Free markets are not the property of the Anglosphere

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Appeared in the Calgary Herald

In the debate over whether the partially state-owned energy company, China’s CNOOC, should be given the go-ahead by Ottawa to take over Calgary-based Nexen, there is the danger that the discussion will be cast in an adversarial east-west context.

Regrettably, an example of this appeared in a recent column from Edy Wong, associate dean at the University of Alberta’s business school. In it, Wong mused about how the Canada-China economic relationship might progress and characterized the discussion over the possible CNOOC takeover of Nexen as a tussle over values. He also called it a “struggle between economic realism and libertarian idealism”.

More specifically, Wong queried about how Canada could best “transition from a global economic order dominated by Anglo-American values to one that espouses values foreign to ours.”

Wong seems to associate free market policies with recent Anglo-American values. But this is a false correlation.

The Netherlands practised open trade at least as early as England; further back, the Roman emperors Augustus and Tiberius favoured private enterprise, private property and free trade. More recently, as a look at the Fraser Institute’s Economic Freedom index will reveal, many diverse societies have adopted free market policies while the United Kingdom and the United States stand in the rear.

Ironically, it is the official ideology of the Chinese communist party, Marxism, which developed in the West although China in practice has obviously moved away from that creed.

In any event, Wong’s framing of the issue is unhelpful. It would be unfortunate if those with Chinese heritage felt compelled to choose between that and “Western” institutions given that the distinction is phony.

For example, Martin Lee, founder of Hong Kong’s largest pro-democracy party, has long defended political, civil and economic liberties as integral to that city’s success. On economic policy, Lee has noted how “free markets and free trade are the lifeblood of Hong Kong’s economic success.”

Thus, instead of casting the CNOOC-Nexen issue as one of competing cultures, it is better to ask this simple question: what sort of institutional regime works best to “deliver the goods”?

Answer: Not one where the legal system and property rights are relatively insecure compared to Canada and to Hong Kong, or where the political process is relied upon too heavily to allocate resources and goods and services, or where the government is too large and invasive. Problematically, those inadequacies have characterized China for decades.

Such realities explain why in the Fraser Institute’s Economic Freedom Index, which compared 144 jurisdictions on just such necessary ingredients (and others) for economic freedom, China ranked 107th.

In contrast, two other Asian jurisdictions—Hong Kong and Singapore—ranked first and second as the most economically free places on the planet. The top “Anglo” country was New Zealand in third place; non-Anglo Switzerland was fourth; followed by Canada and Australia. In fact, only three of the top 10 nations were “Anglo” and only six of the top 20.

Hundreds of years of experience and a wealth of empirical evidence demonstrate that free markets produce greater prosperity, reduced poverty, and lead to other positive outcomes, including enhanced freedom in general. This is not a fight between particular cultures but an effort to improve lives across all cultures.

Critically, the mistaken allocation of resources, goods and services according to political priorities is unlikely to be improved upon when governments own the commanding heights of the economy, i.e., when they have a plethora of government-owned enterprises (or partly government-owned in the case of CNOOC).  That’s because such “enterprises” still have political priorities that today, tomorrow or ten years from now can interfere with running solid companies. Also, not unimportantly, such state-owned companies will always be available to be corrupted by a government, or might themselves corrupt politicians.

So let’s be clear-headed about this as it relates to all possible foreign takeovers and where government-owned (or partly-owned) conglomerates are in play: State-owned enterprises are a bad idea. Even if takeovers by such entities are permitted in the short-term on the grounds of realpolitik, or the need for foreign capital in Canada’s energy patch, or the rights of shareholders to sell to the highest bidder (and where no question of militarily sensitive technology exists and the buyer is not Iran, for example) such “enterprises” are ultimately not in anyone’s medium and long-term interest: not in Canada’s but especially not in China’s.

As for property rights, the rule of law, independent courts, a lack of corruption, transparency, or the critical need for businesses to be run as businesses (and not as adjuncts of a political party in Beijing or anywhere else), these are sensible ideas that help people and have stood the test of time. Such policies have been practised by, belong to and benefit diverse peoples the world over.

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