How Is China Different From the USSR?

[stone]

I do think it is important not only to see things in terms of groundbreaking elite achievments. Everyday mundane stuff ticking along nicely is also very important. IMO the great strength of capitalism is that it makes even people with excessive power pay attention to ironing out mundane everyday problems effecting lots of ordinary people.

[Tortoise]

Well said, stone.

I see the USSR's and China's elite achievements not as the very definition of a successful economy, but more as an indicator of those nations' potential and raw talent.

The idea, to me, is that if the USSR had transitioned gradually to capitalism before crumbling, they could have probably become one of the world's more prosperous economies. The same goes for China today. The raw talent required eventually to make China an economic powerhouse is there; it will just be a matter of how willing they are to transition over to capitalism in order to harness that talent most effectively.

[stone]

Tortoise, I think capitalism is a very wide ranging term. Russia transitioned straight into oligarchy with gangsters becoming the oligarchs. It was a tragic waste IMO driven as much by the criminality of the Harvard professors organizing it as by some sort of ideology or mishap:-

http://en.wikipedia.org/wiki/Andrei_Shleifer
"Under the False Claims Act, the US government sued Harvard, Shleifer, Shleifer's wife Nancy Zimmerman, Shleifer's assistant Jonathan Hay, and Hay's girlfriend (now his wife) Elizabeth Hebert, because these individuals bought Russian stocks and GKOs while they were working on the country's privatization, which potentially contravened Harvard's contract with USAID. In 2001, a federal judge dismissed all charges against Zimmerman and Hebert.[11] In June 2004, a federal judge ruled that Harvard had violated the contract but was not liable for treble damages, but that Shleifer and Hay might be held liable for treble damages (up to $105 million) if found guilty by a jury.[12]

In June 2005, Harvard and Shleifer announced that they had reached a tentative settlement with the US government. On August 3 of the same year, Harvard University, Shleifer and the Justice department reached an agreement under which the university paid $26.5 million to settle the five-year-old lawsuit. Shleifer was also responsible for paying $2 million dollars worth of damages, though he did not admit any wrong doing. A firm owned by his wife previously had paid $1.5 million in an out of court settlement.

Shleifer's conduct was reviewed by Harvard's internal ethics committee. In October 2006, at the close of that review, Shleifer released a statement making it clear that he remains on Harvard's faculty. However, according to the Boston Globe, he has been stripped of his honorary title of Whipple V. N. Jones Professor of Economics.[5]"

An alternative could even have been to have had a transition to employee owned firms. Just look at the contrast between Russia today and its neighbors to the East (Japan) and West (Finland). If a latter day General McArthur had instead been the American advisor to the conversion from Soviet communism, Russia might instead be like post WWII Japan except without the need for bomb damage reconstruction. Russia had possibly the best educated population in the world. That resource was cast aside and Russia degenerated into just being an oil field with a lot of unemployed people scattered across it.

[Tortoise]

stone, what I had in mind by "transition to capitalism" was more of a gradual, bottom-up transition to a capitalist way of life rather than a rapid, top-down transition masterminded by a single individual or group. The example of Andrei Shleifer you cited is a good illustration of the problem with attempting rapid, top-down changes to a nation's core way of life.

Maybe another way of stating the problem would be to say that one cannot "centrally plan" capitalism. It needs to emerge organically from the bottom up based on the voluntary actions of millions of free individuals whose property rights and liberty are protected by the government. If people are free, then enterprising individuals will eventually band together to form capitalist structures like stock markets. They don't need to be, nor should they be, engineered by Harvard economics professors.

The whole idea that societies can be "engineered" independently of the people that comprise the society is part of the problem with centrally-planned systems like communism and the U.S. government's delusional project of "spreading democracy" throughout the world with bombs. Human beings are not cogs in a machine. They will control their own destinies eventually, one way or another.

[stone]

Tortoise, that link that dualstow put up was just such an example of individual Chinese farm workers self organizing a transition to a form of capitalism that they thought would work for them.

While I was following this thread, the following story was broadcast on NPR. Good stuff.
http://www.npr.org/blogs/money/2012/01/ ... rmed-china

In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China's economy in ways that are still reverberating today.
...

[stone]

I guess it is hard though to transition from state ownership to some other form of ownership without involving the state  :-\  . General McArthur was an outside agent setting up the Japanese economy. It really is amazing that that worked thinking about it.

In the UK we have a large retail group called the John Lewis Partnership. It was donated by an eccentric private owner to the employees in the 1920s and has been employee owned ever since. I guess the soviet state was the owner of soviet industries etc and so in principle they could have done the same.

In fact in the UK much of our industry was state owned and then privatized in the 1980s. The privatizations here were relatively benign -I guess because it wasn't just a handfull of gangsters gaining ownership as happened in Russia.

[MachineGhost]

In the UK we have a large retail group called the John Lewis Partnership. It was donated by an eccentric private owner to the employees in the 1920s and has been employee owned ever since. I guess the soviet state was the owner of soviet industries etc and so in principle they could have done the same.

Such is called "market socialism" which would exist within a capitalist ecosystem.  In fact, it was first cooked up by your idol, Lerner, godfather of Functional Finance. 

In fact in the UK much of our industry was state owned and then privatized in the 1980s. The privatizations here were relatively benign -I guess because it wasn't just a handfull of gangsters gaining ownership as happened in Russia.

I don't think its 100% accurate to call the oligarchs gangsters as distinct from the mafioso.  The oligarchs were formerly the high level managers, if not minority owners, of the state-owned enterprises before privatization.  The privatization scheme was totally botched in Russia, but in the other ex-Sovet Bloc countries such as Hungary or Poland the state-owned company shares were distributed to the public.

MG

[stone]

MG, I'm not a fan of the deficit prescription of functional finance .