I was brought up to believe that the form of capitalist representative democracy practiced in nations such as my own was not only the fairest and the freest but also the most effective system available to man. I used to believe it. Now I am not so sure.
Of course the terms and definitions involved here are ambiguous and emotionally charged. It is amazing how the word socialism has become so toxic in the US, for example, despite few people understanding what it means. Democracy, authoritarianism and dictatorship certainly have overlaps and also examples within each category that have little in common. The same can be said of capitalism, socialism and communism. There are also features of each of the models of power that are incorrectly ascribed to the economic models, and vice versa.
Exhibit A to support my comfortable hypothesis that west is best was always the USSR. It was a rather ambiguous example while I was growing up, because we were simultaneously supposed to believe that the soviets were both inefficient and dangerous. But then came 1989 and the utter wreck of the soviet-led communist economies became apparent for all of us to see. QED.
In case there was any doubt, we could quote exhibit B, the Reagan Thatcher revolution of the 1980’s. Everyone could see that this had its downsides, but we could not deny that the privatisation of state companies was a masterstroke. Just imagine how the Internet and smart phone eras would have progressed if the stodgy old telephone service still existed!
There have been other exhibits from around the globe. India was stuck until it started to unleash free markets. Venezuela shows what happens when socialism is unbridled. Comparing North Korea with South Korea is pretty conclusive.
The logic seemed pretty watertight and the west duly crowed for a while, with The Economist among the cheerleaders. But over the last twenty years the dominant idea has started to fray around the edges. Might we all be wrong?
In the case of the power systems, democracy usually avoided the very worst outcomes. Mao’s Cultural Revolution, Stalin’s purges and Pol Pot are not great advertisements for dictatorships. But we should remember that Hitler was elected into power in a democracy, and more recently so were Salvini and Orban and some unsavoury characters closer to home. Democracy was perfectly happy to defend slavery, and a partial democracy led to apartheid.
Singapore is an interesting example to defend a rather autocratic regime. Lee Kuan Yew might have had more difficulty implementing his housing and developmental policies in a true democracy. Perhaps Dubai can be claimed as a similar example. Still, there are also many counter-examples to knock the gloss from authoritarianism.
The arguments for different economic models are more nuanced. A starting point has to be that the power of markets and free capital and joint stock companies has been the primary driver for unprecedented global development since 1945. 2020 will start a historical blip, but the global trend in poverty reduction is truly impressive.
Meanwhile, the form of communism practised in the USSR led to stagnation and misery. But we should be too sweeping. The USSR was characterised by brutal rule by an elite focused only on maintaining power and using corruption as an everyday weapon. Marx did not envisage such constraints, though he might have supported five year plans and fell central control, and they did not work out too well.
A capitalist system with property rights, company law, predominantly market mechanisms and the encouragement of innovation had a good track record until recently. But the most capitalist economies have been largely stagnant since 1980, all the while suffering increasing inequality. Meanwhile most of global growth has been generated by a notionally communist economy, China. The Economist and other westerners have sniffed at China throughout its rise, belittling its products, methods, expertise and much besides, but have been blindsided again and again. China often messes things up when it tries something new, but it learns quickly and succeeds in the end.
The Economist tried to define China’s chosen economic model for the coming years, and concluded that it is a powerful one. State companies compete with private ones under arcane rules giving both a chance and allow a mixture of overarching strategy and entrepreneurial fire. Infrastructure has been modernised, and next will come finance, seeking to remove dependence on the US. Health and education reforms are following, but even the starting points are arguably stronger than many in the west. The latest index of top universities has Chinese institutions marching up the league table. Everyone must pay fealty to the communist party, but that is ideologically light nowadays, in most cases simply a commitment to play within certain boundaries and not be corrupt.
This new hybrid model is rather interesting, and The Economist feels right in paying it some respect. One way to look at competing economic systems is via an analogy with sports. In soccer, debates rage all the time about the respective merits of a back four and a back five – the way players are deployed around the pitch. Many ideologues declare one system better, just like we do for capitalism. But the reality is subtler.
Each system has advantages and disadvantages. A team can succeed with either, so long as it has a strategy and applies it consistently, for example recruiting players to fit the chosen method. The method itself should be rather adaptable, depending on the talent available, current fashions and opponents, and the rules in force. Every system should evolve.
When I compare the economic prospects of the US and China over the next twenty years, naïve commentary starts by pointing out that one’s system is inherently superior, perhaps because it has done well in the past or because we are fans of that team. But any deeper analysis suggests the Chinese are poised to win big.
One team has a clear strategy. One team is investing in talent. One team plays to the limit of the rules but does not think it is above them. One team has a couple of greedy players, several fat and lazy old ones and others bought on the cheap and paid nearly nothing. One team looks forward and innovates and respects its competition. One team has a head coach who grabs power but does seem to care about more than whether he looks good wearing a mask. Can we really believe that the one on the losing end of all these comparisons will win anyway because they are playing with a back four?
But a back four system can still win. Germany seems to be doing OK, and it doesn’t have to suppress a chunk of its population to do so. So how is Germany different to the US? It protects its institutions, values competence and competition (to an extent). But it can be argued that at the core, the difference is a long-term drive towards equality of opportunity. As a football team, it values teamwork, and it is hard to win for long without that.
Perhaps US capitalism is now on a path like the USSR, condemned to cycles of instability from terminal inequality. Increasingly, order is only maintained by feeding the beast of inequality and suppressing the cries of the rest. Institutions crumble, congress enacts nothing, and greed, spin and lobbying win out, all different manifestations of corruption.
I am not defending the brutality around the periphery of China, and nor am I writing the USA off, because it still has considerable strengths even if it has just spent four years actively undermining them. But if I compare a hungry young Chinese person, trained to work, targeted at nationally valuable sectors, able to apply fantastic infrastructure and banking, with a US filled with entitled, corporeal, undereducated, angry kids looking to make a quick buck in corrupt finance or law, it feels like watching the recent Bayern Munich-Barcelona soccer match. It finished 8-2. And a Bayern player scored one of the two.
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