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The Power of Markets
You probably wouldn’t want to live in a centrally planned economy where a distant authority decides what should be produced and in what quantities. You wouldn’t want prices to be set by fiat, or be forced to buy from state monopolies. You prefer choice to compulsion.
Over time, centralized control creates profound distortions—unbalanced sectoral growth (typically favoring capital-intensive industries), bloated state enterprises, chronic under- or overcapacity, and epic waste. China’s state-owned enterprises, for example, generate about 20 percent of Chinese output, but account for more than three-quarters of all corporate borrowing.1 Moreover, the state sector’s return on assets is barely a fifth of what China’s ...
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