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Andy Stern Endorses Chinese-Style Central Planning

Written by , Posted in Economics & the Economy, Free Markets

In one of the most outlandish economic screeds we’re likely to see for some time, Obama buddy and former SEIU President Andy Stern has declared his love for Chinese style economic planning, and wishes for the same in America:

I was part of a U.S.-China dialogue—a trip organized by the China-United States Exchange Foundation and the Center for American Progress—with high-ranking Chinese government officials, both past and present. For me, the tension resulting from the chorus of American criticism paled in significance compared to reading the emerging outline of China’s 12th five-year plan. The aims: a 7% annual economic growth rate; a $640 billion investment in renewable energy; construction of six million homes; and expanding next-generation IT, clean-energy vehicles, biotechnology, high-end manufacturing and environmental protection—all while promoting social equity and rural development.

Some Americans are drawing lessons from this. Last month, the China Daily quoted Orville Schell, who directs the Center on U.S.-China Relations at the Asia Society, as saying: “I think we have come to realize the ability to plan is exactly what is missing in America.” The article also noted that Robert Engle, who won a Nobel Prize in 2003 for economics, has said that while China is making five-year plans for the next generation, Americans are planning only for the next election.

American needs more 5 year plans! This sounds so familiar…

For those of us who love this country and believe America has every asset it needs to remain the No. 1 economic engine of the world, it is troubling that we have no plan—and substitute a demonization of government and worship of the free market at a historical moment that requires a rethinking of both those beliefs.

America needs to embrace a plan for growth and innovation, with a streamlined government as a partner with the private sector. Economic revolutions require institutions to change and maybe make history, because if they stick to the status quo they soon become history. Our great country, which sparked and wants to lead this global revolution, needs a forward looking, long-term economic plan.

It’s hard to know where to begin. Perhaps the most obvious starting point is his rosy view of the Chinese economy, which while improving, is still pretty bad. Pointing to their growth rate, for instance, doesn’t tell us much as they have considerably more room to grow.

Even his contention that China will surpass the US as the largest economy by 2025 (a reasonable estimate, I think) is misleading. They have 3 times the population that we do, so matching us in economic output means they are still only one-third as productive. What’s noteworthy, however, is how utterly poor so much of China remains today. For all their growth, they still have 128 million people living on less than $1 a day. That kind of poverty is all but unheard of in the US. As Dan Mitchell points out, the overall Chinese standard of living is simply a lot lower than it is here. Their per capita GDP is not even 25% that of the US. Why on Earth would we want to mimic them, as opposed to Singapore, which has both a freer market and higher per capita GDP than the US?

Contra Stern, the US does not employ a “free-market fundamentalist economic model.” There are economically freer nations, and according to the Heritage Index of Economic Freedom, we are becoming less and less economically free over time. In other words, we are already in the process of transitioning to the more centralized economy desired by Stern. It is that very shift which is holding us down.

But the fundamental flaw in his argument is Stern’s call for more planning. He favorably summarized Robert Engle as saying “that while China is making five-year plans for the next generation, Americans are planning only for the next election.” This is patently false, and confuses planning for central planning.

Planning is all around us. Businesses plan for future products, innovations, investments and expansions. Workers plan for climbing the ladder, providing for their families, and retirement. We have plans by the plenty, but Stern hardly notices. He doesn’t care about all these plans, but wants only one – by government.

What is the basis for his belief in the superiority of a single government plan over the aggregate plans of free people? There is no evidence for this belief that I can find. In every instance where one has been pitted against the other, the single plan as failed miserably. The information transmitted by individual transactions, through prices and countless other signals, is too vast to ever be captured, much less understood, by any single entity. In short, the planning of a benevolent economic dictatorship of the sort desired by Stern is no match for the planning of a truly free market.