Do Free Markets Still Beat Central Planning?
Institutional arrangements are complex systems, shaped by history, geography, and culture. The objective should not be to identify a one-size-fits-all approach, but rather to devise the combination of characteristics that would deliver the greatest good for the greatest number of people, with the right checks and balances.
HONG KONG – In 1944, Friedrich A. Hayek suggested that the spontaneous order of markets was inherently superior to the supposedly dynamism-draining totalitarian order of communist or fascist regimes. The ensuing decades – when free-market economies thrived, and the Soviet Union’s centrally planned economy imploded – seemed to vindicate him. Then along came China.
The metrics of China’s phenomenal economic rise are well known: three decades of double-digit GDP growth; some 700 million people lifted out of poverty; an infrastructure boom; the emergence of innovative tech giants; and a comprehensive blueprint for continued (sustainable) growth and development.
China’s success has eroded the belief that free markets represent the best development strategy for everyone, to the point that even the International Monetary Fund – long a leading champion of free-market ideology – has been rethinking its own orthodoxy. Yet Chinese-style central planning is still viewed with disdain in the West, where observers disparage it for its supposed opacity and repressiveness.