth.

But always? Obviously not; especially when the private sector suffers from demand slack and there are unused resources (i.e. unemployed labor). Government employees are also part of the economy; they are paid with money they use to purchase things from private industry, which can then sell more things and pay their own employees and stockholders.

There are also sectors where perverse profit incentives make government better at doing work than private industry—namely infrastructure, defense, justice, and health care.

Cruiser's avatar

Up to the late 70’s, China was in the relative Stone Age as far as productivity. Being a communist country it controlled all the economic growth and methods of production. As an example, if you ever saw a Chinese road crew back then it was all workers with picks and shovels, not very efficient but it kept everyone employed.

The Chinese Government changed their ways of doing things and through a series of economic reforms, experienced a huge improvement in efficiencies of production and experienced consistent economic growth for all these years as they continue to improve worker productivity. What they are and will be facing is the prospect of massive unstoppable inflation if they are not careful.

The US on the other hand has already maxed out it’s worker productivity and either has to do the same production with less workers or pay less wages in order to compete with China’s lower wage structure and almost no legacy or union costs in their products costs. Or get an administration that is not afraid to hand China some tougher trade policies to better balance the massive trade imbalance that currently exists.

wundayatta's avatar

Sometimes government stimulates growth. Sometimes it’s the only entity that can do so. Sometimes it puts the breaks on growth, either accidentally or on purpose.

We need to know much more about the relationship between the Chinese govt and business before we can say how it might work here. It wouldn’t fit with our culture, that’s for sure. Too many people think that government can do no good. Government hires lazy incompetent people is a common belief. Too many people don’t trust government in the US.

In China, people have no choice. They live with the government in their lives or they leave (or die). They make do with what they have. They are inventive and creative, although not as much as Americans are, I believe. But they are really good at doing knockoffs.

CaptainHarley's avatar

It might work there, but it wouldn’t work here. The temperment and social inclinations of the people are different. Besides, the US can’t just arbitrarily lock up anyone they don’t like, or who isn’t performing to their expectations… yet.

Jaxk's avatar

Has it been so long since Tiananmen Square that we now want to replace our government with theirs. I can only hope this is a minority view.

flutherother's avatar

The Chinese economy is developing in a way that is without precedent. It has moved successfully from a centrally planned system towards one based on free market principles. Provincial governments have been allowed to establish and operate enterprises on market principles without interference from central government and citizens have been encouraged to start their own businesses.

All land remains in the hands of the state however and the state has control of the banking sector. So far it has been very successful though there are terrible problems with pollution and poor government regulation has resulted in health and safety concerns with some Chinese products.

Qingu's avatar

@Jaxk, not theirs. I’d be happy with Sweden’s.

Neizvestnaya's avatar

I think it’s amazing in just a few decades a country considered to be 3rd world is now a major economic world power. I don’t agree with many details in the methods used but I have to credit people of a polar opposite mindset where family is concerned to sacrifice for advancement and greater living conditions for all.

As @flutherother wrote, there are things such as environmental, program regulation and human abuses I shudder over.

Qingu's avatar

To be fair, the bad things China has done and are doing today aren’t really much worse than the bad things America has done in the past.

Neizvestnaya's avatar

I definitely agree with what @Qingu wrote. We are shocked by some things China does but maybe because it’s done in the modern day and we associate those things with stuff the USA and other countries have more or less moved away from and left behind.

Qingu's avatar

I don’t want to imply that we shouldn’t judge China for its human rights abuses or environmental destruction: we should. But we should also remember that we’ve done those things in the past; we also imprison far more people than China does per capita (probably just period) and we’ve started significantly more wars than they have, often for stupid reasons. And Manifest Destiny was every bit as immoral if not moreso than the Cultural Revolution, even if less people died.

zenvelo's avatar

@Qingu That’s a pretty extreme statement. The Chinese government under Mao was responsible for 40 to 70 million deaths. During the Cultural Revolution the rivers carried bodied down to the harbors of Hong Kong and Macao.

I am not discounting White America’s treatment of Native Americans, but saying Manifest Destiny was the moral equivalent of the Cultural Revolution is applying late 20th century values to early 19th century behavior.

Qingu's avatar

Not all of those deaths were deliberate, unlike Manifest Destiny’s policy of explicit genocide.

I also wasn’t trying to draw equivalencies, just pointing out that America also has a history of government-sanctioned mass killing. It just ended 50–100 years before some other countries, fortunately.

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