Liberal Talk Radio

I’m sure there’s a book or two out there on the symbiotic relationship of Democracy and Capitalism. The two do seem inexorably linked. In my lifetime, the economic fallout from Sept. 11 was the epitome of this, as we were all encouraged by our government to be patriotic consumers so as to keep the Dow Industrials above 8,500.

But terrorist attacks on global financial markets aside, there’s obviously a conventional sentiment out there that the President of the U.S. is mainly the CEO of America Corporation, and we are the shareholders. It’s like Nixon’s famously simple advice to incumbents: if the economy’s good, you’ll win. If it’s bad, you’ll lose. Plain and simple. American presidents are expected to deliver jobs on the domestic front and security on the international front.

So there’s an interesting article by Henry Blodget in Slate on China. He asks: how long can they have capitalism without democracy?

His answer: until the bubble bursts. And he should know.

If the Chinese economy sputters, he argues, the people will look for someone to blame. And that will finally be what topples the Communists. Unless they can line up another sucker to pin it on:

If the government is to maintain control in such an environment, it will probably have to engage in a practice that has long been a fixture of oligarchies and democracies alike: blame. As long as the countrywide pain can be laid at the feet of an individual or group, instead of the system—and as long as the scapegoats can be tossed out on their respective rears—the public pressure for revolutionary change can probably be controlled.

Uh-oh. What if Taiwan becomes the scapegoat? Or Japan? What if the powers that be attempt to hold on to power by harping on a vague foreign threat to maintain their own influence during a time of economic malaise?

Nah… that’d never happen.

Snark aside, the idea that the U.S. would have to defend Taiwan and Japan against not just the Communist elite but also a Chinese population convinced that those island neighbors are the cause of its problems… that’s almost enough to keep you awake at night.

Reading Bruno’s post about how the U.S. may be the only place where the poor don’t hate the rich (and thanks for the props, by the way, Bruno), I’m inspired to think a little about why capitalism and democracy must go hand in hand.

In grad school, we used to talk about three development models for the third world (or LDCs, or NICs, or whatever the development buzz-speak of the day preferred). If the end goal is both individual liberty AND ensuring that all citizens have their basic needs for food, housing, and other essentials met, then the two must go hand in hand. This is a central tenet of classic liberalism. On the one hand, people must be FREE to make choices that maximize their personal utility (and, by extension, total social welfare), and they must also have the MEANS with which to accomplish that (or, to turn this on its head, it’s also possible to say that the marginal utility to one individual of an extra unit of income declines as income increases, so total social utility is maximized by ensuring that those with lower incomes get any additional money).

The question is, what comes first — democracy or economic development? In the world of Kissingerian realpolitik, the implicit assumption was that economic development was more important. Ultimately, richer citizens would begin to demand the right to spend their earnings, which would cause them to rise up against oppressive economic regulations, which would in turn force governments to grant more general freedoms. In many parts of Asia, most notably Singapore and South Korea, this is exactly what happened.

An alternative was the Indian model. Democratize first, and then watch the economy grow. Until very recently, the Indian experiment, while successful in terms of promoting Democracy, was an abject failure at causing incomes to rise. Even today, for all the outcry over Bangalore call centers, more than 25% of Indians live in utter destitution.

The hybrid approach was followed (or imposed) in many Latin American countries. Simultaneous (if slow) democratization and economic liberalization. Bruno can probably attest to the consequences of that.

The point here is not to defend command-and-control government, but rather to point out that economic development is a crucial part of bringing freedom to people around the world. And while the Bechtels and Enrons of the world deserve no Nobels, it’s important to keep this in mind the next time the Democratic or Republican establishments start talking about trade barriers as a way to ensure “fairness.”