A Stern Vision of America

By Jeffrey Folks

Yesterday, in a lengthy op-ed in the Wall Street Journal, Andy Stern laid out his vision of America's future in remarkably unambiguous, and chilling, terms.  That vision hinges on state planning and government control of a kind practically indistinguishable from that practiced in communist China.  The fact that Stern, former president of the Service Employees International Union (SEIU), holds such opinions is not really surprising.  But the fact that he has been and remains a close confidant of President Obama should sound warning bells.

Stern makes it abundantly clear that in his view, the capitalist economic model that fostered American prosperity over the last two centuries is now obsolete.  The "free-market fundamentalist, shareholder-only model," as he calls it, "is being thrown onto the trash heap of history."  What has replaced it is the centrally planned economy, with its 5-year plans and state allocation of resources, as practiced in China and other communist states.  In particular, Stern lauds the achievements of Chinese communist hard-liner Bo Xilai, mayor of Chongqing and popular spokesman for a resurgent Chinese nationalism.  According to Stern, who recently toured China (sponsored by the left-leaning Center for American Progress), Chongqing is a city on the move with "1.5 million square feet" going up daily and "700,000 new units of public housing annually."

Stern seems to have swallowed the Chinese communist hype hook, line, and sinker.  Not since Edgar Snow's The Long Revolution has there appeared such an unabashedly fawning report on the Red Star rising in the East.  Not content to laud the achievements of the state-run economy, Stern seems to go out of his way to diminish the recent accomplishments of American capitalism.  He sneeringly refers to "Team USA's results" of high unemployment, stagnant wage growth, trade deficits, and income inequality.  All of this, he believes, is the consequence of America's inability to emulate China and other state-planned economies.

It is clear that Stern's thinking has had a profound influence on President Obama.  No outside adviser has visited the White House more often than Stern during Obama's presidency, and no one has had freer access to the Oval Office.  Every major policy decision coming out of the Obama administration has had to be cleared with Big Labor, and Stern has been Big Labor's point man in this regard.  It is no accident that Obama's massive stimulus spending contained such largesse for states and municipalities to reward their public-sector employees.  Nor is it accidental that ObamaCare, Dodd-Frank, and other administration initiatives are designed to extend state control over major sectors of the economy.  Obama and Stern must sit around at night thinking up ways to subject more and more of the private sector to state control.

The problem with all of this is that Stern's vision of the future modeled on that of mainland China is not only fanciful, but dangerously misguided.  It contains so many errors of interpretation that one hardly knows where to start.

Is it true, for example, that the impressive gains racked up by the Chinese economy over the past decade have resulted from state planning?  Is it state-sponsored industries that have driven employment growth in China?  Are state-run Chinese banks to be credited with astute long-term planning and keen investment acumen?

In point of fact, China's record of centralized planning, stretching back to Mao's disastrous Great Leap Forward, has been anything but impressive.  Even the Chinese state's more recent attempts to manage its economy in the wake of the Asian financial crisis of the late 1990s and the financial crisis of 2008-2009 have shown decidedly mixed results.  State planning has led to inefficient steel mills that have collapsed under the weight of their unsustainable cost structures, oversupply of housing (including those 700,000 units going up in Chongqing annually), high-speed rail networks that have had to be shut down, and state-sponsored banks with opaque balance sheets masking undisclosed losses.  It is not state control and planning that have resulted in economic growth.  That growth has taken place in spite of the state's efforts to plan and control the economy.

Nor is China the edenic land of income equality that Stern wishes to foster in the U.S.  Under revised guidelines, China has just quadrupled its estimate of the number of its citizens living in poverty.  Political corruption is rampant throughout the party apparatus that governs the economy -- so much so that thousands of spontaneous protests, many involving violent crackdowns on the part of the state, take place every year. This may be the future that Obama and his closest advisers have in mind for America, but it is not my idea of utopia.

In fact, I doubt if very many Americans would wish to reside in any of those thousands of public housing "units" going up all over China.  Not that those units are enough.  For millions of Chinese, life remains an endless round of hunger, poverty, and disease amid the shelter of the mud hut.  One hundred million Chinese still live in rural poverty, and millions of others who have emigrated to the cities lead a precarious existence of day labor and black-market transactions.  It is clear that the Chinese state does not have a very good record in regard to its most impoverished citizens.

To the extent that the Chinese economy has evinced growth over the past two decades, it is the result not of state planning, but of the same free-market forces that Stern so wishes to suppress in the U.S.  It is not the state-run industries, banks, and service companies that have lifted a quarter-billion Chinese into the middle class; it is the free market.  Home-grown entrepreneurs, foreign corporations, and foreign investors have unleashed an engine for growth and wealth-creation that has transformed China from the backwater dominated by state-run industries that it was just 20 years ago into the second-largest economy in the world.

Clearly, the Chinese people on average are enjoying a better quality of life because the partial privatization of the Chinese economy.  But the Chinese continue to live under the iron hand of an authoritarian government that restricts nearly all forms of liberty.  The basic freedoms guaranteed by our Constitution do not exist in China.

I find it striking that Andy Stern's paean to Chinese economic planning contains no mention of the fact that Chinese citizens do not enjoy even the most basic of human rights.  Nor does there seem to be any realization on Stern's part that the freedoms enjoyed in America, including the protection of free speech and the rights of property, evolved within a free-market economy and are to a great extent intertwined with and dependent upon the continuation of capitalism.

As Michael Novak writes in The Spirit of Democratic Capitalism, "[w]hat censorship is to free speech, the command economy is to the free market" (p. 112).  The freedom to engage in business, to earn and retain profits, and to decide how and where to invest capital are inextricably bound up with basic human liberties of freedom of speech and assembly, religious freedom, the free conduct of marriage and family life, and other essential liberties.  The fact that neither Andy Stern nor President Obama recognizes this fact is incredibly alarming.