BANKER’S NOTE – Communist China’s Capitalism: Lessons in Freedom

The Wall Street Journal published an article on the demise of communist China’s capitalism.

A friend wrote the book “All Roads Lead to China.”  He often said that China was more capitalistic than America.  It was. 

China’s capitalism exists only because the Chinese government allowed it to exist.  It exists in an artificial bubble created by the Communist Chinese government.   The bubble is collapsing because communist control is killing the golden goose, as so often happen when government bureaucrats try to run businesses and “enhance” capitalism with a new regulation or subsidies.  

The entire concept of Capitalism is encompassed in the idea of Free Trade: A willing buyer, a willing seller, without outside coercion.  Capitalism, which is free enterprise based on the individual’s right to ownership of property, can be crushed by an over-aggressive government.  This is what we see in China today.

Herein lies the chasm between two forms of capitalism: American and Chinese.  One springs from the individual and the other, from government.  America’s form of capitalism sprang from the individual transacting business in a free society, with a Constitutionally restrained government. The Chinese government is not constrained by a constitution that sanctifies the individual.  China’s communism promotes the collective, which is the antithesis of the individual.

True Capitalism did not spring from any federal action.  It spontaneous arose when freemen started transacting business between other individuals. This is the Private Sector or Private Business as distinct from the Public Sector or government.  Our Constitution recognizes the inalienable right for ownership of property, it does not grant it.   The individual’s ability to do with that property as he pleases, as long as he follows the laws and, perhaps needless to say, doesn’t harm another.    Our Constitution functions to control our government and its bureaucracy, not the individual.

Our own country would do well to re-learn this lesson.  Individual freedom, protected by a controlled, not controlling, government supports the most powerful and prosperous economy that history has ever seen.  It is an economy that significantly raised the standard of living for everyone, not just the Elite.  The question for America is do we follow China’s lead and allow a controlling government entity to restrict our individual freedoms?

America was not freed from tyrants, nor was America built, by the timid.  She was forged in the fires of individualism.  Each citizen took responsibility for his own freedom.  Our country’s backbone is the Constitution. Said document recognizes that individual liberty does not spring from government but from our Creator.  Hence Thomas Jeferson’s statement in the Declaration of Independence: “We hold these Truths to be self-evident that all men are created equal, that they are endowed by their Creator with certain unalienable rights, among them Life, Liberty and the Ownership of Property.”

Jay Davidson is founder and CEO of a commercial bank.  He is a student of the Austrian School of Economics and a rabid capitalist.  He believes there is a direct connection between individual right and responsibility, our Constitution, capitalism, and the intent of our Creator.