The economic rise of China since the 1980s has been one of the most, if not the most, impressive feats of economic progress ever. It has eradicated poverty by the hundreds of millions, created an industrial sector that has dwarfed anything ever seen in human history, and despite the country’s size and maturity, continues to grow at a pace that any Western democracy and even most developing economies can only dream of. This has been largely been achieved by the Chinese government’s adoption of market policies. China is now the world’s greatest trading nation and also a massive receptor and supplier of foreign investment. Capitalism works, and it follows that China is the perfect example of why countries should liberalize their economies and embrace free markets unconditionally.
Except it doesn’t follow.
If you were tempted to draw this apparently obvious conclusion, congratulations, you are a victim of what I like to call the Spectrum Fallacy, possibly the most pernicious flaw of logical argumentation in policy circles. What is the Spectrum Fallacy? It is the flawed premise that just because something is demonstrably better than something else, more of that something is necessarily better than only some of it. It is very similar to a well known logical fallacy, the false dilemma. Like the false dilemma, the spectrum fallacy assumes that there is a false choice, that one must necessarily choose between two mutually exclusive options (statist communism or laissez-faire capitalism). However, here we are assuming not that there are more choices but that either of these two choices can be better when they are applied less extremely across the spectrum of possibilities.
The conservative dream
Conservatives love the spectrum fallacy because it’s rather easy to find examples of disastrous outcomes for extreme statist or communist countries. There is the recent case of Venezuela, for example, of a left-wing statist petro-dictatorship imploding spectacularly. Critics of Venezuela on the right then naturally use this example of why any left-wing policy is doomed, and why every left-wing candidate is almost destined to repeat the example of Venezuela. And yet when denouncing the “socialist” policies of the Chavez/Maduro regime, they fail to take into account the countless success stories of less extreme socialist policies like those of Scandinavia or continental Europe. By almost every measurable socio-economic outcome, these countries do much better than the laissez-faire wonderlands of the US and Britain. As Rutger Bregman writes in the excellent Utopia for Realists: “there is almost no country on Earth where the American Dream is less likely to come true than in the US of A” in light of the country’s staggering inequality and lack of social mobility. Socialism works… when it’s in a much less extreme point in the spectrum than in Venezuela.
Likewise, China is far from the capitalist miracle that many conservatives claim. It remains an autocratic single-party state, where most of its largest firms are still state-owned, and where there is no sector in the economy that is not free from state oversight. If China was compared to the US or Britain rather than its pre-Deng state it would be unquestionably a statist regime. And if China were judged by the standards that the IMF/World Bank judge the liberalization processes of developing countries, it would have spectacularly flunked. As such, the only reason its market-oriented policies are praised are because they are taken in comparison with the dysfunctional Maoism that preceded it (remember the disastrous Great Leap Forward?). Same with India. Same with nearly every developing country that has done better by adopting some elements of capitalism, rather than the full spectrum of laissez-faire. For examples of the latter, just look at the collapse of so many ex-Communist economies who applied “shock therapy” in the 1990s, or those developing countries that ended up worse from adopting IMF-led structural adjustment programs around the same time, or the hyper-financialization of some European economies like Iceland and Ireland before the recent global crisis.
Once again, the Spectrum Fallacy fails to make people realize that a less extreme version of something good (whether it’s statism or markets) is better than all of it. Whether it’s an deliberate case of intellectual dishonesty or simply people’s inability to grasp the basics of logical argumentation, the Spectrum Fallacy always tends to rear its ugly head when opposing ideologies go head to head.
Free to choose?
Aside from economics, the Spectrum Fallacy can also be applied to democracy. Is complete democracy necessarily better than only some of it? Direct democracy sounds good but perhaps we can be best served in terms of outcomes from a system where less people make less choices. The consensus among behavioral scientists, in fact, is that more choice does not necessarily lead to better decision-making. We might feel that more choice is better for us but that’s because we often don’t realize how bad we are at making some of the most important decisions in our life like saving for retirement or financing the mortgage on our homes. The ones who ultimately benefit from more choice are often the ones who profit from your bad decisions. But wait, would you rather have no choice? If your impulse was to react with this thought then congratulate yourself again, you once more caved in to the Spectrum Fallacy. Choice may be better than no choice just like democracy may be better than totalitarianism, but it doesn’t follow that maximizing choice and maximizing democracy and freedom is necessarily better. Perhaps more than anything else, this is why liberal democracy is under threat, because maximizing individual freedom may not be leading to maximizing well-being after all.
Still not convinced? Well maybe you’re just libertarian at heart. What’s left of it.