Michael Maiello's picture

    Globalization, Dictators and Your Money

    I hope you'll all indulge me once a week if I post the lede to my new column here, along with a link back to "The Daily."  Because, heck... I want to discuss this stuff with you guys.  But they own it because I sold it to them for money that I wanted.  I mean, "that I needed."

    So, assuming your indulgence (since I'm not going to wait for an answer), here's the first bit:

    No dictator stays in power forever.  If the grim reaper doesn't get him, his own people eventually do.  But the U.S. will continue to snuggle up to authoritarians, because the global economy, as it's developed over the last 40 years, is a garden that nourishes tyranny.

    The rest of it is here.



    Good column, destor. And congratulations on landing a paying day job. To lessen the disconnect, is it too much to ask that you dye Mr. Maiello's hair blond? He can keep his shirt on.

    Ms. Destor has nixed me getting a Ric Flair dye job on numerous occasions.  But some day I'll be drunk and she'll be out of town...

    Judging from your meatspace portrait on the site, I think just a nice white skunk stripe on one side would look good on you. (Do more a Wolfman Jack kinda thing rather than Ric Flair.). Just my humble marketing opinion. Wink

    You point out that China is running its economy like a private equity fund.   Very many other countries and two of our states have them as well.


    At the federal level, the US Department of Natural Resources collects royalties on natural resources extracted as do most states.   The FDIC collects insurance premiums from banks.  There is a whole big utility called the Tennessee Valley Authority that is wholly owned by the federal government.   I read somewhere recently that TVA paid NC around $3 billion* in lieu of taxes, a kind of profit-sharing maybe. 

    We already have the investments. Why don't we get flashy, easy-to-read quarterly and annual reports like the private funds?  Because the managers of our enterprises want to keep the we shareholders in the dark and totally dependent on them.   I m m e l t.

    Nice column.   Why can't I excerpt with simple cut an paste?

    *Caveat lector:   I did not verify the figure and not sure over what time frame.

    Interesting, your Daily voice is so much different from your blog voice. I like both, just struck by the difference.

    I'm not certain that economic growth breeds democracy, but I have to say that I'm unconvinced by your counterexamples. China, U.A.E. and others demonstrate that dictatorships can be economically robust, but the fascists already proved that long ago.

    The question is not whether dictatorships can grow but for how long they can grow. We don't have enough history of long-running, economically robust dictatorships to say one way or the other.

    The longest lasting example you cite, Pinochet's 27 years in power, is overstated. Chile's economic recovery began in 1975, but it remained erratic until the early 1980s. In 1989, Pinochet lost power in a popular referendum, and Patricio Aylwin, an opponent, replaced him. Pinochet remained head of the military until 1998, but he was no longer running the country. So we're really only talking about seven years of steady growth before democratic elections.

    Thanks Genghis.  Yeah, Destor has a voice of his own.  It just happened.  Whoo!

    As for Chile -- the professors I cited argue that Pinochet didn't event adopt the Friedman reforms for a few years.  It took making him realize how it would work for his political advantage to get him to drink the Kool Aid.  But once he did, Chile was kind of stuck with the reforms.  It's still basically the Pinochet economy now.  Foreign capital basically wanted to deal with Pinochet and one of the features of the 1989 change of power was to enshrine the bulk of Pinochet's economic doctine in Chile's constitution.  And, of course, Pinochet was kept around and had considerable power over domestic affairs.

    It seems like at least theoretically possible that an economically successful dictatorship can remain so, as long as it has access to foreign capital.  It would have that so long as it doesn't screw foreign investors (which is tough since the temptation to cheat is immense) and so long as foreign capitalists believe the dictator will remain in power.

    But heck, Pinochet's rule was at least contentious.  Chile had been a democracy for most of the 20th century.  He was an aberration.  In places like the UAE or Singapore or China, things seem far more likely to endure.

    Possibly, but I say that the jury's still out. I acknowledge, however, that the belief that free market growth inevitably leads to democracy is at best an assumption.

    Speaking of assumptions, I say that the jury is also still out on how long dictatorships can sustain growth. China has been roaring since the early 90s, so that's twenty years so far, and I can see it doing another twenty and overtaking the U.S.

    But...it's my pet theory that totalitarian systems tend to ossify as privilege becomes rooted in the bureaucracy, which ultimately chokes off growth. One of the greatest advantages of democracy is that you get to throw the bums out when things get ugly. I think that this ossification happened in Japan, which while technically a democracy functioned as a one party state for half a century. And I expect the same to happen to China sooner or later if they don't democratize.

    I hope you're right.  None of this fits into a box.  I have my own reservations about using Chile as an example.  It didn't last forever, as you say, and how long it lasted depends on how you measure it.  The paper I used measured the China growth to a post-Tiananmen deal with the people.  We're going to stay in charge, said the government, but we're going to make it worth your while by doing something about the rampant poverty.

    But another way to measure it is to go all the way back to the 70s.  Then you could say that China began to correct its economic course and things really did get better for a lot of Chinese people.  That led to Tianenmen and perhaps a revision of the grand bargain between the people and their government, but that modern China has actually been getting stronger for 40 years now with no governmental change in sight.

    But I'm thinking in very broad strikes because I've been to exactly none of these places.

    Not to dis Mrs. Gilson and Milhaupt's theories, which I don't know at all except what you write about them, the examples you picked struck me with a commonality that didn't have to do with trade policy or similar. That "it might partly be the birth control, stupids" that influences economic success more than a lot of other things...

    Singapore's total fertility rate (TFR) dropped to a record low of 1.16, last year - well below the replacement rate of 2.1.


    Malaysia's birth rate continues its downward trend


    Why is Vietnam's birth rate so much lower than its neighbors?


    UAE birth rate falls by nearly 50%


    And we all know the Russia and China stories on this front.

    Interesting.  Though then you've got people who say that lower birth rates cause economic contraction at a certain point.  Hence all the worry about the U.S. with the Gen X population so much smaller than the Boomers and also the aging population in Europe.

    But I guess if you can avoid letting the population outgrow the ability of the economy to support it, that's an advantage.

    What about Franco?

    Perhaps David Seaton can add something to the conversation as he lives in Spain ruled for 40 years by a single dictator.

    First of all, congratulations on the op-ed gig, Destor!

    Secondly, great piece, lots to think about.

    Thirdly ... a minor criticism - it'd be nice if we could cut and paste, I wanted to comment on a couple of passages...

    For instance, I was struck by this: "The Western dream is that China's growing middle class will demand political power. But the very economy fueling the growth of the middle class is also empowering the existing undemocratic regime". 

    Why exactly does the West *dream* about this? (I don’t deny that we do, I just wonder why we do.) If the Chinese are happy with how things are being run with the current setup, why is that a source of distress for Westerners, exactly? I'm not sure if this is a deeply profound question or a really stupid question, but let me know...

    We wouldn’t, say, want Saudi Arabia’s “growing Islamist population to demand political power” and institute hard-core Sharia law, right? Americans really aren’t very wedded to the idea of self-determination for others in its own right, as present events sadly show. It is a dream we have only about those people who walk around in white collar suits just like us, who we imagine share our values and outlook on life. It’s them we want to take power. So is it just that we dream about them taking over because they are like us? Or because we dream and wish and hope that they may become more like us? (After all, they will be the new superpower, so if they’re very different, life might get unpleasant).

    Beyond that, I find the assumption underlying your thought to be a bit odd. You seem to assume that their middle class is losing political power to some nebulous ‘regime’ just as that regime subversively dulls their senses by throwing money at them. Like it is some kind of devious bait-and-switch played by the CCP. When we think of undemocratic regimes, we think of Kim Jong Il-type despots, unyielding, distant and at least partly mad insofar as they identify-slash-confuse the nation's good with their own private interests. China's regime is, imo, nothing like that. It is definitely a form of government that we find foreign, based on a value-system we find foreign (i.e. not so interested in individual rights and freedoms), which leaves us quite queasily uncomfortable with the idea that it might be sustainable, and worse, it might become the dominant power in the future. And there is a cognitive dissonance in the last sentence of yours I quote above, that seems based on a strange set of assumptions: you imply that it is a *problem* that the success of the current regime is empowering it. Isn't that what should happen in a meritocracy? Shouldn't a government be strengthened by implementing successful policy? Shouldn't the growing middle class indeed be happy about that success?

    You seem to be suggesting that this growing vibrant middle class is somehow getting screwed in the process. I don't quite get your worry here. Is it that one day, all the wealth of the middle class will disappear and they will turn around and realize they have no power as well? If so, then you really have faulty assumptions about the direction the Chinese political system is taking, and the growing power of the broader middle class - through the local branches of the CCP, through the People's Congress (which is much more powerful than it used to be), through the increasingly influential academic sphere and the ever-powerful civil service (by the by, both independent from the CCP structure). The rising Chinese middle class have a vast and growing amount of political power, too much in my view relative to that of the oppressed class of migrant workers. Their system of government and power dynamics just doesn’t operate in a way recognizably similar to the American bi-annual ostentatiously melodramatic Red V Blue election ritual.

    The stability of the Chinese political system rests on its ability to adapt to a quickly changing country and a quickly changing world (think the power vacuum left by the US on the world stage, energy and commodity shortages, and so on). It rests on whether it can provide for its citizens and govern according to their values. That might of course somehow be related to whether they have a one-party system or a multi-party system. But I see no reason to think why (it doesn't seem as sclerotic as the US system, for instance). And I see no reason why they should want anything like what the US has. The latter is demonstrably incapable of adapting to changing circumstances and of sensitivity to the public’s needs and desires (though it still is more sensitive to the public’s Rights, which is different).

    In general, I think you’re wrong to question whether economic development leads to political reforms, where the latter is conceived of as less corruption and abuse, more individual freedom and better rule of law. The two tendencies – development and reform – go hand in hand, forming a virtuous circle of positive feedback. China is both developing and reforming, but it is just not moving towards anything recognizable as a US-style liberal democracy. Which, imo, is fine. The existence of multi-party elections is far from the most important institution in a well-functioning political system, often serving just to paper over more fundamental flaws.

    The issue is more that when US businesses invest in countries run by dictators, they will often be uninterested in the economic development of the countries in question. They are merely seeking to extract – literally or figuratively – whatever value already exists in that country, not trying to build up any further value within the country. And dictators tend to be willing accomplices in that enterprise. Which is why most Asian countries post ’98 have opted for a growth strategy without foreign capital investment (leading to the current US whining about ‘imbalances’). Of course now the issue of whether ‘US businesses’ ought to invest in dictatorships is really moot. The current crop of US-based multinationals have no national allegiance, they are as uninterested in the economic development of the US itself as they are in the development of developing countries. They have managed to decouple profit-growth from economic growth more broadly. That is the problem which now faces all countries.

    Wow, Obey.  A lot to chew on here.  On the cut and paste, since others have asked... seems like the Web versions are just screenshots of the iPad versions.  They're not so interested in the Web as they are in selling iPads.  I, as a none iPad owner, find this frustrating as well.

    Now, to substance.

    What is it we're imagining here in the U.S.?  Some of it is what you say -- we imagine that democracies will be like us.  We imagine that people who demand democracy will share our values generally.  This is, of course, naive.  But I think it's what people have in mind.  Some even think that a world of democracies won't have so many wars.  Or any.  I don't buy that either.  But that's what some people think.  I think that when a lot of Americans talk about spreading democracy that they really mean spreading American values.  So, there's that.

    On China you seem to be arguing that China isn't a dictatorship in the strictest sense.  It's authoritarian though.  It doesn't allow for free expression, jails (and tortures and murders) dissenters and gives its people very little say in what kind of society they live in.  I don't think they're going to one day just take all of the money away from the people.  I suppose this could all be something of a voluntary arrangement.  Maybe China's population has decided "you know what?  This kind of government performs economically better than the U.S. style.  So long as I share in the fruits of growth, I'm fine with it."  They might just have, as you say, different values.

    But, then... the government still jails and tortures and murders dissenters, right?  If there are dissenters to jail and torture and murder then there's no universal agreement about this grand bargain.  I cast my moral lot with the dissenters because I don't believe that even a huge majority should be able to take somebody's human rights away.

    I guess I'm afraid that the market doesn't favor western style democracies.  Since markets are the measure of so much of how decisions get made they might actually represent a threat to democracy.  If the global meritocracy favors China's form of government over the U.S. form of government then I want out of that game and fast.

    Just reread that. Sorry about the length. I obviously had too much time on my hands or a desperate need to procrastinate...


    Okay, now you seem to be saying something a bit different - that the problem isn't that multinationals cooperating with autocracies will be bad for the population (on their own terms), but that multinationals cooperating with autocracies will be bad for ... the remaining democracies. Or maybe I was just misreading you before.

    I don't think that is true, or rather I don't think the problem has anything to do with the involvement of big Corporate in developing countries of whatever sort. I think it has to do with multinationals getting too big for countries to control or regulate, and democracies being in denial about the threat coming from the big corporations, as if their interests weren't in diametrical opposition to the interests of the general population of the country.

    Or maybe I'm just channeling my inner Maoist today...

    Another thought - the US didn't start caring about civil rights so much until it was at a stage of development (i.e. widespread material prosperity) much more advanced than China at the current time. So, I'm not trying to belittle the problems they do have, but they should be seen from the vantage-point of the trajectory they have taken over the last ten-twenty years. And that trajectory seems to be going in the right direction, as far as I can see.

    (and, full disclosure, yes I'm a bit biased - I'm part Chinese, with family and loved ones over there and/or from there)

    Although I understand your larger point, I'd argue that most of those whose civil rights were being violated (e.g., minority ethnicities, women, homosexuals) cared about that from the beginning. The question is, when did they feel like they could rectify the situation, and why?

    Point taken. I should have made it clear that I was arguing from the assumption that China and other similar autocracies are akin to a 'tyranny of the majority' - where respect for minorities and their rights is lacking, and then just pointing out that the US was not too far from a similar model just fifty years ago. So when I said the US didn't care about the rights of minorities, I meant the US government - and the majority whose interests it defended.

    As for 'when and why did they feel they could rectify the situation?', good question...

    I don't think they're biased.  This is a great observation and it's shared by most.  Contra me, most foreign policy thinkers will tell you that once a certain level of economic development is achieved that issues of human and civil rights (and also the environment) will be dealt with in due course.  It's an economy first argument and it has evidence to support it, including increasing civil rights in the US during the post World War II economic boom.

    But what if that evidence doesn't tell the whole story?  What if an authoritarian refgime can exist indefinitely, even if it enriches its citizens?  Then everyone is better off economically but they could still go to jail for writing a dissident blog post.  To answer your question above, I'm concerned both about the competition this would cause for existing democracies (because I want to live in something more, not less, democratic than what we have now) and for the people living under these authoritarian regimes, particularly the dissenters.  There's more to life than economic success, after all.

    I guess I'm much more sanguine about the threat to existing democracies since over here in Europe I don't see (ex Great Britain) the same kind of evisceration of democratic institutions that seems to be happening in the US.

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