China and the Future of Capitalism
August 14, 2007 8:48 AM
I am just returning from a remarkable trip to China. The logline is simple: everything you have heard about China’s emergence has been greatly understated. In the future, we will ironically likely be learning many of our lessons about forward-looking capitalism from our friends on the other side of the globe.
Perhaps the biggest issues facing the future of capitalism involve protection and accountability in a global internet economy. The U.S. music business has been decimated by a lack of enforcement of copyright laws in the U.S. marketplace. Feeble arguments are made that the oppressive record companies had it coming to them. Any market economist would recognize that such an argument is utterly anti-capitalist (communist?) in nature.
If you want to foster healthy markets, a level playing field is critical. And that requires enforcement. If the bandits are not stopped, and in fact thrive, legitimate markets die.
Ironically, China represents one of the few places in the world that protects legitimate businesses from being preyed upon by online businesses that will not play by the rules.
They simply shut the sites down in China. And, it works.
The U.S. is too afraid of the implications to do the same. And, everything from telecom to poker will be threatened until we find a way to enforce our laws and regulations.
Free market advocates should agree with this proposition. Either we abandon things like copyright ownership entirely… or we enforce it. Today we have a system that rewards the cheaters and discourages ethical behavior. That simply cannot be the capitalist system we desire.
A side benefit of enforcement is innovation. Imagine if the NAPSTER guys had been forced to come up with an internet solution to take on the status quo—that did not steal content. Someone would have done it. And, it would have been a market enhancer rather than a market disrupter. Another side benefit might be that, when we become consistent, it makes it easier to get countries like China to help us enforce western intellectual property rights in their territories.