Archive for October 4th, 2018

Asia’s Strongmen and Their Weak Economies

October 4, 2018

Jayati Ghosh of JNU in this piece argues that our belief that authoritarian leaders deliver better economic performance is flawed:

all of Asia’s strongmen share a key characteristic: they secure public support by preying on economic ignorance. In particular, they trade on the popular belief that leaders who concentrate political power are freer to guide economic growth. For the most part, people accept this claim, expecting that financial gain and “development” will be their reward.

Curiously, markets have also accepted this flawed reasoning. Global investors tend to overlook human rights, and to prefer stability and autocratic resolve to the unpredictability of democracy. Equity and currency markets regularly punish countries for even a hint of political upheaval, whereas rulers with more power and fewer checks and balances are assumed to be more capable of ensuring meaningful “reforms.”

And yet, with the possible exception of Xi, the perception that strong autocratic rulers deliver better economic results is wrong. The truth is that Asia’s strongmen are presiding over increasingly vulnerable states and even more fragile economies.

….

What explains weak economic performances by Asia’s strongmen? Maybe untrammeled political power enables large-scale economic mistakes. Furthermore, while most autocrats show strength to their own public, they become meek in the face of global capital. Even when rulers rant against policies that will hurt their populist agendas – like high interest rates – they typically succumb to pressure from financial markets.

This is because the policies they have pursued have integrated their economies so completely into global trade and finance, on unequal terms. Despite their nationalist rhetoric, when the economic winds blow against them, it can be hard to change direction. The exception is China, where heterodox policies and significant state intervention have made the economy far less vulnerable to external shocks. But while Xi has thus far managed to deal with an increasingly complex and hostile external economic environment, many serious internal concerns could easily erupt into bigger problems.

Whatever the reason for Asia’s profusion of strongmen, people and markets have gotten it wrong for too long. Strongman rulers are bad for democracy, and they are really bad for the economy.

 Well, the decline is a lot due to hubris as well…

Adam Smith and his Russian admirers of the 18th century

October 4, 2018

How ideas transcend borders and in unlikeliest of places.

This is a fascinating paper written in 1937 by a Russian Michael P. Alekseev. It is reprinted in Econ Journal Watch.

Alekseev writes on how Adam Smith’s thoughts and ideas were so well admired in Russia in the late 18th- early 19th century. There is even a Pushkin connection!:

Reproduced here is an essay by Michael P. (Mikhail Pavlovich) Alekseev. In the 1760s two students from Russia, Semyon Efimovich Desnitsky (1740–1789) and Ivan Andreevich Tretyakov (1735–1776), attended Glasgow University, learned directly from Adam Smith, John Millar, and others, returned to Russia, and commenced a tradition of Smithian thought in Russia. Alekseev tells of other Russian Smithians including N. S. Mordinov (1754–1845), Ekaterina Romanovna Dashkova (1744–1810), Alexander Romanovich Vorontsov (1741–1805), Semyon Romanovich Vorontsov (1744–1832), Christian von Schlözer (1774–1831), Heinrich Friedrich von Storch (1766–1835), M. A. Balugiansky (1769–1847), Nikolay Turgenev (1789–1871), and the great author Alexander Pushkin (1799–1837). Alekseev writes: “After the war of 1812 Adam Smith became extremely popular among the liberal youth of Russia who were organizing secret circles. In endowing the hero of his novel Eugene Onegin with a taste for economic problems and by making him read Adam Smith, Pushkin merely reproduced the actual feature of the time, the writer himself having had the same taste.”

Hmm. That is a long list of admirers.

What is even more interesting is how there were these two Russian students who had studied under Smith. They made notes in early 1770s which clearly shows that Smith was teaching what was to become The Wealth of Nations. 🙂

 


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