Chinese and American cadres in a second-best world

The free market is falling apart. That we all know. Lamentations on the current state of affairs abound. The free market has immiserated the middle class. The free market has created oligarchs. The free market has de-industrialized the Western world. The free market has been gamed by China.

Industrial policy is now in the air. “You started it” fingers are being pointed. Industries are being ring-fenced. Tariffs and subsidies are being threatened and implemented. How did it come to this? Was Marx right? How did the free market fail us so badly? Where did it all go wrong? How right was Marx?

Sorcerers have crawled out from under rocks to explain the free market’s demise through witchcraft and incantations like multiple equilibria, crowd psychology, behavior economics and, horror of horrors, reflexivity.

And it’s not just markets, it’s the entire neoliberal scaffolding! Populist parties with angry “burn it all down” wings are surfacing across the democratic world. The youth are carrying around dog-eared copies of Das Kapital. And, as if to rub it all in, China just sent its largest delegation in years to Davos.

The biggest error the West can possibly make at this point is to overreact – to throw out the baby with the bathwater. The free market is failing because the West, after the Soviet Union fell apart, consecrated it with undeserved theological reverence.

The market was never an infallible god at whose altar anyone should ever have worshipped. It is a dirty, messy, imperfect, friction-filled contraption that will grind up fingers and spit out dead bodies if not carefully attended. Well-tended, markets can deliver a 40-fold increase in GDP in four decades, wipe out poverty, put Taikonauts into space and still fail to