State Capitalism and Democratic Capitalism Duke It Out

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For those of you who missed last night’s debate on China vs. American capitalism hosted by Intelligence Squared U.S., here is the video. There was one decided winner with 85 percent of the audience’s votes, but we won’t spoil the surprise.

Check out the video here:

Robert Rosenkranz, CEO of Intelligence Squared U.S., provided the below framework for the discussion.

Why China is Better:

China is communist in name only. In most of the ways that matter, China is a model of capitalism.

Firms are free to buy the labor, technology and raw materials needed to produce the products they want in open competition with others and to sell them at market price.

If you include government firms, goods produced in a market system accounts for a substantially larger share of China’s output than they do in America.

In the past 30 years, China has saved more than half of its total output and has invested most of those savings in capital assets. American savings rates only recently reached 6 percent of total output.

China’s economy has grown tenfold, while the U.S. has barely doubled in the last 30 years.

Why America is Better:

Rule of law is more developed. Property rights are more secure and innovation is protected by intellectual property.

This makes America’s economy far more innovative, which results in companies like Google, Apple and Facebook. Nothing comparable has come from China.

American permits individuals to move freely in search of jobs and opportunities. But for millions of people living in rural China, there is no such freedom.

Corruption by government officials is far more prevalent in China.

Crony capitalism is rife in China.

“In the final analysis, this debate is not just about economics.” said Rosenkranz. “But about which system, American democratic capitalism or Chinese state capitalism, will be the model that developing countries around the world admire and seek to emulate.”

We’d like to hear what you think. Which model of capitalism should developing countries copy? Tell us your thoughts in the comments below.

A weekly newsletter featuring the biggest ideas from the smartest people