Hayek's doctrine would prove poisonous to China's reform efforts

By He Zili Source:Global Times Published: 2014-4-15 20:33:01

China is now engaged in an unprecedented comprehensive reform under the guidance of socialist theories with Chinese characteristics. Some do not identify with this system and try to influence the large-scale reform with what we might call "Hayekism."

Based on the theories of Friedrich August von Hayek, an Austrian-born British economist, Hayekism is an economic and social development theory denying government intervention and therefore constitutes an important part of the neoliberalism popular among Western governments.

Since the 1970s, Western countries have adopted a wide spectrum of measures to dent state intervention and reinforce market regulation under the guidance of Hayekism, including privatization of formerly state-owned enterprises (SOEs) and financial deregulation.

However, Hayekism failed to bring long-term benefits to the West. With the growing freedom and recklessness of market, drawbacks and contradictions of its economic development mode began to emerge.

The real economy kept contracting, governments had to sustain public expenditure with heavy debts, national competence declined and foreign trade deficits kept swelling, all of which led to the 2008 financial disaster and the subsequent European debt crisis.

Suffice to say, the crisis of the Western development model has declared the bankruptcy of Hayekism. But such a theory is cherished and touted by some Chinese people who demand the privatization of SOEs. They claim that the SOEs possess quality resources but operate with low efficiency and lack of innovation. They exaggerate "entrepreneurship" by maintaining that only the market is capable to effectively allocate resources and any government interference is misleading.

They pave the way for private capital manipulating resources, kidnapping public power and encroaching public interests. And they embellish and peddle the raddled US model by belittling China's path. Though appearing radical and popular, their proposition is nothing but a duplicate of Hayekism.

China's reform is a grand cause concerning the destiny and future of the whole Chinese nation and therefore should be given due importance.

During the past six decades since the foundation of the PRC and in particular over 30 years since the nation's reform and opening-up, China has explored and embarked on a socialist development road with Chinese characteristics and then configured a basic framework of the socialist market economy.

China's path has entirely changed its backward appearance. Compared with Hayekism, this path conforms more to China's national conditions and the development trend of the times. Hayekism will contribute nothing to China's dual transformation in both its development mode and economic system.

Developed Western economies embracing Hayekism have been bogged down in grave recession, and some developing countries that believe in this theory have now been mired in sluggish economies, ubiquitous corruption and unabated civil strife.

If China adopts Hayekism to guide its reforms, it will be bound to repeat the same mistakes. Now that a new round of reform is in full swing, we must keep a sober mind and refrain from being misled by Hayekism.

The author is a professor at the School of Economics, Nankai University. opinion@globaltimes.com.cn

Posted in: Viewpoint

blog comments powered by Disqus