Consider an article in today’s Wall Street Journal, “China Steps Up Efforts to Contain Growth.” It is consistent with much of the news concerning China, and its government’s efforts to control the economy.
Those who praise China’s economy often fail to recognize that it would be much stronger with a free market. Leaving aside the moral issue of any government directing individuals’ lives, central planning always fails, and China’s controls are a futile effort to defy the laws of economics. China tries to control lending, prices, and growth, when only the market can rationally allocate capital, determine prices, and reflect natural growth.
China blames the rise in commodity prices on “hoarding” and speculation, neglecting the benefits of buyers’ accumulation of reserves, and speculators’ contribution to the efficiency of markets. It condemns “profiteering” by companies for charging more than the price set by the government, while the shortages are an inevitable result of price controls.
Finally, China demonstrates confusion on the cause of inflation. Inflation is a monetary phenomenon resulting from government mismanagement of the money supply. Stifling growth or controlling prices does not address this.
