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01/11/2006:

"Robert Reich: China: Capitalism Doesn't Require Democracy"

...China shows that when it comes to economics, the dividing line among the world’s nations is no longer between communism and capitalism. Capitalism has won hands down. The real dividing line is no longer economic. It’s political. And that divide is between democracy and authoritarianism. China is a capitalist economy with an authoritarian government.

For years, we’ve assumed that capitalism and democracy fit hand in glove. We took it as an article of faith that you can’t have one without the other. That’s why a key element of American policy toward China has been to encourage free trade, direct investment, and open markets. As China becomes more prosperous and integrated into the global market -- so American policy makers have thought -- China will also become more democratic.

Well, maybe we’ve been a bit naive. It’s true that democracy needs capitalism. Try to come up with the name of a single democracy in the world that doesn’t have a capitalist economy. For democracy to function there must be centers of power outside of government. Capitalism decentralizes economic power, and thereby provides the private ground in which democracy can take root.

But China shows that the reverse may not be true -- capitalism doesn’t need democracy. Capitalism’s wide diffusion of economic power offers enough incentive for investors to take risks with their money. But, as China shows, capitalism doesn’t necessarily provide enough protection for individuals to take risks with their opinions.
commondreams.org

How about the idea that robber baron capitalism is antithetical to democracy?

Mike Whitney: China and the Dollar
“It's the death blow to the US dollar,” said Peter Grandich, editor of the Grandich Letter.

On Thursday, The People’s Republic of China fired off the first volley in what could turn out to be economic Armageddon. China announced that it would begin to diversify its foreign-exchange reserves away from US dollar.

Gulp!

The only thing keeping the dollar atop its fragile perch is the fact that other countries have been willing to lap up the $600 billion of American red ink every year via the trade deficit. That amounts to roughly $2 billion per day or nearly 7% GDP.

Currently, China is holding $769 billion, the vast majority of its foreign exchange reserves. This is a humongous sum by any measurement and represents approximately 30% of China’s gross domestic product. Regrettably, the Bush administration’s wasteful spending makes the dollar look like a bad long term investment, so China will either have to change its strategy or face a huge loss on its reserves. It’s a thorny predicament and one that China needs to handle delicately. If they move too aggressively it could trigger a sell-off and send the dollar plummeting.