Dictatorship and Innovation

It seems the world is heading in an authoritarian direction.  Countries across Europe are heading right-ward and countries are turning in on themselves.  This of course is going to have a real effect on the economy both internationally and at home.  So are dictatorships really so bad?  Few people in the democratic, “Free world”like to admit that the economic miracles that are Singapore, South Korea, Taiwan, Thailand and China were all long-time dictatorships when they emerged on the global scene kicking butt.  Today, with China jumping on the renewable energy bandwagon with gusto, is in fact, in spite of it’s systematic and insidious police state apparatus, extremely creative.

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“Look, there’s North Korea!”

So if dictatorships can be so great, and democracy and capitalism have led to such horrible economic unfairness, maybe the western world needs to give dictatorship a chance.

How about we don’t, and here’s why.

A good dictatorship success is predicated on that strong man, be he Lee Kwan Yew, Deng Xiaoping or even Pak Chung-hee, is predicated on him actually having the interest of the collective at heart.  Lee Kwan Yew, recognized by many as the father of the Asian Economic Miracle, was a stern dad.  He wasn’t sweet and cute, he threw his enemies into prison, he backhanded politicians that didn’t do his bidding, he cajoled, he insisted he held the reins of the government and if it wasn’t going the way he thought it should go, he made sure it did.  He was an economist, not a reality star, not a fabulously wealthy businessman.  He was a wonk, he liked crunching numbers.  He helped his nation win independence from Britain and when he was constructing the civil service he made sure it was a meritocracy and incorruptible.

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Or else you will be detained by undercover goons

Having earned billions of dollars was not the measuring stick for his cronies, brains and hard work were.  Lee was able to protect the fledgling Singapore from harmful influences, at the time that was public protest and media control.  His guiding principles in this multi-ethnic enclave were putting multi-cultural-ism first while uniting the country in making English the national language.

The dictatorship has lead to Singapore having one of the most consistently dynamic economies in the world.  Lee understood that with ethnic pluralism, open economic policies and rule of law, economies are completely self-sustaining.

Dictatorships on the whole though, have a generally negative impact on economic growth.  Economic growth comes from differentiation and exports.  A paranoid dictator, in forcing his countrymen to retract inward by stirring up antipathy towards outsiders, not only risks silencing internal voices that could be great sources of innovation, but also retards trade with outside nations.  It is not good to have unfavorable balances of trade, but when tariffs are placed on imports, targeted countries respond in kind.  The result is that the insult is returned in the form of more expensive imports and slower sales in exports.

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China – 2008 “I love Beijing” “Hope”

Xenophobia was on the rise in the 1930’s.  In the US southern and Eastern Europeans and Jewish immigrants were openly reviled.  Employment crises across the U.S. and Canada led to widespread racial discrimination against Chinese and Japanese Americans and Canadians.  Even though African Americans had been American since the beginning, they were enduring such horrible treatment in the South due to their “other” status that the “Great Migration” accelerated depositing huge numbers in northern cities.

The result of treating people poorly, of ignoring a collective good which includes the “other” is economic stagnation.  The roaring 20’s, particularly in the U.S. is remembered as a halcyon era of excess, yet the fact is that it was actually an epoque of great inequality.  Where according to the Gini-coefficient .1 being perfect income equality and .6 being perfect inequality, the U.S. in 1928 and now in 2017 is around .5.

So where do we go from here?  We can look to Lee Kwan Yew’s example as a start.  When the dictatorship stops being benevolent and starts being corrupt, that is a problem.  So far, we’re not in a dictatorship, but it is good to remain vigilant  Adolph Hitler, after all, was democratically elected.

 

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