If the Shoe Fits

Dr. X posts this from an Internet cafe on that little island just outside the jurisdiction of Singapore:

"Interesting to watch China sit down and start to think about how property, corporatism, and freedom interact. I was always taught that capitalism and freedom go hand in hand, and this is a fundamental premise of libertarian conservatives like Milton Friedman as well as many liberal civil libertarians. It's nice to have rights, but it's a little easier to defend them if you can appeal to economic self interest to do so.

"But it's a little more complicated than that. This post from Macroblog offers several views, but this is the one that caught my eye, from Daron Acemoglu:

Many societies counted as "democratic" using standard measures are really
"dysfunctional democracies" where traditional elites dominate politics through
control of the party system, political influence, vote buying, intimidation and
even assassination...

So, why haven't democracies been more successful? I believe the answer lies in recognizing two things. First, there are different kinds of democracies. And second, it's important to consider that economic growth and democracy have a very different relationship over the long term -- that is for periods as long as 100 years -- than over the short or medium term.

... it's true that autocratic regimes can generate growth for certain periods of time by providing secure property rights and good business conditions to firms aligned with political powers. But modern capitalist growth requires not only secure property rights, but also creative destruction, that is, the entry of new firms with new ideas and technologies that replace the successful firms of the past. Creative destruction requires a level playing field, which democracies are better at providing because they have more equal distributions of political power than autocracies or monarchies.

"Anyway, back to Singapore - a few days ago Morgan Stanley analyst Andy Xie weighed in on this, writing that 'a strong government and a strong private sector cannot coexist - in Singapore it's all about the government taking intiatives'. He was, of course, fired immediately. And his boss has resigned suddenly."