Ever since China began liberalizing its economy, it has become fashionable in some circles to suggest that China went “capitalist.” This was especially true as economic prosperity in the country began rising. Not only were Chinese business people becoming millionaires and even billionaires, the standard of living of the Chinese people generally was soaring.
The Chinese experience confirms what libertarians and Austrian economists have long maintained: that the greater the degree of economic liberty, the greater the economic prosperity and the higher the standards of living. If the government of Cuba or North Korea, for example, were to reduce the control they maintain over economic activity, the standard of living of their citizens would rise.
Licensed under Creative Commons.
Of course, there is also a benefit to the government — increased tax revenues, which enable the government to fund and even expand its activities. The more the amount of income and wealth rises in a society, the greater temptation there is to tax it.
There is one big problem, however, with this phenomenon from the standpoint of public officials. As people become wealthier, they become more independent-minded. The government, for example, has less control over a billionaire than it does over someone who is barely eking out a living.
Most governments, especially totalitarian governments, don’t like independent-minded citizens. They prefer compliant, submissive, passive citizens. That’s why the regimes in Cuba and North Korea are perfectly happy with their socialist systems.
In a campaign against such economic independence, the Chinese authorities are now in the process of disappearing Chinese billionaires and millionaires, especially in the tech industry. The process is taking place in at least one instance under the guise of “assisting the government with investigations.” It’s actually a way to “reeducate” business leaders with the aim of getting his mind straight.
Last Friday, the Washington Post detailed this crusade against Chinese business people in an article entitled “Why are China’s Tech Leaders Still Disappearing If the Crackdown Is Over?” The article describes business leaders being brought to heel by the Chinese communist state.
The Chinese phenomenon goes to show the difference between economic liberty as a right compared to treating it as a privilege bestowed by the state.
When economic liberty is a right, there is nothing that the government can do to interfere with how much money businesses make, how big they become, or how independent-minded their owners are. That’s because the government lacks the power to interfere with any of this. That is a genuine capitalist system.
When economic liberty is considered to be a privilege bestowed by the government, then it is the prerogative of government to confiscate the wealth of the business and control and regulate its activities. For business leaders who get out of line, the government is prepared to use its tax and regulatory power to bring such businessmen under control.
It is amazing that Adam Smith’s Wealth of Nations was published in the same year as the Declaration of Independence. Smith declared that when governments refrained from taxing and controlling economic activity, people experience a higher standard of living. The Declaration of Independence declared that people’s natural, God-given rights of life, liberty, and the pursuit of happiness preexist government. Put those two concepts together and you have a society that is characterized by economic liberty as a right and high standards of living as a consequence.
Too bad the United States abandoned that sound founding principle of economic liberty as a right. But we should count our blessings — at least it doesn’t control, tax, regulate, and punish private businesses as heavily as the Chinese government does.