How the Chinese Government Creates Jobs

The Red Chinese are more capitalist than Obama.

As soon as Mao Zedong's Communist army defeated the forces of Chiang Kai-Shek in 1949, Mao led the effort to establish a communist society throughout China.  His blend of Marxist-Leninist theory, military strategy, and detailed economic policies is known as "Maoism."

Mao's basic drive was economic egalitarianism - rather than believing that all people should be equal before the law, he essentially went to war against his fellow citizens to remove economic and social inequalities among the Chinese people.  As a practical matter, Mao focused his wrath on landowners, traders, bankers, scholars, businessmen, and anyone else who was better off than "the masses."

In the name of "fairness," he either had "capitalist roaders" and "economic parasites" shot or worked them to death in labor camps.  His economic policies and political purges are believed to have cost the lives of 50 to 70 million people between the time he took power in 1949 and his death in 1976.

Income Inequality Was Reduced

To give the devil his due, Mao's efforts did reduce economic inequality all across China.  The early 1900's were the waning years of the Qing dynasty when decades of bureaucratic ineffectiveness was making it impossible for the government to take action against the European powers which were carving China apart.  As with Rome just before the fall, the rich were so busy protecting their wealth against the poor that they were unable to face external enemies.  Mao wiped out the rich and brought about equality.

Income equalization came at a cost, however - as with other Communist countries, the overwhelming majority of Chinese were equal in miserable poverty.  There were exceptions, of course - just as our ruling elites exempted themselves from Obamacare and intend to enjoy lavish medical care at our expense and exempted themselves from Social Security so they can enjoy lavish pensions at our expense, the very topmost layers of the Communist party enjoyed lifestyles of great wealth at the people's expense.

The Problem of National Poverty

Traditional Chinese rulers didn't care much about the poor unless they tried to rebel.  The Qing emperors would have understood Mao's system of extreme poverty for the masses while elite rulers lived in luxury, but there were two minor difficulties:

  1. Chinese military capabilities did not match their ambitions.  When the Chinese army fought a war against India in 1962, their military forces had much more difficulty than expected.

  2. As global communications improved, the Chinese people realized that people in other countries were much better off economically than they were.  The Chinese rulers observed that the Communist government melted away in 1989 once the East Germans realized how poor they were relative to the West Germans.

In 1989, the Chinese government realized that their citizens were becoming dissatisfied when 100,000 people gathered in Tiananmen square to mourn the death of Hu Yaobang, an official who had been in favor of democracy and had criticized the corruption at the higher levels of the Communist Party.  This protest grew both in scope and intensity until the government sent tanks to crush the rebels on June 4.

Lessons Learned

The Chinese Communists had observed that Communist governments in East Germany, Romania, Yugoslavia, and other countries were collapsing and they realized that their power was at risk.  Mr. Deng, chairman of the Communist party, realized that Communist ideology was failing so badly that young people had no stake in the system and were rebelling.  Something had to give.

To keep everybody else from following the students into revolt, he allowed the Chinese people to start private businesses so they would have a personal interest in China's success.  He hoped that if the students could find find jobs which promised to make them better off, they'd settle for getting rich instead of continuing to demand that the government share power with the people via democracy.

His protégé Hu Yaobank followed up with the slogan "To get rich is glorious."   In arguing that "capitalist exploiters" should not only be permitted but encouraged, Mr. Deng and Mr. Hu implicitly declared that two generations of Communist policies which had cost millions of lives were simply wrong.

Mr. Deng first admitted that competition was the only way to make the economy function efficiently and he then convinced the Party that small-C communism simply couldn't work in the real world.  The system had to change or people would rebel, starve, or both.  Change was painful but social collapse into the abyss of the Confucian cycle would have been worse as far as the people on top were concerned.

Note that the Chinese government didn't offer tax credits for creating jobs or encourage businesses to hire more people than they needed, they just got out of the way!

How The Chinese Created Jobs

The years since then have shown the world a "Chinese miracle" which involves far more people, investors, businessmen, and money than the Massachusetts miracle ever imagined - about 300 million people went from Third World to First World in 20 years.  This economic miracle occurred even though the Communist Party retained total power; did not clean up the judicial system; kept their primitive state-controlled banking system; let corruption, bribery, and influence peddling continue; and didn't do much to improve their antediluvian transportation infrastructure until fairly recently.

It's illuminating to contrast these Chinese policy initiatives with what Mr. Obama's doing.

Instead of declaring that getting rich is glorious so that he can tax the resulting income, Mr. Obama keeps saying he simply must increase taxes in the name of fairness.  Instead of praising businessmen who create jobs and pay more and more taxes, Mr. Obama excoriates them for greed.

Many pundits have accused Mr. Obama of being a socialist.  That's neither here nor there.

What Mr. Obama plainly is, is an egalitarian.  He believes that it's inherently unfair for some Americans to have more money, or better cars, or better health care than anyone else; he's trying to drag the well-off down to lower levels.  He believes it's unfair for businessmen who create jobs to get paid according to how well their businesses do so he's trying to take away what he sees as unfair gains.  Like Mao, he wants everybody to be equal - except for himself and his pals, of course, who by virtue of their power are America's natural aristocracy and have every right to the best of everything.

Mao Zedong established a society where most people worked for State-Owned Enterprises (SOE) which had far more employees than they needed.  Everybody other than the ruling elite was indeed equal, but it was equality at a very low level.

This was unacceptable because a poverty-stricken populace simply couldn't support modern military power.  By urging their people to generate wealth, the Chinese government generated enough tax revenue to afford not only a modern military but the Beijing Olympics and  a brand-new space program while Mr. Obama's deficits threaten to take us out of space entirely.  Mr. Obama's associates who rule Government Motors are encouraging GM to hire more workers than needed just as Mao's SOEs had far more workers than needed.

Mr. Obama seems to be determined to destroy the businesses who've generated so much national wealth and so much tax revenue over the past centuries.  When Mao had finished destroying income inequality, the Chinese military could barely function, everybody outside the upper echelon was dirt poor, and lives were nasty, brutish, and short.

What will happen to America if Mr. Obama manages to destroy income inequality here?  Are the Tea Party Protests Mr. Obama's Tiananmen?  Will he send in the tanks if they become a serious threat to his power?

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Economics.
Reader Comments
Mao did not eliminate inequality. During the Cultural Revolution many Chinese college students took pilgrimages to famous sites. Many of the rural people in the nation had almost nothing, including food. The equality of the masses was an illusion in China.
April 20, 2010 1:35 PM
It isn't just the Obama administration, unfortunately. Someone sent me this:

I have always thought that Chris Dodd was a complete, boneheaded idiot. But, he has outdone himself. Part of his 1,400 page "financial reform" bill takes aim at destroying angel financing of small companies in America. This man is a true menace and is probably in the employ of our country's worst enemy. Iran? China? Venezuela? Bin Laden? Let's see who he goes to work for after he leaves the Senate.

Angels Out of America
How the Dodd bill harms start-ups.

Senator Chris Dodd's 1,400-page financial reform bill contains many economic land mines, and here's one of the worst: Provisions that would make it harder for business start-ups to raise seed capital.

Currently, wealthy individuals who want to invest directly in a new business can do so with minimum interference from regulators. The law requires only that the investor be "accredited" by meeting thresholds for net worth ($1 million) or income ($250,000). Entrepreneurs depend on these "angel" investors, since many new businesses lack the collateral for bank loans and are too small to interest venture capitalists.

Amazon, Yahoo, Google and Facebook all benefited from angel investors, who typically target companies under five years old. According to a 2009 Kaufman Foundation study, such firms are less than 1% of all companies yet generate about 10% of new jobs. Between 1980 and 2005, companies less than five years old accounted for all net job growth in the U.S. In 2008, angels invested some $19 billion in more than 55,000 companies.

Mr. Dodd's bill would change all this for the worse. Most preposterously, it would require that start-ups seeking angel investments file with the Securities and Exchange Commission and endure a 120-day review. Rare is the new company that doesn't need immediate access to the capital it raises, and a four-month delay is the kind of rule popular in banana republics that create few new businesses.

The legislation also removes a federal pre-emption that prevents start-ups and investors from being subject to 50 different state regulators. The North American Securities Administrators Association, which represents state regulators, argues that federal pre-emption contributes to fraud. But angel investors don't use broker-dealers and other middlemen linked to recent investment scandals. Nascent companies often seek financing from multiple investors in different states, and a state-by-state regulatory regime would mean higher compliance costs and more legal risks.

The Dodd bill also raises the net worth and income thresholds to $2.3 million and $450,000, respectively. The Angel Capital Association, a trade group, estimates that these provisions would disqualify about 77% of current accredited investors. Accreditation matters in luring other potential investors, such as venture capitalists who enter the picture once a company begins to mature.

We hear Senator Dodd is taking such complaints seriously, and we hope so. No one believes angel investors pose a systemic risk, so it's hard to understand why these proposals are part of a bill aimed at preventing another financial collapse. The economy needs more private job creation, as Democrats who have to explain a 9.7% jobless rate should especially understand.

It appears that Sen. Dodd doesn't realize that Government's main task is to get out of the way.
April 22, 2010 5:37 PM
The Times is catching on!

The Economy Needs a Bit of Ingenuity
A lack of demand isn't the economic problem - it's the lack of long-term investment.

Starting with a dead-obvoius headline, the articles says:


Sustained business investment, in turn, rests on innovation. Business cannot wait for discoveries in science or the rare successes in state-run labs. Without cutting-edge products and business methods, rates of return on a great many investments will sag. Furthermore, innovation creates jobs across the economy, for entrepreneurs, marketers and buyers. State-led technology projects do not.

High business investment also depends on companies having confidence in the future. A company might be afraid to invest in research or product lines if it fears the rest of the economy is not doing the same - or if it fears the government might become hostile to its goals. During the Depression, John Maynard Keynes warned President Franklin D. Roosevelt not to damage business confidence with anti-profit rhetoric - to treat titans of business "not as wolves or tigers, but as domestic animals by nature."

Roosevelt ignored Keynes, as we know, and the depression dragged on until WW II. Who's going to invest with such an anti-business administration hauling the levers of power in DC?
August 7, 2010 11:02 AM


You have at one fact wrong:

When the Chinese attacked India in 1962, the Indian Army folded in no time, not because of lack of courage but because the brainless, incompetent Nehru (first King aka PM of so-called independent India and creator of countless corrupt government "jobs") had the belief that military strength was not needed or desirable.

So, to correct you, the Chinese Army defeated the Indian Army easily in 1962 and carved off a big chunk without any trouble.

And in present times, the Chinese Government doesn't even need to field it's army - funding the Maoist dissidents with arms and (fake) currency is sufficient.

To get back to your article, at the end you ask a question and the answer to that is that *all* Leftist Elites have no compunction about using unlimited force to hold on to power.



February 8, 2011 7:12 PM
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