Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

December 28, 2006

Chinese Rent-Seekers Get Evicted

by Brad Warbiany

Much is made of the Chinese “threat” of economic hegemony. Well, I’m not buying it. I personally believe that if America would re-liberalize our economy, we would have no trouble competing with the Chinese. But right now, the Chinese are shooting themselves in the foot. They’re making economic success partially dependent on political pull, which will never result in prosperity.

For Eco-Entrepreneurs in China, No Simple Way to Grow a Business

But the experiences of Shen-Li and other companies with ambitions to market hydrogen power suggest that China’s one-party system and pervasive controls hamper innovation in many fields, from arts to sciences. In a nation where the party retains a monopoly on power — economic and otherwise — bursting from the official mold with a new idea and bringing it to market is never easy.

Although the need for pollution-free vehicles and renewable energy is clear in China’s increasingly choked cities, the future of hydrogen power has remained in the grasp of a powerful officialdom that decides on budget allocations. The government’s senior levels repeatedly have endorsed alternative forms of energy but have yet to take decisive steps toward getting hydrogen-powered vehicles onto the streets.

The Shanghai municipal government and party apparatus, proud of a can-do attitude that helped make their city China’s most prosperous, promised big-time investment in a hydrogen-powered bus and taxi fleet. But the local leadership went down in a corruption scandal in September, raising doubts about their plans.

“In China, it all depends on the government,” said Mao Zongqiang, one of the country’s leading experts on hydrogen and other alternative fuels at Tsinghua University’s Nuclear and New Energy Institute.

When entrepreneurs kneel before political whim, they know that their success is dependent on the winds continuing to blow their way. In China, as with anywhere else, the gusts can change quickly and without warning. So Shen-Li, a company depending on the Shanghai government’s promise to roll out a certain number of hydrogen vehicles, is left high and dry.

Normally I’d feel sorry for an entrepreneur who is down on his luck due to circumstances he couldn’t foresee. But when you rely on government promises, you should expect to get burned the moment you’re no longer “politically useful”. Had they made sure they had a viable business plan that the free market would support, they’d be doing just fine right now, but instead they’re scrambling for answers. That’s too bad, but they had no reason to expect any different.

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