Location: People's Republic of Madison, Wisconsin

Thursday, August 18, 2005

Guess that economic policy

Here's a picture of cars in China, all lined up for the filling station:

Question: What economic policy is obvious from this picture?

Answer: China has price controls on gasoline.

See the story at Gateway Pundit, along with some good comments.

One thing we cannot conclude from this picture is that China's leaders are Carter-like economic illiterates. Their reasons for price controls are more likely to be political rather than economic. Even if they realize that gas lines can be treated by free-market gas prices, the risks of social unrest could trump any economic consideration. The Chinese economy is strewn with these kinds of roadblocks.

The conventional wisdom says that China will shortly be America's main superpower rival. That's possible, but another strong possibility is that China will simply implode because its leaders cannot resolve their contradictory desires: they want to maintain dictatorial control over the country, while also riding China to greater prosperity. They won't always be able to have it both ways, because prosperity requires freedom.


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