Oligarchic Capitalism, a system in which the most critical of the economy’s productive resources are in the hands of a few extremely wealthy individuals or families, is the most indefensible form of capitalism from the point of view of growth. In such economies, the wealthy few characteristically siphon off greatly disproportionate shares of the output of their economies, lead the lives of royalty, and are surrounded by a desperately impoverished population. The oligarchs generally do nothing to promote growth and have little interest in doing so. After all, they are apt to be aware that any changes can trigger threats to their positions. As a result, in such economies methods of production are frequently all but stagnant and evolve slowly only when their retrograde character threatens foreign markets or domestic unrest, so that the oligarchs are reluctantly forced to yield and to permit an iota of economic progress. It should hardly be surprising that the oligarchic economies in Africa, Latin America, and parts of Asia are models of stagnation and economic misery.
“When it comes to the prosperity and growth of an economy, the choice is no longer between socialism (or communism) and capitalism. Rather, the choice is between forms of control of the economy that are all arguably capitalistic, in the sense that the bulk of the means of production are in private hands.”
Bureaucratic Capitalism, in contrast, has a more mixed record. This form of capitalism entails substantial government intervention and control. Today, China provides a prime example of this approach, although it still has substantial vestiges of communism, with a very substantial portion of the larger firms still owned by the state. There are countries in Africa that are similarly organized. As a rule, economists tend to express distaste for government intervention in the economy. But it must be admitted that in a number of places, such as South Korea, governmental influence in the economy has been very successful in getting growth started. The transformation of South Korea from a desperately poor, war-ravaged nation in the 1950s into a highly industrialized economic powerhouse has been one of the great success stories of the past half-century. Such stimulation of start-up is not easy to achieve, as repeated unfortunate experiences have shown. But in Korea’s case, government intervention, including industrial policy, played a significant role.
The downside of bureaucratic capitalism is that the government does not always make the right choices. On the contrary, bureaucratic capitalist economies have had their share of dismal failures. Still, the record shows that this form of organization is not to be dismissed out of hand – as a start-up mechanism.
It’s in the next phase of development that bureaucratic capitalist economies appear to have experienced quite consistent failure. Many nations find it difficult to preserve the incentives that ensure continued innovation and growth and do not sink the economy in the morass of traditional ways of operation. In order to spur continued growth, there must be some mechanism that does not permit those who guide the economy to sit on their laurels and simply enjoy their initial achievement.
Friday, February 16, 2007
Monday, February 12, 2007
Friday, February 9, 2007
In the realm of the more curious statements coming out of the Kremlin's bogeyman Vlad Surkov,is his comparison of Putin to Roosevelt! Just goes to show how far out there the people running Russia are. To compare a authoritarian former KGB agent to one of the greatest presidents in American history is not only ridiculous but is absurd to the power of infinity. And this is while Khodorkovsky is being accused of stealing 32 billion! To compare Roosevelt to Putin is like comparing him to Mussolini, perhaps Surkov wanted to show how he admires American history, while openly supporting it's biggest enemy in Iran.