You can’t replace the decentralized aspirations and plans of millions with the plans of a few central planners. It doesn’t work. From Charles Hugh Smith at oftwominds.com:
The illusion created by the initial success of central planning is that it can continue indefinitely, when the reality is it’s unavoidably self-liquidating as the distortions unravel the entire economy.
China offers a real-time case study of the upsides and downsides of central planning, broadly defined as the central state establishing the goals, financing, incentives and regulatory structure for various sectors of the nation’s economy.
In the U.S., examples include the transformation of the American economy to wartime production in World War II, and the razing of inner city neighborhoods to build freeways in the 1960s. A swath wasn’t just bulldozed in one or two cities; it happened everywhere because the federal government established the funding and incentives.
Turning to China: those of us who were fortunate enough to visit China just before the “China miracle” took off recall the decrepit state of China’s housing stock, much of which was unchanged from the 19th century except for electrical wires strung haphazardly through dimly lit common areas.
Starting in the 1990s, China’s central government began selling land leases to households, retaining ownership but granting lessor ownership rights to those living in the homes, in effect transferring ownership from the state to households. The idea wasn’t to create an asset that households could sell, and so after-market sales were non-existent. The idea was to shift the cost of housing from the state to the private sector, freeing up state funding for industrialization and infrastructure.
