Union Boss Wants to Turn the U.S. into … China?!

Dec 2, 2011

Andy Stern, the former head of the SEIU, published an extraordinary op-ed in which he argued that the U.S. should adopt the central economic planning model of the People’s Republic of China.  And to support his argument, he misconstrues an important thought piece written by one of the greatest capitalists of all time, Andy Grove of Intel.  The whole thing leaves me stammering.

Let’s start with some facts.  The PRC has had a centrally planned economy since 1949 – and for the vast majority of that time the system didn’t work very well.  Actually, it often generated starvation and political violence, resulting in the deaths of millions of people.  It was only when the government moved away from central control in the late 1970’s – and unleashed the power of free enterprise – that the economy started to grow rapidly.  Even so, their economy is still built on the back of a low wage labor market with weak (bordering on nonexistent) unions.  I didn’t know that was what the SEIU was aiming for!

Further, while the central government in China still publishes Five Year Plans and still aspires to “direct” the course of the economy, do we know that these plans or direction will actually help China in the long run?  Is the Three Gorges Dam consistent with Andy Stern’s vision of forward-thinking state economic planning?  How about the South-North Water Transfer Project or Ordos City (called a “ghost city”). Maybe those projects will be deemed good investments in the future, but the jury is still very far out.  Saying that the Chinese are “planning for 7% growth” doesn’t mean that they will get it or, if they do, that the achievement will have anything to do with the Five Year Plan.  Stern shouldn’t confuse the dreams of bureaucrats with the raw creative power of entrepreneurs.

As to Andy Grove’s supposed support for Stern’s dubious proposition, that would constitute a major over-reading of Grove’s message.  In his article, Grove makes the point that manufacturing is, in and of itself, an important component of innovation – and that when you lose manufacturing you lose future innovation.  He doesn’t believe that business people and policy makers fully understand this point and, as a result, we are trading short-term cost savings/profits for long-term loss of economic competitiveness.  Grove then goes on to make the case that government should have policies that promote domestic manufacturing (this is where he would “modify” free enterprise) which, in turn, would promote long-term job growth.  He even goes so far as to suggest a tax on the use of offshore labor.  I don’t understand that idea – but neither do I see Grove’s support a new Five Year Plan for the U.S. economy.

The bottom line is that the U.S. record regarding economic management may not be perfect, but it is much better than China’s.  We still have solid demographics, vast untapped natural resources, a good deal of water and a long history of entrepreneurism.  We can do much better but there is no need to panic.  And there is most certainly no need to swoon over the power of a Chinese-like bureaucracy to save us.

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