This is definitely outside of my usual scope of China stuff, but when I read the latest Sebastian Mallaby column in the Washington Post, I felt like sharing. I read all his columns, because he is a non-partisan, smart guy who does his homework – he also happens to write about trade policy, political economy and other subjects that are cool.

Mallaby's latest is on a threatened Bush veto of a U.S. Congress bill dealing with children's health care. The details are not important, nor are Bush's arguments against it. The interesting part is when Mallaby, who is definitely a free market (and free trade) person, rises above the usual wonkish details to remind us of a quite obvious point, that any absolute preference for privatization makes no sense:

Bush the philosopher has one thing right: Human dignity is served when people make choices for themselves rather than being nannied by the government. But only simpletons suppose that this principle is absolute: Where unfettered private initiative produces evidently bad outcomes, most people prefer an alternative. This is why we have a police force, food safety regulation and public schools. Indeed, this is why we have a government.

Why do I bring this up at all? The issue comes up a lot in U.S. politics, to be sure, but it also comes up a lot in developing countries, particularly when such countries are transitioning away from command economies to free markets. Sometimes this is done poorly (e.g. Russia) and sometimes it is done well (e.g. China), but the "proper" role of the government always seems to be at the heart of policy arguments.

Even now, what are the hot issues about China that the rest of the world are talking about? Certainly product safety is one – a clear example of the need for a strong regulatory presence by a government that is trying to find its way in a relatively new capitalist economy. Currency reform and capital controls? Also fundamentally an issue of government control in the financial sector.

Just food for thought. Whenever I hear knee-jerk policy pronouncements about free markets (or any other kind of dogmatic response from the left or right) from a politician in the future, I can read that paragraph from Mallaby as a "reality check".

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