The Price of Blurred Borders: A Market-Liberal Critique of China’s 75-Year "Commons"

 

The Price of Blurred Borders: A Market-Liberal Critique of China’s 75-Year "Commons"

From the perspective of a synthesized school of Chicago School pragmatism (Friedman), Misesian praxeology, and Hayekian information theory, the history of the People's Republic of China is not just a series of policy errors—it is a 75-year laboratory proving that without clearly defined, transferable private property rights, "tragedy" is the inevitable default.

The Diagnostic: Why China Collapsed into the Commons

Whether it was the starvation of the Great Leap Forward or the "Cancer Villages" of the 1990s, the root cause was the "Illusion of Ownership."

1. The Calculation Problem (Mises): In the Mao era, by abolishing the market, the state destroyed the price mechanism. Without prices, there was no way to know the true value of grain or steel. The "Commons" was exploited because there was no economic calculation to signal scarcity.

2. The Incentive Gap (Chicago/Friedman): "If everyone owns it, nobody owns it." The 承包 (Contract) system failed environmentally because it decoupled use rights from residual claimancy. Farmers were "renters" of the state. As any Chicago economist knows, a renter has every incentive to extract maximum value today and zero incentive to invest in the soil's health for tomorrow.

3. Fatal Conceit (Hayek): The central planning of urban spaces and the "Bike Sharing" boom failed because planners suffered from the "Fatal Conceit"—the belief that they could manage the "Commons" better than the spontaneous order of the market. The result was massive capital malinvestment (Bicycle Graveyards).

Lessons for Global Economies: Avoiding the Trap

To avoid the Chinese cycle of depletion, other nations must adopt three fundamental pillars:

• Total Privatization of "Residual" Rights: Move beyond "contracts" or "leases." Only when an individual owns the future value of a resource (land, water, or air rights) will they preserve it.

• Pricing the Externalities: Where a "Commons" must exist (like the atmosphere), the Chicago approach suggests market-based pricing (Pigouvian taxes or tradable permits) to internalize costs that are currently being dumped on the public.

• Decentralized Knowledge: Trust the local "man on the spot" (Hayek). Environmental management should not be a top-down decree from a capital city but a result of local owners protecting their own asset values.

---

[The Mirage of Order: Why Rule by Law is Not the Rule of Law]

Friedrich Hayek, in The Road to Serfdom and The Constitution of Liberty, offered a precise definition of the Rule of Law: it is a system where laws are general, abstract, and known beforehand, allowing individuals to predict how the state will use its coercive power. This stands in stark contrast to Legislation or "Rule by Law," where the state uses specific commands to achieve particular social or political ends.

Many look at Singapore, China, and Hong Kong and see "order." However, from a Hayekian perspective, these regions are increasingly substituting the spontaneous order of liberty for the rigid commands of a central authority.

1. Singapore: The Managed Success

Singapore is often lauded for its efficiency, but its legal system relies heavily on arbitrary administrative power.

• The Examples: Laws like the Protection from Online Falsehoods and Manipulation Act (POFMA) allow ministers to decide what is "false" and issue correction orders.¹ This is not a general rule; it is a discretionary command used to manage the information market. Similarly, the Internal Security Act (ISA) allows for detention without trial—the ultimate negation of predictable law.²

• The Ending: Hayek would argue that as the state continues to manage every facet of life—from housing quotas to social behavior—the entrepreneurial spirit will eventually stifle, leading to a "golden cage" where growth plateaus because of a lack of spontaneous innovation.

2. China: The Zenith of Central Planning

In China, the law is explicitly a tool for the Communist Party to achieve "national rejuvenation."³

• The Examples: The Social Credit System is a digital manifestation of Hayek’s nightmare; it turns law into a granular, real-time command system that rewards or punishes behavior based on state-defined "trustworthiness." Furthermore, the National Intelligence Law requires all organizations to "support and cooperate" with state intelligence, creating an unpredictable environment where no private sphere is safe from state command.⁴

• The Ending: By centralizing all knowledge and power, China risks the "Knowledge Problem." Without the feedback loops of a free society, the system becomes brittle. Hayek would predict that the "Road to Serfdom" here ends in a massive economic correction or systemic collapse when the central commands can no longer manage the complexity of a billion people.

3. Hong Kong: The Lost Spontaneous Order

Hong Kong was once Hayek’s favorite example of a "spontaneous order." That has changed.

• The Examples: The National Security Law (NSL) and Article 23 introduce vague, broad categories like "collusion" and "soft resistance."⁵ Because the definitions are so fluid, the law is no longer a "predictable rule" but a "political command." When a businessman cannot know if a past comment constitutes a crime today, the Rule of Law has vanished.

• The Ending: As the legal system becomes an instrument of political "Legislation," Hong Kong’s unique status as a global hub will continue to erode. It will cease to be a bridge between East and West and become just another managed city, losing its dynamic economic soul.

---