Chapter 5 of Angelo M. Codevilla’s “The Character Of Nations” deals with prosperity, or more specifically how a regimes policies can combine with the character of a people to generate prosperity. How does this chapter relate to the American experience?
America is undoubtably a prosperous country. Depending on how you measure it it may be the richest country the world has ever seen. The reason it has achieved this level of prosperity is that past American regimes have encouraged its citizens to be productive as a means of getting ahead as opposed to seeking political favors. This has been one of the secrets of the success that defines most of the Anglosphere with America being the shining example.
This fact seems so simple yet it is one that most political economists ignore. The holy grail for most political economists, as Codevilla points out, is to find a system that somehow merges free markets with some kind of planning – with them doing the planning. (I remember reading a recent article by Thomas Friedman explaining the benefits of China style government). It strikes me that many elites possess a certain intellectual arrogance. They’re just so sure they’re right that they feel they must be given control in some regards. The results have not been encouraging.
There are many examples of elites not understanding the lessons of the American model which is why they keep falling into the “planning” trap. Here’s one. During the 1960’s the World Bank promoted guidelines that were supposed to help 3rd world countries become 1st world. The plan was to use foreign aid to strengthen and centralize government, build roads, dams, steel mills and infrastructure, use taxation to reform and change patterns, raise tariffs to benefit industries and encourage secularization and liberal attitudes. The results of the above was disaster. Due to these policies It became far easier to gain benefits via government largess than to actually work for anything. Political leaders and others who were well connected would drive around in Mercedes while their countrymen lived in worsening squalor.
The reason that all of the planning on foreign aid failed is that it encouraged and put in power people who sole skill was doling out political favors. Getting ahead by being productive was always the worst option. If you were smart it made much more sense to put your effort into becoming a “gatekeeper” of the regime and doling out favors while skimming off the top.
In the rest of the chapter Codevilla looks at other countries and how their systems deal with prosperity. Here is brief overview:
Japan – For a time in the late 1990’s Japan was the darling of political economists as it seemed to combine free markets with planning. I remember reading an article by James Fallows in The Atlantic praising Japan and the economist Friedrich List as being the model to follow as opposed to America/Great Britain and Adam Smith. Of course then the 90’s happened and Japan fell into a funk from which it hasn’t really recovered.
What is interesting about Japan is that although it is a rich country its people are not really prosperous. They are able to produce 1st world products yet most live in almost 3rd world conditions. For example, in Japan only 3 in 10 homes have central heating. The reasons for this is that with all of the planning being done it encourages exports but discourages imports. It is often cheaper to buy Japanese products abroad than it is at home. The Japanese regime protects many favored and politically connected sectors of the economy at the expense of the nation as a whole. Therefore Japanese are forced to pay $1 for a strawberry or $7 for a bag of rice. Far above world prices. What is interesting is that the Japanese put up with this and in fact see it as their role. In Japan, as I suspect in most of Asia, you are an organ in an organism. If it’s your role to work in a factory and be forced to pay $7 for a bag of rice, that’s the way it is.
With all of the political trade-offs and competing economic interests it has made it very difficult for the Japanese regime to change course when it needs to. This is something that Japan struggles with to this day.
China – China is the latest contender for the role of economic world leader. The Chinese regime has managed to achieve its growth rates by allowing limited private property and encouraging it’s citizens to “jump into the sea” of entrepreneurship. Although China is generating real wealth it still is bedeviled by a parasitic governing class. In China there remain all kinds of political gatekeepers that live at the expense of consumers and producers. For the Chinese you produce if you cannot avoid it, you consume at your peril. Ideally, you want to become a “gatekeeper”. This is not a recipe for success in the long run.
Europe – Europe has an enormous political class that seeps into every aspect of European life. The EU commission has the power to set the standards for everything from the bacteria in cheese to the length of condoms. When such a powerful political regime exists corruption is common as there are constant exchanges of political power for money. This system is coming under increasing pressure as it is forced to deal with the costs of rising pensions and medical care.
Chile – One of the most fascinating examples of regimes and prosperity is that of Chile. It is an example of a regime that uniquely tried to separate political power from economic life, believing that each tends to corrupt the other. I think I’m going to talk about Chile in a future post.
Now, what does all of the above mean for America and American prosperity? I’m thinking the question is to what extent political gatekeepers are becoming more prominent in American Life as opposed to producers. If you want to succeed in America and live a good life are you better off creating something or seeking political favor? At this point I suspect you’re still better off being a producer although I’m concerned which direction this is going.