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Research shows that the political ideology of communism restricts innovation, todays panacea for economic growth and long-term prosperity.

In broad strokes, the communist tenets of state ownership of business and property with strict government supervision lead to a risk-averse culture working in an environment that discourages ambition and creativity. This could not be further from the building blocks that innovation needs to thrive.

The 2017 International Intellectual Property Index, recently published by the Global Intellectual Property Center (GIPC) of the U.S. Chamber of Commerce, ranks the current bastion of communism, China No. 27 and formerly communist Russia No. 23behind the smaller economies of Malaysia, Mexico, and Turkey, for example.

The report associates stronger intellectual property (IP) protection regimes with more innovative economies and conversely, weak IP protection as hindering long-term strategic innovation and development.

A robust national IP environment correlates strongly with a wide range of macroeconomic indicators that fall under the umbrella of innovation and creativity, according to the GIPC report.

The leading countries in IP strength are free market, capitalist economies such as the United States and United Kingdom. First-world democratic countries of Europe and Asia also rank highly.

Ma Guangyuan,Independent Chinese economist

The report states that Russias protectionist moveslocal production, procurement, and manufacturingwork to restrict IP rights. Russia also suffers from persistently high levels of software piracy.

For China, the report singles out historically high levels of IP infringement.

China and Russia are the usual suspects of cyberespionage. Theft of IP, the infrastructure for innovation, is one way these nations heavily influenced by communism try to stay competitive globally.

Melbourne, Australia-based agency 2thinknow has been ranking the worlds most innovative cities for the past 10 years. In its latest rankings published Feb. 23, the most innovative city in a communist country, Beijing, ranks No. 30, and Moscow ranks No. 43.

According to the Organisation for Economic Co-operation and Development (OECD), not a single Chinese university ranks among the worlds top 30 in terms of most-cited scientific publications.

Universities are breeding grounds for young, innovative minds. Within their walls, ideas are born and debated, companies are formed, and research is conducted. They are key components of a healthy innovation ecosystem.

Harvard Business School professor William Kirby wrote about the strict limitations within Chinese universities on what faculty could discuss with students.

Faculty could not talk about any past failures of the communist party. They could not talk about the advantages of separation between the judicial and executive arms of the government, Kirby stated in an article in the Harvard Business Review (HBR) in 2015.

It is hard to overstate the impact of these strictures on campus discourse and the learning environment, Kirby wrote.

Protestors shout slogans during a rally against a pro-Beijing official who was appointed as chairman of Hong Kong Universitys (HKU) governing council, in Hong Kong on Jan. 3, 2016. Fears are growing over political interference in the citys education system. (Anthony Wallace/AFP/Getty Images)

Communism is known for its corruption and cronyism. A Science editorial noted that the bulk of the Chinese governments R&D budget is allocated due to political connection rather than merit based on the judgment of independent review panels.

McKinseys 2014 report The China Effect on Global Innovation noted that the impact of innovation on Chinas economic growth declined to the lowest level since about 1980.

China has a massive consumer market and a government willing to invest huge sums of moneynearly US$200 billion on R&D in 2014and its universities graduate more than 1.2 million engineers each year.

Garry Kasparov,former world chess champion

Clearly, China has so much potential, but it is the United States that has taken the lead in technological dominance.

The country [China] has yet to make an internal-combustion engine that could be exported and lags behind developed countries in sciences ranging from biotechnology to materials, according to McKinsey.

While almost all western technology giants have R&D labs in China, the bulk of what they do is local adaptation rather than developing next generation technologies and products, wrote Anil Gupta and Haiyan Wang in a 2016 article in the HBR. Gupta and Wang are co-authors of the book Getting China and India Right.

Excessive government involvement often leads to waste and excessoverbuilding and overcapacity. Chinas real estate bubble and steel mills are two such examples.

Lately, the Chinese government has been trying to spur an onslaught of startups by providing them with generous subsidies. But it doesnt have the savvy to pick winners and losers. Instead, a more efficient use of capital comes from knowledgeable and discerning venture capitalists. Most startups are meant to fail after all.

Why China Cant Innovate, a 2014 article in the HBR co-authored by Kirby, noted that the Chinese Communist Party requires one of its representatives to be associated with every company of more than 50 employees. Larger firms must have a Party cell, whose leader reports directly to the Party at the municipal or provincial level.

These requirements compromise the proprietary nature of a firms strategic direction, operations, and competitive advantage, thus constraining normal competitive behavior, not to mention the incentives that drive founders to grow their own businesses, according to the article.

The system of parallel governance constrains the flow of ideas. Chinas innovation largely comes through creative adaptation, which can mean a lot of things including foreign acquisitions, partnerships, but also cybertheft.

Communism is against private ownership of property. This puts a damper on innovation.

The key to whether China can become a country of innovation is tied to the respect of property rights and the rule of law, wrote Ma Guangyuan, an independent economist in China.

In his blog, Ma cites renowned U.S. investor William Bernsteins writings, which discuss property rights as being the most important of four factors needed for rapid economic growth. Guangyang wrote, Entrepreneurs live in constant fear of punishment, due to the questionable business practices in China, an environment that leads them to lose trust in a viable long-term economic future.

Capital flight out of China is one symptom of the problem; another is the preference of wealthy Chinese to send their children overseas for higher education. The loss of entrepreneurs like Li Ka-shing and Cao Dewang is a sign that greener pastures lie abroad.

Former world chess champion Garry Kasparov, a Russian, wrote: Communism as a political ideology is as bankrupt as ever.

In his blog, he went on to say: It is no coincidence that the values of the American century are also the values of innovation and exploration. Individual freedom, risk-taking, investment, opportunity, ambition, and sacrifice. Religious and secular dictatorships cannot compete with these values and so they attack the systems founded upon them.

The authors of the HBR article Why China Cant Innovate recognize the nearly limitless capability of the Chinese individual, however, the political environment in China acts like a choke collar on innovation.

The problem, we think, is not the innovative or intellectual capacity of the Chinese people, which is boundless, but the political world in which their schools, universities, and businesses need to operate, which is very much bounded, they wrote.

Follow Rahul on Twitter @RV_ETBiz

Communism is estimated to have killed at least 100 million people, yet its crimes have not been compiled and its ideology still persists. Epoch Times seeks to expose the history and beliefs of this movement, which has been a source of tyranny and destruction since it emerged.

See the entire series of articles here.

Originally posted here:
How Communism Stifles Innovation - The Epoch Times