Author:Huang Yasheng(Professor, MIT Sloan School of Management).
*: September 24, 2019.
Over the past few hundred years, capitalism has developed rapidly across the globe. For many social science scholars, the concepts of free market and private ownership encompassed capitalism are the best way to promote economic development and improve human living standards. However, in the global capitalist economy, the very nature of capitalism is being undermined by the capitalist group, which is born of its own system.
In 2003, two professors at the University of Chicago's Graduate School of Business, Raghuram Rajan and Luigi Zingales, published a book called "S**ing Capitalism from the Capitalists." In the book, the two authors discuss the financial market, arguing that the concepts of free market and private ownership contained in capitalism are good in themselves, and they are the best institutions for promoting economic development that mankind has imagined at present.
However, in practice, vested interests led by capitalists often choose to intervene in or even undermine the free market to prevent new potential rivals from entering the competition and ensure their monopoly position. More importantly, the capitalists have the strength to achieve these goals, because they can influence politics with money.
In Rajan and Zincares' view, there is a need to ensure that effective policies and institutions are in place to protect the free market, but many times this is difficult because it is often also influenced by the forces of capital, which often see politicians who save the capitalist system as their enemies. This can be said to be a Greek tragedy of capitalism.
Hong Kong's predicament
Hong Kong's current predicament is actually largely reflected in the views of Rajan and Ziningares. In 2013, a Hong Kong primary school student's essay "The City of the Li Family" caused a great response on the Internet, in which the primary school student wrote sarcastically, "Li Ka-shing, worthy of the name, Hong Kong is the city of the Li family." He is our God, and all things are created by Him. Of course, the legendary trinity in Hong Kong is them: Li Ka-shing, Li Zekai, and Li Zeju. Their strength far surpasses that of human beings, sheltering workers from the wind and rain, and protecting Hong Kong from typhoon signals and torrential rains. They give so much and just hope we can get to work on time and leave work on time. This is all the greatness of Brother Cheng. ”
The primary school student's essay points out one of the stubborn problems of Hong Kong's economy and society, that is, the monopoly of the capitalists on the Hong Kong economy. For more than 20 years, Hong Kong has been ranked as the world's freest economy by the Economic Freedom Index of the Tradition Association, a US think tank. Forbes magazine also ranked Hong Kong as the third best business environment in the world. In the eyes of many, Hong Kong is a model of capitalism and the functioning of the free market. Admittedly, it is easy to do business in Hong Kong, and the tax rate in Hong Kong's business sector is also very low, and there is relatively little intervention,** these are all factors that favor the free development of business. However, none of these factors can obscure the status quo of monopoly capitalism in Hong Kong.
According to Bloomberg's 2016 statistics, the total wealth of Hong Kong's 10 richest businessmen accounts for 35% of Hong Kong's GDP. This is the highest among private economies. In second place is Sweden, with a proportion of 25%, which is also much lower than Hong Kong. (Also, Sweden has high taxes.) Developed countries such as Germany, the United Kingdom, the United States, and Canada have not exceeded 5%. In 2016 and 2017, Hong Kong's five richest people reportedly made a profit of HK$236 billion on dividends alone. According to another set of statistics from 2016, the median monthly income of the richest 10% in Hong Kong is 43 of the median monthly income of the poorest 10%.9 times.
Many of Hong Kong's wealthy families started their careers in real estate, and then quickly expanded their businesses into other sectors, such as electricity and retail, and formed monopolies in a number of different sectors to prevent later competitors from entering. And the influence of these tycoons is not just in the business world.
According to data from The Economist, 27% of Hong Kong's revenue comes from land. Hong Kong's dependence on the land business has somehow expanded the influence of Hong Kong's wealthy families. It is worth noting that the monopoly capitalism represented by several wealthy families in Hong Kong is not a product of Hong Kong's return to the motherland. Monopoly capitalism in Hong Kong was formed during the British colonial period, long before 1997. Even back in the 50s, when Hong Kong's local entrepreneurs had not yet risen, many of the lifeblood of Hong Kong's economy were controlled by a handful of British capitalists at that time.
The crisis in the United States
The monopoly of Hong Kong capitalists over the daily economic activities of the city is not unique, and it exists in many capitalist regions and countries around the world, including highly mature capitalist countries such as the United States. Although the total wealth of the 10 richest businessmen in the United States accounts for less than 5% of the total GDP of the United States, the monopoly of capital can still be seen in daily economic activities. Of the 100 largest U.S. airports, 40 have the majority of daily flights occupied by a single airline. In the U.S., airlines are willing to discourage new competitors from entering through predatory pricing (ultra-low pricing). In the fast-paced tech sector, Google controls more than 90 percent of the U.S. internet search business, while Facebook controls more than 80 percent of the U.S. social networking.
However, the destruction of the American capitalist system by the American capitalists is far more than simply preventing new competitors from entering the market. And these business tactics don't always work. If we look back at the 2008 financial crisis, we can see that bankers, especially in the United States, bear a lot of responsibility for this financial crisis. In the years leading up to the crisis, they were active in the very high-risk mortgage lending business, which laid the foundation for the outbreak of the financial crisis. Among them, many trading activities can be described as irresponsible. And now, many scholars have expressed concern that the U.S. financial industry may once again be over-borrowing.
The aforementioned University of Chicago School of Business professor Rajramai Rajan said in 2018 that although most banks in the United States have become more cautious about lending after 2008, the "low-threshold loan" business in the United States is rapidly rising, and for borrowers, this kind of loan is easier to obtain than ordinary loans, and is subject to relatively less regulation, so it is also more risky. This type of lending is mainly handled by non-bank finance companies, but many banks are also involved. It is true that risk is a part of financial investment, but the financial industry has a very strong spillover effect, and large-scale financial risks may bring great disasters to the entire country and even the global economy.
The greatest damage to the market economy by the capitalists comes from their interference and influence on politics. Historically, American capitalists have generally supported the Republican Party, although the Republican Party's economic performance is far inferior to that of the Democratic Party. Right now, there are a lot of capitalists who are backing a Trump who wantonly raises tariffs, jeopardizes the free market and international cooperation system, undermines the rule of law, and threatens the independence of banks.
According to data released by the Trump campaign, in the second quarter of this year, Trump raised a total of 1$0.5 billion in campaign funding is higher than Obama's level in the same period in 2012, and at this trend, Trump will receive much more campaign funding this year than in 2016. A few days ago, Trump held a two-day campaign campaign in California, one of the Democratic strongholds, and received a total of $15 million in donations.
In August, real estate tycoons Stephen Ross and Joe Farrell held a fundraiser for Mr. Trump, raising more than $12 million in campaign funds. In addition, hedge financier John Paulson, Sequoia Global Partner Doug Leone, and former Intel CEO Brian Krzanich have all donated money or attempted to hold fundraisers for Trump. It can be said that these capitalists are the gravediggers of the capitalist system.
Conclusion
We must be clear about the concept that "pro-business" is not necessarily "pro-market", and even "pro-business" destroys the market. "Pro-market" policies encourage competition and remain open, while "pro-business" policies are more concerned with the interests of existing firms in the market. For the United States, the monopoly behavior of the capitalists, the irresponsible financial and investment activities, as well as the influence on politics and the support of a person like Trump who undermines the market economy, are undoubtedly creating a crisis for American capitalism.
More or less out of the mentality of great power competition, Trump's destruction of the United States is precisely one of the reasons why many Chinese support Trump to govern in the United States. In this respect, the Chinese are smarter, sharper, and more perceptive than the American capitalist community, which themselves do not realize that they are digging their own grave for capitalism and harming the system from which they benefit.
In the world's capitalist economies, many of the capitalists' actions are causing the operation of the capitalist economies to gradually deviate from the essence and original intention of capitalism. This requires standing up for the capitalist system through institutional reform, but to do so it is necessary to elect politicians who are truly independent of the influence of the capitalists. In the history of the United States, the greatest ** to save the American system was not Reagan, but Roosevelt, the Democratic Party rather than the Republican Party, the politician who restrained the capitalists rather than the politicians who connived at them.