Does unregulated capitalism look like China?

I’m not firmly on either side of this, but I’d like to hear your positions.

You’ve seen the trail of poisonous and/or adulterated products from China in the news. I don’t mean accidentally contaminated food. I mean intentional decisions to put melamine in animal food instead of protein, and intentional decisions to paint toys with lead paint. Well, you’ve seen the rest of the list.

There has always been a debate between free market business and government protection of consumers. This spate of awful goods from the budding, nearly unregulated capitalism in China is worrisome. Sometimes it seems to show what happens when untrammeled greed is allowed to run wild.

Is this what America was like before the government began to ride on the businessman’s back?

I don’t know. I think it can be quite reasonably argued that manufacturing defective or dangerous products could harm future custom - so that’s an incentive for businesses to avoid doing it. Except that in this case, it would appear that the desire for short-term profit overrode such concerns.

On the whole, yes. China is playing catch-up with the industrialised West, and so it’s going throught the dark side of the industrial revolution.

But China is regulated: just not regulated in the same way as North America and Western Europe are. Firstly, all aspects of politics are regulated, so there’s no utside challenge to the ruling party. That includes things that don’t look like politics to us westerners, such as Falun Gong

Secondly, the government is encouraging the industrialisation of China, and not just taking a neutral stance. It’s doing this by such means as controlling the exchange rate of the renminbi against the US dollar, and by setting up Special Economic Zones such as Shenzhen. And it’s encouraging industry knowing that mean burning lots of polluting coal, etc.

Toys designed by Disney in America have been recalled for lead base paint. Poisonous toothpaste ,defective tires etc . Yep it is just dandy.

Designed by Disney, but built where? The latest Fisher-Price recall is of toys made in China to F-P designs. As for the toothpaste (?) and tires, were there decisions to intentionally make faulty goods? My question is about greed, not mistakes by the manufacturers.

Fisher-Price, btw, is now part of Mattel.

Pretty much, yes.

The various regulatory agencies in the US and Europe that help prevent such things are a direct result of the same sorts of problems.

But … but … the Libertarians here have assured me that, contrary to what that alarmist old hack Dickens would have us believe, capitalists wouldn’t even begin to think about dreaming about considering putting short term profits above he safety and well being of workers or customers.

No need for all that regulation. It just gets in the way of the market’s benevolent hand.

It can’t be classified as “unregulated” until every last bureaucrat is harshly punished for dereliction of duties.

Isn’t that always the case, though?

Free market evangelists claim that, absent regulatory pressure, a business will make a rational decision not to cut its own legs out from under itself by engaging in harmful practices. If the business injures or kills the consumer today, it will be frozen out of the marketplace tomorrow — not because a government shuts it down but because free consumers choose not to buy its goods.

The problem with this is that businesses don’t make decisions: people do. And it’s entirely rational for a person to say, “I don’t care if I injure or kill a consumer today, because I got their money today, and tomorrow I will have retired to a tropical country without extradition.” Further, it’s entirely rational for a consumer to say, “I know there’s a one-in-fifty chance I’ll get sick from this product but I will choose to accept the relatively small risk as a tradeoff for saving a few coins. And I neither know nor care about that guy a hundred miles away who died, so I will not make an emotional decision to punish the company for its wrongdoing. Give me the cheap goods and let me deal with the risk.” And that’s assuming the consumer actually has information about the business’s practices, and has sufficient data on which to base a rational decision.

Free market evangelists will argue that all of this is true, but that, counterintuitively, these apparent negative effects really aren’t all that bad in the long term — because, in the current system, government regulation is distorting the assignment of responsibility, and short-circuiting what should be the market’s rational analysis. If consumers were forced to bear the risk of poor decision making, they would become much more involved with evaluating the wisdom of their purchases, and they would avoid business that do not freely make disclosures about their practices. When government steps in as a protector, the marketplace is blanketed with an artificial sense of safety, and there’s a feeling that goods can be purchased without any concern or personal responsibility.

The problem there is the same as in the previous paragraph: Just as businesses don’t make decisions, neither does the marketplace, collectively. In both cases, individual people are making choices, and if we’ve learned anything in the last couple of hundred years it’s that most people are really bad at weighing short-term interests against long-term needs. And what we’re seeing in China, I think, is a pretty overwhelming argument against the unregulated-market model, for exactly those reasons. That the Chinese government is now being forced to execute officials for corruption demonstrates a failure of analysis and decision-making, and speaks strongly for an official oversight role somewhere along the line.

(The cold-blooded among us might argue that a system in which people are punished for bad analysis is actually desirable, and would gradually cause the crummy thinkers to be weeded out, thereby strengthening the civilization in the long term. I recognize the intellectual basis of that position but I will not advocate it.)

But… but… the market HAS worked, because now all the people with dead pets from poisoned cat food know not to buy from that one company that made all the terrible food. Everything is okay and back to normal thanks to the market, the companies have learned their lesson, so nobody has anything to complain about. And the pet cemeteries even managed to drum up a little business, so everyone wins!

Eh, a couple of misconceptions here.

One is that capitalism can exist without regulation. Trouble is, capitalism requires certain institutions or it can’t work. It might be possible for those institutions to not be government controlled institutions, but you can’t have capitalism unless you have a method for enforcing contracts, a method for recovering damages, a method for protecting property rights, and even a method for protecting human rights. If Bill Gates can send private soldiers over to the Google offices and burn it down and kill everyone there, what you have is not capitalism but feudalism. Bill Gates isn’t a capitalist businessman then, but rather a feudal warlord.

The other misconception is that China is “unregulated”. It certainly isn’t unregulated. People get executed for violating the law over there. It’s just that the regulations have different purposes over there than they do over here, try criticizing the ruling party and see what happens to you.

In the 19th century dairies routinely diluted milk with water and covered that up by adding chalkdust (which, I suppose, could be seen as fortifying its calcium content), pickles were dyed green with copper compounds, and catsup was reddened with iron compounds. It got worse.

That was mostly ended by the Pure Food and Drugs Act of 1906. And lead paint wasn’t finally banned until 1978.

They executed the man in charge of the Chinese equivalent of the FDA. I’ve seen no reports of lesser bribe-takers or the folks responsible for the melamine scandals being executed.

Ravenman may have been joking when he said the market has worked. The market hasn’t worked, though. I don’t know the name of the Chinese company that made melamine-laced food, and I don’t know the name of the crooked manager who made that profit-making decision. My own reaction is to not buy any Chinese-made food for the time being. I’m distrusting the entire country’s goods because of a few crooked greed-heads. That’s a shame, because most of China’s food products are probably safe.

Unfortunately, it appears that the desire for short-term profits is an overriding concern for a lot of people who manage industries.

(I’m not sure that “unregulated” Capitalism is what we are actually seeing, so much as ineffective regulation. The Chinese are quite willing to administer capital punishment for white collar crime if it involves corruption and they have been executing inspectors and company managers who have sought to circumvent the inspection process with a certain regularity. It seems, however, that the opportunity for high gain makes the risk attractive in China.)

China is highly regulated. It’s just huge and ineffecient.

I’m getting more deeply involved in this thread than I had intended. I need to stand back a bit. Sorry.

True, but would any of the punishments have happened if it were not for the reaction of the West? The Chinese have been suffering from this for quite some time, but the lack of a free press, and corrupt local officials, have prevented any action. Thanks to the corruption, Chinese industries are regulated in the same sense that the Soviet Union was a democracy. They have regulations about the theft of IP also - every so often there is some high profile confiscation of pirated material, but the stuff still seems to get sold freely on the streets.

We can see the reaction of the government also - first denying the problem, second saying it is a Western conspiracy, and thirdly banning Western goods in retaliation. Only then do they punish some high profile officials.

Since any Chinese Upton Sinclair would get tossed into the pokey, perhaps we should make the importers of goods from China pay for the increased level of inspections needed. That might force them to pay the true costs of their products.

I’m having trouble finding it, (I can’t recall whether it was on Marketplace or Fresh Air), but one analyst I heard in the last two days indicated that the number of officials executed for various versions of corruption among inspectors and QA professionals in China has run into the hundreds.

China Capitalism fights all regulation. We have to be vigilant.