Will Hutton’s critique of China

Of course the party should let go, but it does not operate the kind of market economy that Bambi thought he was admiring. This is a system of Leninist corporatism. The party sustains its monopoly of power by control of the economy; it owns what it considers strategically important and allows private companies to operate only because they submit to a board of communist officials.

Entirely different from a Britain in which politicians and unions sit on company boards in order to provide a monopoly of power for right thinking people like Willy, isn’t it? Or where strategically important industries are nationalised.

Entirely different.

14 thoughts on “Will Hutton’s critique of China”

  1. Mr. Hutton has just made the case as to why crony capitalism is such a misnomer. The phenomenon should be more accurately known as crony socialism. Retired bookkeepers would probably approve.

  2. “Chinese state-owned companies are a byword, not least in China, for inefficiency, loss-making and politicisation of decision-making.”

    Now if only he could figure out this applies to any state.

  3. Just trying to think of what fully profitable state owned companies we’ve had in the past 30 years. Cannot think of any – and state owned companies without politicisation of decision making would I imagine be a rarity anywhere.

  4. If you go to the website
    and look up the article “The EU’s Evil Pedigree”, you will find a description of the “state-led economy” by Walther Funk, Reichsminister for the Economy, President of the Reichsbank and Minister for post-war Planning (1942), describing a system not very different from China’s and increasingly like our own.
    I translated it.

    In a recent US broadcast, Bernard Connolly ( one time top economist for the euro currency project and author of “The Rotten Heart of Europe” described the EU as reversing the verdict of the Second World War in economic terms, defeating the “Anglo Saxon” concept

  5. Martin,
    They are common in other countries. In telecom (with which I am extremely familiar) the formula normally takes the form of:

    1. Ban the competition
    2. Ban substitute products (WhatsApp, etc)
    3. Charge a fortune

    With such a simple formula its not surprising that there are many examples.

    I suspect though that you were asking a slightly different question, which is whether state-owned enterprises can survive profitably in a fully competitive market.

  6. Royal Mail is the obvious current example (of both Martin and Gary’s case).

    Indeed, nearly all the utilities were profitable before privatisation – British Gas, all three arms of the electricity industry as privatised (generators, suppliers and National Grid), BT, and the English water companies, were all profitable.

    British Steel, British Airways and British Aerospace were all profitable at the time of privatisation (in all three cases, the cuts required occurred under state ownership as preparation for privatisation, not after the sale). Admittedly, by this point they’d benefited from write-offs of the debt incurred during the previous years of state ownership.

    Jaguar and Rover were trade-sold rather than floated, so I don’t think it was ever clear whether they were profitable at the time of the deal.

    The railways are the only privatised industries I can think of which were unequivocally unprofitable before privatisation, which is why the system under which Railtrack was structured as a fake for-profit company was insane (and failed).

  7. @John b, how can a monopoly utility not be profitable? What stupid and irrelevant statements.

    The problem is not whether they are profitable, it is whether they are supplying the service for the most effective value to their captive customers.

    It was quite plain that the utilities/BA before privatisation were anything but. Saying otherwise is just lying, or being ignorant.

  8. Blimey, Monoi – Martin’s question was “were they profitable”; my answer was “yes, but Greg is right that in many cases they were monopoly providers”. No need to spit the dummy.

    And BA never had captive customers, which is why I stuck it with BS and BL rather than with the utilities – for short-haul, the UK had a competitive domestic and charter industry for as long as BA (and even BEA) have existed; for long-haul, it always competed with the national airlines of wherever it was flying to, plus a wide range of other oddities back in the days when all long-haul flights were five-stop extravaganzas.

    Martin: the answer to your second question is, “get an Economy 7 space heating system and a halogen stove”. It’s no coincidence that the LEBs pushed (inefficient, and expensive without subsidy) electric heating hardest when they were competing against gas, rather than after privatisation when they were able to offer dual-fuel.

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