China’s rejection of Big Tech monopoly capitalism will allow it to see off America in the end

Beijing’s refusal to allow its home-grown technology companies to be utterly dominant in the way the predatory Amazons and Googles are in the West, is a sensible, pragmatic stand – not a rejection of free-market economics.

Over the past few weeks, the corporate media in the West have endlessly bemoaned China's ruthless regulatory clampdown on its own “Big Tech.” Mostly coming from the publications linked to big business interests, such as The Wall Street Journal, The Financial Times and Bloomberg, one might be led to believe that the control of unbridled capitalism by a socialist state is the worst thing in the world. The associated narrative is fixated on doom and gloom, on why this is bad for investors and for China's economy, and so on. Billionaires who fall foul of such actions are presented as victims.

If the take isn't on commercial interests, it's otherwise focused on the cliche of the “Communist Party's authority” and the power of [incumbent president] “Xi Jinping” – which doesn't help explain anything about why China is taking this action, or what it intends. 

In particular, one article from Bloomberg, claiming “China’s Hubris Is a Threat to Its Economic Future” which bemoaned “Beijing’s habit of stamping on private enterprise,” is a classic example. It makes the worn ideological argument that only by “opening up markets more” and by introducing “more capitalism” will China progress, and if it's doing anything else it must be going backwards.

In reality, China's decision-making is not explained by “hubris” or simply by “the party's power.” Rather, China is rejecting “monopoly capitalism” in the most specific sense of the term, as it increasingly believes this is a hindrance to the country's growth and stability. And that its intervention is, in fact, fairer to the principles of the “free market” and of “competition” than the laissez-faire policies enacted by its western counterparts, not least when it comes to Big Tech. 

The Western view of Xi's decision-making is ideological and assumes that the unlimited free market, which allows “monopoly capitalism” to flourish in their own countries, is the answer to all of society's problems, when their own examples demonstrate it is not. 

China is aiming for growth that is lasting, balanced and avoids the pitfalls of the “middle income trap,” which is risked if inequality is allowed to spiral out of control. China wants a comprehensively prosperous society and is prepared to make structural changes in order to achieve it; while it is happy getting western investment, Beijing isn’t prepared to kowtow to it and do what those investors want.

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Since the 1980s, the western world at large, led by the US and UK, has embraced a consensus of neoliberal economics which premises itself on completely open markets and limited state control. This ideological view, built-on by works such as The Road to Serfdom by Friedrich Hayek, argues that the free market is essentially good and will always adapt to people's needs, and that government regulation is bad. The approach was a rejection of Keynesianism, a Post-World War II approach which advocated state intervention and investment in the economy with a view to maintaining employment. 

These economic shifts came at the same time as China's “reform and opening up” under Deng Xiaoping. This was interpreted in the west as China positioning itself on the path to ‘becoming like the west’ and rejecting the chaotic economic legacy of Mao Zedong in favor of the virtues of capitalism, which in turn would inevitably bring liberal political changes. 

This cemented the prevailing logic that more and more capitalism was everything that China needed; western investors hoped the country would become a “bonanza” for them. This thinking underpinned about 50 years of engagement between China and the West.

However, the Xi Jinping era has soured these hopes because China has taken a different path from what, in Washington and London at least, was deemed to be ideologically inevitable, fuelled by the demise of the Soviet Union. 

The Communist Party of China has reasserted its authority, the country has not become more democratic as it has grown, and its development strategy was never to “open up as much as possible” to full capitalist control. It was a strategy of pragmatism and doing what best suited China’s needs at any given time. The solution to China's growth was never just about capitalism, but involved implementing measures in the name of the ‘greater good of society, not investors. The world has changed, and therefore the needs and solutions have changed, and that is what is happening now. 

As an example of this, China's “Anti-Monopoly law” that’s being frequently used against Big Tech, isn't new at all, so explaining this as purely a phenomenon of the Xi era is misleading. It was passed in 2008, and vows to restrain “monopolistic conducts, protecting fair market competition, enhancing economic efficiency, safeguarding the interests of consumers and the interests of the society as a whole.”

Note how the text of this law doesn't proclaim that China is aiming to kill the free market or stifle investors, as is frequently claimed, but is premised on the logic of opposing “monopoly capitalism” – a defining product of the neoliberal era, in which a small number of hugely-rich corporations grow to dominate their sectors exclusively, crushing competitors, controlling prices and racking up huge, almost obscene, profits. However, in the minds of western commenters who still peddle this market fundamentalist ideology, they honestly believe this is what China needs.

But the facts tell us a very different story. Look at what Amazon has done to retailers in the west. It has established itself to such a size and profit margin while it can sell goods at surreal prices. That may seem good upfront, but it also comes at the expense of killing many other retailers and forcing them out of business. Neoliberalism serves to drive down wages and drive up the costs of living. What is gained from Amazon does not balance out the loss of jobs and the poor wages it causes. In Britain for one, Amazon has killed the High Street, even prior to the pandemic. Debenhams? Out of business. House of Fraser? Out of business. Along with many, many more. All so Jeff Bezos can pile up his billions and fly into space for 20 minutes as a vanity project. Ask yourself, would Jack Ma flying into space help China’s economic growth as a developing country? 

Big Tech changes and controls the way we live. It is crucial to the development of the digital economy, but the downside is that, as the Amazons and Googles get too big and establish monopolies, it hollows out the economies of the countries it dominates and sucks wealth upwards; and it doesn’t come back down. Inequality grows, leading to instability.

That’s not sustainable development. Such an approach would not build China’s middle class or help its poorer regions. Yet we are constantly being told it needs this kind of system if it is to prosper. China already has more billionaires than anywhere else in the world, but having a handful of wealthy people is not the same as having a wealthy, and healthy, country as a whole. Ask anyone in Latin America. 

Monopoly capitalism in the neoliberal era destroys small and medium enterprises and stifles progress, drives up costs of living, and creates growing and damaging inequality. This is not the answer, and Beijing recognizes the dangers. China isn’t falling out with the market, it’s falling out with neoliberalism, and with this approach, I believe its economy will, in time, beat the US’s distorted model.

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