Is China now more capitalist than the US?

posted at 8:27 am on December 11, 2008 by Ed Morrissey

In response to the financial crisis of 2008, the United States has responded by nationalizing industries and electing a president who promised to raise taxes on entrepreneurial efforts.  China, the nominally Communist nation, has responded by cutting business taxes to stimulate growth.  Remind me which nation supposedly supports capitalism and free enterprise (via Q&O):

CHINA may soon cut business tax as part of its efforts to prop up the slowing economy amid the global financial crisis, state media reported on Tuesday.

The government is ‘very likely’ to soon cut the business tax for enterprises by one percentage point, the China Daily said, citing an unnamed source close to policymakers.

China’s current business tax varies from three to 20 per cent, boosting government revenue by 600 billion yuan (S$131 billion) last year, according to the paper.

The news follows other state press reports last week that Beijing was planning to cut business tax for commercial banks – possibly to three percent from the current five percent, to help improve their capital adequacy.

While China improves its business climate by lowering the burden of state confiscation, the US plans to increase it, and in some cases by a significant amount.  Meanwhile, the House last night voted 237-170 to sink $15 billion into the American auto industry, with government officially owning part of three private auto makers in order to dictate to management how to run their businesses.  Management welcomed the move, and in fact wanted Congress to buy an even bigger stake in these companies.

Which nation is capitalist?  And which is Socialist?  And which party is more of one than the other?  It’s hard to tell, since 32 Republicans voted for partial nationalization, and 20 Democrats voted against it.  Perhaps Senate Republicans can make the distinction a little more clear with a filibuster to block this new direction in American economics.

When one looks to Beijing for rational tax policies … well, that’s just a sad day for Americans, even if it does portend a brighter future for China.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Comment pages: 1 2

Well since a policy of lower taxes is the most important government objective, maybe supply siders ought to move to China?

e-pirate on December 11, 2008 at 8:33 AM

Well Since childish characterizations of economic policies are a Democrat’s most important objective, maybe lefty trolls ought to move to pre-school?

TheUnrepentantGeek on December 11, 2008 at 12:14 PM

Time to learn Chinese.

Tim Burton on December 11, 2008 at 12:36 PM

China is certainly not nearly as free as the US in a general or political sense. However capitalism is an economic system, not a political one.

You cant have a purely capitalistic economic society when you dont have a purely free society in a political sense. Which is why your statement of the US going to a socialistic society faster than China going to capitalistic economy has lots of merit. We are loosing more freedoms politically faster than they are gaining theirs.

When the government decides who can and cant do certain things no matter how free your economic system is who gets into the system is limited. When the government decides too much political freedom is being granted (as China and any class ruled country always decides at some point) the economic system will take the first hit. take Venezuela for example. The reason they had to nationalize the oil industry was partly due to the fact that they couldn’t get corporations to invest in their country because of their attempts in the past to decide certain equipment or even full parts of the corporation were to be taken by the government. this happened to an extent in china back a few years ago and they are still having some problems getting the most up to date drilling and exploration equipment on the markets because the companies are leery of loosing their investments.

CaptainObvious on December 11, 2008 at 12:48 PM

中国更资本主义

MB4 on December 11, 2008 at 1:13 PM

As Obammunism advances, in a word yes.

tarpon on December 11, 2008 at 1:21 PM

Wow, MahaRushie has just referenced.

Cool.

Darksean on December 11, 2008 at 1:22 PM

Must be good analysis for el rushbo to mention.

Security Mom on December 11, 2008 at 1:23 PM

Must be good analysis for el rushbo to mention.

Security Mom on December 11, 2008 at 1:23 PM

he just did!

neal7 on December 11, 2008 at 1:23 PM

And this is why I am having my kids take Mandarin classes starting in January.

Security Mom on December 11, 2008 at 1:24 PM

Wow, MahaRushie has just referenced.

Cool.

yeah heard it. Don’t bother calling Rush and waiting forever on hold. Leave a comment for him at HA. He’s a visitor. Don’t know if he comments. Maybe as April Orit.

JiangxiDad on December 11, 2008 at 1:24 PM

And this is why I am having my kids take Mandarin classes starting in January.

Security Mom on December 11, 2008 at 1:24 PM

hun hao. (very good).

JiangxiDad on December 11, 2008 at 1:25 PM

RUSH-

I’M FREE THIS WEEKEND. WANT ME TO COME OVER?

JiangxiDad on December 11, 2008 at 1:26 PM

I caught that segment too. Jumped in the car to go send a Fed Ex, and Limbaugh was quoting Morrissey.

forest on December 11, 2008 at 1:33 PM

This is what I used to tell some college-aged Chinese friends when I lived in China–that from what I saw on a business level, and even on a street level, China is in some ways more capitalistic than the USA. It made them very upset, because in college they are drenched in Marxist philosophy. When I said the same thing to adults, they said, “we don’t care what we are called, we just want to make money and live a better life.”

p40tiger on December 11, 2008 at 1:38 PM

When one looks to Beijing for rational tax policies … well, that’s just a sad day for Americans, even if it does portend a brighter future for China.

Indeed, but Obama and MSMers think “sad days” are when Chicago politicians get caught doing what Chicago politicians do.

forest on December 11, 2008 at 1:39 PM

When I said the same thing to adults, they said, “we don’t care what we are called, we just want to make money and live a better life.”

p40tiger on December 11, 2008 at 1:38 PM

That’s refreshing. Sounds like capitalism to me. I wish more people here in the US were saying that.

forest on December 11, 2008 at 1:41 PM

When one looks to Beijing for rational tax policies … well, that’s just a sad day for Americans, even if it does portend a brighter future for China.

What’s a rational tax policy- one that leads to a $9 trillion national debt? Warren Buffet supports higher taxes on the wealthy, just as Alan Greenspan supported Clinton’s tax increases in 1992. Do you think that Warren Buffet and Alan Greenspan are irrational and don’t understand the consequences of tax policy on the economy?

Remember that our current tax policy was dictated by right-leaning ideologues like Karl Rove. Bush’s own Treasury Secretary, Paul O’Neill, strongly opposed the additional tax cuts on the wealthy. But people on the right don’t care what top CEO’s, Greenspan, or Buffet think when there’s any disagreement over the precious ‘lower taxes’ mantra.

It’s the kind of blind support of lower taxes, no matter what the consequences to our budget or deficit, that helped fuel the era of unreasonably cheap credit and all the ills that emerged from it in the first place. As long as the far right can’t accept the advice of its own business leaders and economists (like O’Neill and Greenspan), the harder it will be for the party to return to the majority.

bayam on December 11, 2008 at 1:45 PM

China and India are on the way up. More power to them. Good to see that someone is.

Here’s hoping they come to revere liberty as much as prosperity.

spmat on December 11, 2008 at 1:54 PM

Remember that our current tax policy was dictated by right-leaning ideologues like Karl Rove.

Stopped reading right there.

Alan Greenspan, Warren Buffet et al. have their own reasons for supporting confiscatory progressive taxation. “Higher taxes on the rich” never touch men like them. It just hits men like my father: honest men that have worked their whole lives for something to give to their children only to see it gobbled up by bureaucrats and hyper-wealthy kingmakers like Warren Buffet.

Go choke, lefty. You want to give your wealth to an inept, greedy federal bureaucracy, go ahead. Leave the rest of us alone.

spmat on December 11, 2008 at 1:59 PM

But people on the right don’t care what top CEO’s, Greenspan, or Buffet think when there’s any disagreement over the precious ‘lower taxes’ mantra.

bayam on December 11, 2008 at 1:45 PM

I agree, we should have higher taxes for Greenspan, Buffet and any one else who wants them, including you. Not for others though.

To be honest, I don’t know why you have the funds necessary to have a computer and internet connection. You know, that money could be paying down the deficit and there’s already a mechanism in place to facilitate your donations to the treasury.

DarkCurrent on December 11, 2008 at 2:03 PM

bayam on December 11, 2008 at 1:45 PM

The idea that the Democrats will only increase taxes on the rich is incorrect. My biggest problem with the Democrats’ plan is that they will hurt S-Corps and other small business. I am self-employed and make less than 250k, and my tax burden stands to go up significantly under Rangel’s tax bill as it is now written. It’s not the income tax rate, but an expansion of the application of payroll tax. I also expect to see a significant increase in the rate of payroll taxes, but we’ll have to wait to see how bad that gets when nationalized heath care is factored in. The bill also limits tax deductions and includes some “surchages” which will again disproportionately hit s-corps and other small businesses.

The summary is that they will claim to be reducing taxes by making nominal cuts to top corporate income tax rates, while tax burden actually goes up due to payroll tax and deduction rules changes – especially on smaller businesses.

forest on December 11, 2008 at 2:14 PM

bayam not back yet? I guess he was intellectually honest and sold all of his gear off to make a contribution to the treasury.

bayam, good on you.

DarkCurrent on December 11, 2008 at 2:19 PM

What’s a rational tax policy- one that leads to a $9 trillion national debt?

bayam on December 11, 2008 at 1:45 PM

Almost forgot to address this. The debt is much more a product of reckless spending, overwhelming entitlements, and now massive bailouts than it is of tax policy. And yes, Republicans have been as bad as Democrats when it comes to spending.

forest on December 11, 2008 at 2:20 PM

Do you think that Warren Buffet and Alan Greenspan are irrational and don’t understand the consequences of tax policy on the economy?

bayam on December 11, 2008 at 1:45 PM

Greenspan was too stupid to know that recessions must be allowed every so often. He is also the moron who spoke about “irrational exuberance” in the stock market and then did nothing about margin requirements, allowing the bubble to grow and grow. As far as tax policy and its effects on the economy, he doesn’t seem to know too much, since he was working on a monetary disaster, himself – at least not doing anything about it, at all.

Buffet is just another guilt-ridden, limousine liberal who loves to tell others to give their money to the government but refuses to give his (remember who Buffet gave his big $32 billion donation to … not the US government). Buffet is another “do as I say, not as I do” moron.

progressoverpeace on December 11, 2008 at 2:21 PM

It just hits men like my father: honest men that have worked their whole lives for something to give to their children only to see it gobbled up by bureaucrats and hyper-wealthy kingmakers like Warren Buffet

.

I had no idea that Buffet, Greenspan, and corporate CEO’s who understand fiscal policy were a bunch of idiots.

Here’s another name to add to your list of idiots- Ben Stein who recently said that one good way to run the US into the ground was not raising taxes during an economic boom. You see, business Republicans will simply never agree with you. If you want to make real money and be taken serious on Wall Street, you have to show results, not just float around pet theories.

bayam on December 11, 2008 at 2:21 PM

Here’s another name to add to your list of idiots- Ben Stein who recently said that one good way to run the US into the ground was not raising taxes during an economic boom.

bayam on December 11, 2008 at 2:21 PM

Yeah, Ben Stein’s a fool. So what?

progressoverpeace on December 11, 2008 at 2:24 PM

The idea that the Democrats will only increase taxes on the rich is incorrect. My biggest problem with the Democrats’ plan is that they will hurt S-Corps and other small business. I am self-employed and make less than 250k, and my tax burden stands to go up significantly under Rangel’s tax bill as it is now written. It’s not the income tax rate, but an expansion of the application of payroll tax. I also expect to see a significant increase in the rate of payroll taxes

I agree with you all of the above. Of course, as Buffet pointed out it’s hard to understand how a rational tax policy would result in people like him paying a far lower overall tax rate than a school janitor. Welcome to a country with a $10 trillion debt. It would have been much easier to keep the budget balanced during the era of economic expansion under Bush. But now our backs are up against the wall.

bayam on December 11, 2008 at 2:27 PM

bayam on December 11, 2008 at 1:45 PM

bayam
There is something you left out. Can you think what it might be?
taxes, i.e. revenue vs …….what….something …. that has to balance when you do a budget.

You do know what a budget is, yes?

Skandia Recluse on December 11, 2008 at 2:27 PM

You can make the case that both countries exist on some sort of capitalist continuum, but don’t kid yourself that China doesn’t suffer from fundamental problems which can’t be fixed anytime soon. China makes up numbers on a level that makes Enron look like the FASB candidate of the year award.

Simply take a look at the sham that has taken place to remove NPLs (non performing loans) from the books of banks to meet capital adequacy requirements prior to joining WTO.

It was a sham. 20% + of NPLs were swapped for equity stakes in the failed companies (frequently state owned enterprises or SOEs) and then shown as assets on the books.

Here’s a story about an investigative journalist who uncovered massive bank fraud and found herself unemployed and the paper closed down.

Link

Ed, I take your point that the US govt is sliding inexorably toward more economic control and involvement, which is clearly folly. Clearly we need a pro growth, low tax and low regulatory environment for our economy to get back on its feet. However, China faces the very real challenge of having the wheels fall off the economy and and suffer sever social unrest. The number of riots have doubled over the last few months and are spreading to many of the rural areas where steel mills have been shuttered.

moxie_neanderthal on December 11, 2008 at 2:34 PM

I agree with you all of the above. Of course, as Buffet pointed out it’s hard to understand how a rational tax policy would result in people like him paying a far lower overall tax rate than a school janitor. Welcome to a country with a $10 trillion debt. It would have been much easier to keep the budget balanced during the era of economic expansion under Bush. But now our backs are up against the wall.

bayam on December 11, 2008 at 2:27 PM

Buffet can pay all he wants. There’s really nothing stopping him. He could liquidate all his assets, send the proceeds to the treasury and take up a janatorial position, then pay additional taxes on his earnings.

If he were intellectually honest like you, that’s exactly what he’d do. Except he has that nagging back pain that just makes it unbearable.

DarkCurrent on December 11, 2008 at 2:36 PM

I had no idea that Buffet, Greenspan, and corporate CEO’s who understand fiscal policy were a bunch of idiots.

Here’s another name to add to your list of idiots- Ben Stein who recently said that one good way to run the US into the ground was not raising taxes during an economic boom. You see, business Republicans will simply never agree with you. If you want to make real money and be taken serious on Wall Street, you have to show results, not just float around pet theories.

bayam on December 11, 2008 at 2:21 PM

Yes because Ben Stein is such a genius, and Buffet is obviously a moron …

I like how you can selectively pick what celebrity to listen to, and what (extremely successful) business owner you want to listen to.

A Axe on December 11, 2008 at 2:37 PM

Since The One frequently praises China’s “infrastructure” and sets it up as a model we should follow, perhaps he’ll be willing to copy their new corporate tax model too, but take it a step further an undercut them with an even lower tax here.

Buy Danish on December 11, 2008 at 3:00 PM

Warren Buffet supports higher taxes on the wealthy, just as Alan Greenspan supported Clinton’s tax increases in 1992.

Didn’t Clinton leave us a recession?

The government has enjoyed record tax receipts courtesy of the Bush tax cuts. What more do you want? No need to answer….you clearly have no clue.

xblade on December 11, 2008 at 8:05 PM

Schumpeterian creative destruction, with more destruction than creativity.

moxie_neanderthal on December 11, 2008 at 9:55 PM

China has essentially been a capitalist/communist hybrid for some time now. It seems to be working well for them…. just so long as you don’t disagree with the govt too loudly or breathe the air.

Yakko77 on December 11, 2008 at 10:15 PM

Well done Ed, I linked over from Rush’s daily email. Hot Air is the leading edge. Thank you.

Z

Zorro on December 11, 2008 at 11:03 PM

Comment pages: 1 2