State Capitalism and Poisoned Counterfeits

Faddish financial analysts tend to laud the "State Capitalism" of China for its successes, and for its supposed future dominance of world markets and world politics. Unfortunately for these analysts, state capitalism contains the seeds of its own destruction. We are seeing some of these destructive seeds bearing fruit in China and other similarly modeled state economies.

State capitalism fosters corruption, allowing smaller circles of state-connected elites to control more wealth. In China, state dominance has meant that "princelings," relatives of leading Communist Party members, have gained control of some of the nation's most powerful companies. Even one Chinese government study of 3,000 of the nation's richest businesspeople admitted that a significant majority are related to top officials.

In Venezuela, growing state control has made the national oil firm less productive and more opaque, one reason why the country now ranks near the bottom on Transparency International's index of the world's most corrupt nations....despite the national resources that can be poured into business growth, in the long term, state mega-companies are likely to suffer from competition on the global stage. Without exposure to domestic competition, their managers never get enough experience to compete on an open market. They also have no pressure to adopt real corporate governance and oversight measures.___BostonGlobe

State capitalism based upon natural resources such as oil and gas--as in Russia and Venezuela--and state capitalism based upon technology theft and transfer--as in China--necessarily are living on borrowed time.

The CCP led Chinese seem particularly willing to cut corners to make a quick buck, which has led to the poisoning of China's rivers, soil, and air, as well as to poisoning of many exports to the outside world. Counterfeit Chinese drugs are now taking an increasing human toll outside of China.

"It is unacceptable that Americans have died and been seriously injured by what appears to be deliberate tampering," Sen. Edward M. Kennedy (D-Mass.), who chairs a panel that oversees the FDA, said in a statement. "Whether this contaminant was introduced intentionally or by accident, the full force of the law must be brought to bear to bring those responsible to justice...."This is not a new problem," said England, who now advises foreign companies on how to comply with U.S. regulations. "This is a close cousin of problems that have presented themselves before."

The level of the contaminant ranged from 2% to 50% in lots of heparin tested by the FDA. An agency official said the contaminant was cheaper to produce than heparin, which is refined through a laborious process from a substance in pigs' intestines....."If I had to guess, I would say this is a lot like the pet food case," said Larry D. Sasich, chairman of pharmacy practice at the LECOM School of Pharmacy in Erie, Pa. "This sounds like somebody in China figured out a way to make the active ingredient look or test like heparin when it was not."
___LATimes

Whether poisoned drugs, toys, toothpaste--or counterfeit aircraft and automobile parts that lead to fatal accidents--the problem of Chinese corruption is a rapidly growing problem for the entire world.

Up until now, it has been relatively easy for the Chinese companies and government to bribe US bureaucrats and elected officials, to look the other way. Should the American public ever learn the true extent of the underlying problem within the Chinese system of production, the complacency of current official US attitudes toward the China trade might be shaken at the polls. Information is the greatest enemy of corrupt state capitalist enterprises such as China's. Because in the US--unlike in China and Tibet--information still wants to be free.