Many stock watchers say this week’s China plunge (which led to the Dow plunge) is a story about excessive speculation, and how this activity is inevitably punished when a bubble bursts. They’re missing the real story. Class warfare destroys wealth, and when a nation with a massive economy veers left, a trillion dollars disappears overnight.
Envy hasn’t yet been beaten in China. Yes, markets in China have been opening up, but traditional Confucianist disdain towards merchants goes back millennia. It won’t go away in a decade or two.
Over the past year, Marxist rhetoric has been heating up in the Chinese media. The Communist party’s official paper, the People’s Daily, has been talking a lot about income inequality (perhaps taking its cue from the New York Times). Powerful Communist party officials have been complaining about “black hearted” business tycoons and prattling on about social responsibility.
Entrepreneurs, according to the Asian Times, are “jittery.” And why shouldn’t they be? China’s central bank is consciously trying to slow growth. There has been widespread discussion of the imposition of a capital-gains tax on stock transactions. Small armies of investigators are being unleashed on business firms. And some big corporate fish have ended up in prison.
Walter Wriston, one of the 20th century’s great bankers, said that “capital goes where it’s welcomed and stays where it’s well treated.” That’s doubly true for capitalism.
It’s Marx vs. Markets all over again.
Who will win?