Chairman Bernanke, Dear Leader

This is approximately the only time I’ll be posting anything on macroeconomics, because frankly I’d almost rather be writing about third-wave feminism or something.

But yesterday’s news that the Federal Reserve will be taking an 80% stake in AIG put me in mind of how the PRC does business, only in reverse.

Basically, from 1949 on, all businesses were state-owned enterprises (SOEs). This began to change following Deng Xiaoping’s reforms, but slowly. It was under Zhu Rongji, in the early 90’s that restructuring began in earnest, when some smart people began to realize that the SOEs were, um, not making any money.

Nowadays, the Chinese economy is a three-tiered network, comprised of a few true SOE’s in key industries, like CNOOC and Baosteel; a much larger number of businesses in which the central government has a controlling stake but does not own outright, like Lenovo; and finally an even larger number of private companies.

What complicates things is that the PRC economy is also a Rube Goldberg system, in which SOEs (but not necessarily the PRC per se) have controlling stakes in private enterprises, or companies in which the PRC has a controlling stake have controlling stakes in turn in so-called private enterprises, and so on. At the top sits the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

This structure, by the way, significantly aggravates the already significant inequality in the PRC.

I’m not saying I really think we’re going down that road. But in the interest of consistency, we should probably dial down some of our free market jingoism about now.