Friday, December 18, 2015

Why the Lethal Smog in the Capital of the World's Biggest Big Government is an Argument for Big Government

I've seen a few headlines lately, such as this one, talking about the dangerously poor air quality in Beijing of late. They're onto their second "red alert" (whatever that means) in the past few weeks and there isn't any reason to think things are going to improve without a nice refreshing hurricane coming by and flinging that mess all over Korea.

Me posing for pictures at the Great Wall of China
last year. You should be able to see the mountain
in the background above the rampart, but all you
see is smog.

I had occasion to visit Beijing, Guangzhou and Harbin last year and let me tell you, if it wasn't a "red alert" back then, I'd hate to imagine what it's like right now.

We've even got these smart asses up in Canada bottling air from the Rockies and selling it to Chinese consumers for about $30 a pop, just like Mel Brooks inhaling 'Perri-Air' in "Spaceballs". Here's a clip if you don't know what I'm talking about.
Looking across the valley to the opposite section of wall. The
picture suggests a cool, foggy, early morning but it's not.
It's actually close to noon and quite warm. It's not fog, it's
 particulate matter.

It begs the question, how come the Chinese have allowed this to happen? After all, when I was a kid I remember seeing images of Beijing with thousands of people on bicycles obeying the direction of uniformed traffic cops as the whole city pedaled to work and back every day. Now Beijing has 93 million passenger cars; even more per-capita than gas-guzzling Houston, and the effects would be as plain as the nose on your face - if your nose were visible in Beijing, and not chronically inflamed.

                                                This is Beijing       . . . . . . . . . . . . . . . . . . .              This isn't                Photo

The answer to the above question is, like most things, multifaceted and difficult to summarize, but I'm going to do it anyway. Here goes:

Government is too small in China 

"What did he say?

Is he talking about the Peoples Republic of China? The Communist superpower with constant government surveillance of everything? The same China that bans Google and Facebook , and which makes "spreading attack [Communist] Party and national leaders.” punishable by imprisonment? The China whose government is massive, all-powerful and totally lacking any legal constraint?"

Yes, that's the China I'm talking about. The problem in China is small government. Allow me to explain...

The proper role of government in society is that of a regulator; or a referee if you will.

Each of us, as private citizens, is involved in an intricate social game that is equal parts cooperation and competition. We all derive benefit from institutions of civic value and therefore all have a logical motive to cooperate with one another to maintain that value. At the same time we are all competing for limited resources. 

It's like a massive game of dodgeball. In some instances we are best served by herding together with others. In other instances the smartest move is to dart off on our own. We form loose alliances and strategize collectively, but at the end of the day it's every man for himself. Of course, all of this has to be done while observing the rules of the game; rules that must be enforced. That's what the referees are for. They don't take sides. They don't compete. They simply enforce the rules.

What you have in China, is a country that started seeing the writing on the wall (no pun intended) about 35 years ago and has since been shifting gradually toward it's current market economy. Unlike the overwhelmingly privatized market system we're used to in the west however, China did things their way - the collectivist way. In China, the government has decided that being the referee is lame. In China the government plays to win.

According to the Economist, there were an estimated 75,000+ state owned enterprises in China as of 2014 with the twelve biggest companies in the nation at least partially state owned according to Fortune.

"And what a spectacular mess of huge government that is!!! How in the world can you suggest that more government is the solution to any problem?"

Because when big government ceases to perform the role of the referee and becomes a competing player on the field, not only does that player take on a tremendous advantage over other competitors, but the essential regulatory role that the government is meant to perform is simply not performed. The result is no enforcement of the rules.

Where is the Chinese equivalent of the Environmental Protection Agency? Where are the emissions standards? Where are the efficiency benchmarks? Where are the laws to protect the Chinese people from the toxic smog of unregulated industry and reckless growth?

Yes, the Chinese government is big when it comes to social regulation and paving the path for state owned enterprises, but when it comes to performing the actual regulatory role of government with respect to combatting filthy clouds of particulate matter, government in China is all but non-existent.

The problem is small government...

The lesson we should take away from China's example, is that the size of the government does not tell us anything about how much government is actually doing. Many government employees staffing many government offices does not necessarily mean that the rules are tough and that they're strictly enforced. This is particularly true in the 'revolving door' American regulatory climate where industry actors and government regulators swap high-ranking staff every few years, taking turns enforcing toothless laws drawn up by industry lobbyists. 

The solution to stupid government is smart government -  not less government. If we can have a simpler regulatory landscape whose outcome is higher civic value, great, so be it. But if tougher laws and stricter enforcement are required, let's not allow the size of stupid government to fool us into thinking we're already doing too much.

The massively small Chinese government proves that the math isn't that simple.

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