The People’s Republic of Crony Capitalism

The Wall Street Journal reports that “China’s banking regulator plans to tighten rules covering the underwriting of corporate bonds by commercial banks.” The project, says Chinese bond analyst Wang Yingfeng, “may make it more difficult for small companies … to issue bonds on the interbank market,” but the declared aim of the project is to “rein in potential risks.”

Order, stability, discipline — ever the shibboleths of the corporate, regulatory state — are the familiar overlay of state actions in the interest of reigning elites, watchwords cluing the consumer to the fact that he’s about to get scammed. Corporatist barriers to market entry permeate the American economic structure so deeply and completely that it’s easy to overlook their impacts internationally.

States the world over act as guarantors of entrenched commercial power, promoting their economic interventions with the language of fairness and efficiency. The new rules that the China Banking Regulatory Commission is expected to promulgate are just the kind of power- and market share-consolidating coup that the state specializes in. The state interposes itself between consumers and economic actors that provide, for instance, banking services with the effect of exaggerating the price of such services.

Drawing on the specter of the uncontrolled market, which we’re assured is a province of savagery and exploitation, the state corrals banking for its favorites. Walter Bagehot cautioned against this kind of special dispensation in 1873, detecting that government policies “give peculiar favour” to certain banks, securing for them a “mischievous supremacy above all other banks.”

New requirements that dispatch smaller banks, rather than screening consumers from risk, create risk by swelling large banks far beyond the size an honest free market would allow. They stay the dynamic competition that Benjamin Tucker — in agreement with the classical political economists — saw as “the great leveler of prices.” Although addressing the Federal Reserve’s cartelization of banking in the U.S., Murray Rothbard exploded the myth of the banks’ natural “tendency to over-expand” that provides the motivation for China’s new regulations.

The claim is that banks in determined competition are more likely to engage in risky investing activities than banks buffered from competition by the state. China stresses that it’s worried about an “overheated property market,” about “wasteful” investments contrary to the public good, but it is centralization that enables these results.

That libertarianism has traditionally been so very congratulatory of the state’s competition-loathing inheritors of privilege is some evidence of the success of the state’s campaign to project its system as some kind of free market. The defining feature of state-capitalism is the concerted forestalling of the natural market, the browbeating of consumers by a partnership between Big Business and Big Government that couldn’t care less about free enterprise.

Whether we see these favored businesses as arms of the state or, inversely, the state as the pawn of the corporate class is largely beside the point. The fact is, they can hardly be thought of as distinct institutions at all, constituting the two sides of a single coin and forming a coercive, hierarchical symbiosis. China’s banksters, anxious to put down potential challengers, are doubtless among the principal agitators for the regulatory changes. I suppose it’s their esteem for the sovereign lendee that inspires banks toward support of these progressive measures.

Behold the vista of Chinese Communism, a corporate-capitalist feeding frenzy for big banks using the state to bleed “the People.” Where the consumer is concerned — in China and everywhere else — the state is the ultimate enemy, the institution most hostile to the market and most companionable to cutthroat monopolists.

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Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory