Are you crossing China West?

Since the 19th century to the 20th, Western countries have said that economic growth has come through the discoveries of scientists and explorers. One country was sufficient to have the zeal needed to develop trade opportunities and build the infrastructure needed to respond to the demand for new products.

Until recently, the Chinese have believed the same thing. But now, businessmen and entrepreneurs from China are showing not only the will to adapt to new opportunities, but also a desire to create capacities that can be renovated themselves instead of copying others.

More and more Chinese companies have realized that they need innovation, without making progress or even staying on the world market. Many, especially Alibaba, Baidu and Tencent, have made new discoveries offering digital-era infrastructure that facilitates innovative activity. Many industrial firms have begun to use robotics and artificial intelligence.

The Chinese government has supported its country's businesses to build capacities that could lead to domestic innovation. Of course they realize that local technological innovations are even more valuable, when innovation in the West is moving in weak steps and where the rise of the Total Production Factor (FTP) has continued to slow down.

China's government has launched new initiatives recently, with the goal of boosting innovation and entrepreneurship. It has dramatically cut the procedures for opening a business. He has built a large number of professional schools where Chinese children can learn about the world they'll face. And recently it facilitated the entry of foreign experts to work on new projects in the business sector.

Authorities have also recognized the importance of allowing competition. Individuals should feel free to open new companies, and existing companies should feel free to expand into new industries. Competition solves many problems, an increasingly weakened concept in the West.

At Switzerland's Davos annual Economic Forum, Chinese officials discussed basic reforms their government had undertaken two years ago to boost competition. New policies cause when the capacities are in excess, the offer is allowed to contract other firms and exit the market. Of course, excessive demand indicates that the offer should be allowed to increase, enabling the involvement of new firms.

The point is that when enterprises are protected by new companies that enter the market with new ideas, there will be less innovation and less adaptation to the changing new world, as Friedrich Hayek calls it.

There could be another argument. In every modern economy, every industry operates in the face of an unpredictable future. The more companies are thinking about the same problem, the more likely they are to find solutions. A company kept out of an industry might know something that all companies together know is part of that industry. Or a particular experience of an individual can create personal knowledge that is then conveyed to all others. However, when outsiders are set free to add something, society gains prices, job creation, better services, etc.

This was known by the greatorists of the 1920s and 1930s: Hayek, Frank Knight, and John Keynes. Now the Chinese know, too, who have realized that a country benefits when companies are allowed to compete.

The West seems to have forgotten. Most Western governments, since the 1930 ' s, have seen it as an obligation to protect from competition existing enterprises, even when new firms come with innovation and adaptation to modern. These various protections have discouraged many entrepreneurs from offering innovations.

History is full of evidence that shows the value of competition. In post-war Britain in the 1970s, industries were controlled by exclusive clubs within the British Industry Confederate, which did not allow youth to enter. When Margaret Thecher became prime minister in 1979, the TFP had remained in a stalemate. But Thecher banned anti-competitive practices of confederations, and Britain's TFP began to rise again in the mid-1980s.

Now we're seeing something similar in China. In 2016, TFP growth in China had slowed, but it has begun to grow again because of reforms in recent years.

The West has to address the TFP landing, which has started since the 1960s. The ban on protecting older people from new ideas is a good start.