Market Economy Beats Planned Economy


In the past decades, we have seen fantastic economic development. Market economy and free trade were able to defeat poverty in many countries.

The times we are living in – the pandemic – are times when our fundamental values are threatened maybe more than ever in modern times. More than ever in modern times because we are living not in a time of containment, with an Iron Curtain, or a Bamboo Curtain, dividing the world in two as in the Cold War. Now, we have a time of diffusion, where societies are in some ways able to work on each other’s different territories. Due to their laws and legislations, dictatorships can use the freedom of free societies in order to work for their aims and destructive goals. This is a difficult time.

In the past three decades, we have seen fantastic global economic development. Market economy and free trade have been able to defeat poverty in country after country, region after region. Poverty does still exist, but it is extremely important to underline that free trade and globalization have seen victory.

More people than ever are having the opportunity and the privilege, to live in prosperity. Some in less prosperity, some in more property. But the overall trend has been that the market economy has defeated not only planned economy as such, but the market economy has defeated the planned economy in practice, not just in theory. Very few, the diehards, still believe in the planned economy. They still exist and sometimes seek other arguments. They are protectionists that don’t want to have change. They have nationalistic goals. They want to state to steal and govern more of the society than before. But they always come short.

During the last thirty years, we have seen these fantastic developments. And yet, now we see our values threatened in a number of different ways. One is because of the dramatic geopolitical changes in the recent past. When Barack Obama came into power in 2009, the US economy and the economy of the European Union were more or less of the same size. At the same time, the Chinese economy stood at only $5 trillion (nearly a third of the US economy), while Russia had only $1.5 trillion in GDP. That was the big picture of that time. This is important because these figures represent not only prosperity but also political strength and influence. Economic strength is crucial for political influence and the ability to develop the world.

Since then, we have seen a tectonic change because China and the European Union are having more or less the same size. Russia, which was the main global threat during the Cold War is today globally a marginal player. It still is the dominant player defining the security of the European Union. But, from a global perspective, due to its shrinking economy and the failure of the Putin regime, Russia is playing a marginal role.

China, by adopting state capitalism has been able to use the best of the economic forces of a market economy in a politically corrupt system, and a dictatorship. It has worked in the sense that economic freedom that has been injected into the dictatorship has given enormous economic development and strength.

So, now we see a global world where the US and the European Union are playing a smaller role than before. The trans-Atlantic economies represent around only forty percent of the global economy. This means that the share of global GDP of these two main entities representing market economy and democracy has been decaying during modern times. They are relatively much weaker than ever before. The other forces in the world, China, the rest of Asia, Latin America, the emerging economies of Africa, are altogether bigger than ever before compared to the trans-Atlantic economies. And while the trans-Atlantic economy has been deeply rooted in democracy and market economy, that is not the case for the other parts of the world. More or less democracy, more or less rule of law, but not the same stability.

Thus, the main threat treading forward now is of course China. And let’s be very clear about one thing – China is not what we would normally mean by a market economy. There exists no real freedom. A market economy is preconditioned to have freedom. And free trade is preconditioning freedom in society. Otherwise, it is not free trade. China today is using its economic power for influence, threats, and actions against the Free World, attacking those who criticize the dictatorship, their behavior on the international scene, their regional ambitions, and their ambition all over the world. They are acting with the logic of a dictatorship.

How should we face that

First of all, we need a new, some sort of rerevolution of market economy ideas. We need to secure a digital economy developed based on freedom, a market economy, and entrepreneurship. Digital and social platforms must be following the same laws that we have in all societies. That we shall not globally try to regulate them, because then the regimes of the despots and authoritarians will undermine their freedom. We need to call upon them to behave as they say they do. They need to be transparent. Let’s welcome the success of the successful companies. Otherwise, we will not have successful followers. We will not have new successful companies all over the world.

The second thing is we need to secure free trade. And free trade must be free trade! We need to secure that china is not using other countries’ freedom to enhance its power over us. The time is ripe for the Free World to become the Free World as an entity. We need to gather. In spite of the fact that China is emerging strong economy, in ten to twenty years the biggest economy, still, the Free World is much, much bigger. Together we can form a nucleus, a momentum, for standing up for freedom and telling all those authoritarians how to behave on the global scene. How to behave regarding economy and trade. And also to how to behave regarding democracy and freedom.

There is one common denominator in all this. We can’t do it alone! We need the European Union to stand up for this. We need to have a strong trans-Atlantic link for this. We need to show that the European Union is a strong partner to us, not the little brother. We are a strong partner to the US because the US needs to know there is a strong partner also safeguarding freedom and democracy. The time is not for anyone to say that my nation is first. The time is for all of us to say freedom and market economy and democracy is first. That is the main talk for all of us believing in freedom in the market economy because by then we are putting people and individuals first. That is our common task. Let’s do that! And let’s make the Free World an entity that can create strength and provide better opportunities in the world.

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