Zhu Yuan

Learn pros and cons of market economy

By Zhu Yuan (China Daily)
Updated: 2010-10-13 08:03

How much do we know about capitalism? I don't think we know it a lot, at least not as thoroughly as we should.

When the domination of ideology jaundiced our understanding of the world, capitalism, in our minds' eye, was as bad as anything we could think of to suck the blood of workers. But when the country opened-up to the outside world, some went to another extreme, believing that we should learn everything from capitalism.

A recently published book entitled The Power of Companies enables us to have some basic knowledge of, and some insight into the development of, companies and capitalism in the West.

What strikes me most about the book- and I am a man without a mind for business - is the fact that the history of companies in the West, despite the wickedest things they did at the very beginning, does present a trajectory of progress when it comes to human civilizations.

To Chinese readers, what should make sense is the fact that the development of Chinese corporations was stunted by historical events and they caught up only in early 1980s when China introduced reform and opening-up.

In traditional Chinese culture, business people were looked down upon, since greed was considered as the root cause of many evils. Before reform and opening-up, making money was taboo and viewed as bourgeois behavior. The intrinsic desire for a better life and for wealth was suppressed. Allowed to reassert itself, it has gone to the other extreme: The pursuit of profits without scruples.

Some say that China must undergo a period of primitive accumulation, as it can hardly jump to the advanced stage of development in the West. I take such sayings as pretexts for pursuing profits at the expense of social justice, fairness and equality.

Corporate culture is something many Chinese tend to talk about when they mention competition and a market economy. They also talked a lot about the invisible hand in the early 1980s when the country had just opened-up to the outside world. It was believed that it was possible to guide the market economy to develop in a healthy manner. Yet, in talking about that, most only emphasized competition, without mentioning social responsibility and benevolence.

Even in the West, whose market economy is much older, the desire to pursue profits can frequently go too far, so that social justice and fairness are trampled underfoot in the headlong rush to make money.

John Maynard Keynes once said that capitalism meant the wickedest men will do the wickedest things for the greatest good of everyone. This, to a large extent, touches on the nature of capitalism. The problem is, of course, that sometimes they do the wickedest of things not for the greatest good of everyone, but for the greatest good of themselves.

The current financial crisis offers a most vivid example of how unscrupulous the pursuit of profits can be in the West. The issue for us now is what we should learn, and how, from Western capitalism.

As far as the ongoing market economy is concerned, nothing could be worse than the combination of China's guanxi or renqing and the pursuit of profit by hook or by crook. It's a symbiotic relationship that has contributed a great deal to the country's rampant corruption.

Apart from the regulation of guanxi or renqing by the applied rule of law, one thing that policy-makers must be aware of, is that not all that is practiced in the West is good and worthy of learning when it comes to a market economy. The various derivatives created by financial institutions on Wall Street have proved to be the culprit for the current financial turmoil. They are definitely not what our financial institutions should learn.

We need to know much more about companies and capitalism so as to take the correct path.

The author is a senior writer of China Daily. He can be reached at [email protected]

(China Daily 10/13/2010 page8)