So, there I was, having dinner with Foseti, and as usual, his insights about stuff he's seen directly are excellent.
We got near agreement on the following:
In broad strokes, there is only one political system yet discovered that generates wealth and economic growth in rich countries:
The northern-european/germanic/anglo system of strong individual property rights and common law. In less broad strokes, there are two-and-a-half:
Anglo systems (low redistribution, low regulation, strong individual property rights):
England, America, Australia, New Zealand, Canada, Singapore, Hong Kong, Dubai, post-war Japan.
Nordic systems (assuming the existence of enough nords) (high redistribution, low regulation, property rights):
Denmark, Sweden, Norway, Finland, maybe Germany.
Swiss system (Maybe would collapse into nordic systems if ANY swiss people needed welfare) (hyper-federalist, direct democracy, cantonal competition driving low taxes):
On the other hand, there is a widely admired economic system that does NOT deliver growth after catch-up: Fascism/Corporatism/Crony Capitalism/Japan/South Korea. Foseti's was the excellent point that from being in Korea, he saw that the line between the government and the Zaibatsu was blurry at best. And that it lined up well with Japan.
Aretaevian competition-theory says that you cannot build an innovation system out of that approach.
And so...South Korean growth should fall off pretty hard. You heard it here.
Oh...and Foseti's a real nice guy in person.
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6 comments:
Catchup is the problem.
All the "corporatist"* supporters have a huge dataset they can point to that supports their world view. Currently China is exhibit A, before that the "Asian Tigers", before that Japan, then the Soviet Union, then Nazi Germany, and Japan again, then the Soviets again etc. etc.
(Krugman did a really good essay on this back when he was writing economics. He basically quoted a bunch of people talking about how the eastern countries were using managed development to outgrow the west. Then he pointed out that they weren't talking about Japan in the late 1980s, but the USSR in the 1960s. Same feelings, same economic catchup effect, same eventual stagnation (only USSR was worse of course).)
My personal theory is that Crony corporatist states can "catch up" to a level about 20 to 30 years behind the leading individualist states. That's the point at which the messy, organic systems of the cutting edge can be systematised and regimented so as to be implemented top-down. Thus 1940 Germany could grow quickly until it was as developed as 1920 USA (or more specifically, the most advanced parts of the USA, which was more heterogeneous at the time). The USSR in the 1980s managed to just about reach 1950s USA levels, with peaks of the 1970s. Modern China will probably level out when they reach ~2000AD USA in about 2030.
*I urge everyone to use "Corporatist" as a term. "Fascism" has FAR too much baggage and the term basically means "people I don't like" to most of the population. Using that term just derails most trains of thought, and lets face it, most trains of thought need all the help staying on track that they can get.
"Crony capitalism", while a better description, tends to indict real capitalism by association.
Maybe "Crony Corporatism" is better still?
"On the other hand, there is a widely admired economic system that does NOT deliver growth after catch-up: Fascism/Corporatism/Crony Capitalism/Japan/South Korea."
"Economic growth" is a phrase I dislike, because it refers to a variety of very different phenomena under one header. Let me propose that after "catch-up" the thing that matters is "continually technological advancement that results in the average person getting either better quality or greater quantity of products and services that they desire and that brings them utility"
By this definition, I think Japan and South Korea have been advancing every bit as fast as the U.S. and Britain. Much of the improvements in electronics and LCD screens that make smart phones possible have been driven by advances in those countries. They are also ahead of the U.S. in automobile technology, nuclear, robotics, etc. I do not see evidence that overall their model is performing significantly worse than the American model. (Japan GDP numbers have been somewhat lousy, but GDP is a bogus metric.
Going further back, during the late 19th and early 20th century Germany seemed to have a much more corporatist model, and yet at that time overtook Britain in economic power and in its ability to drive technological advancement.
Nordics are low regulation?
RSF,
If you haven't checked recently, yes. In terms of economic freedom, basically all the nordics, after flirting with high regulation, are lower regulation that the US and moving further in that direction.
RSF: good article here for futher reading http://www.economist.com/news/leaders/21571136-politicians-both-right-and-left-could-learn-nordic-countries-next-supermodel
As usual Devin Finbarr is right. Korea is arguable, but the idea that Japan hasn't grown since catch-up is laughable.
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