the conservation of a dictatorship’s economic environment

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Matthew Raska

Prof. Evan W. Osbourne

Economic Life, EC200

February 17, 2012

The Dictatorship¶s Unique Economic Opportunities

As ³Communist´ China¶s economy flourishes and blossoms, the question must be asked:

³How can a previously impoverished, communist, repressive nation be so successful competing

against the massive economic power of the United States and European Union?´ The answer is

unfortunate: Holding absolute power, the government of China is capable of ignoring populist

pleas from its people and directing its resources towards unrelenting economic growth. (Karon)

For proof, the economies of the United States and European Union grew by an average of

.33% and shrunk by .2% (respectively) per year over the last three years; however, the economy

of China has grown an average of 9.66% per year for the previous three years. (Factbook)

Russia, arguably a democracy in name only (Weir), experienced tremendous economic growth

under the leader of its brief democracy¶s death, Vladimir Putin.

The progress made by the Russian economy in the past eight years is truly impressive.

GDP has gone up about 70%, industrial growth has been 75% and investments have

increased by 125%, regaining Russia its place among the world's top 10 economies... The

proportion of population living below the poverty line decreased from 30% in 2000 to

14% now. (RIA Novosti)

Before progressing further, it must be noted that a capitalist dictatorship is the subject of

study. There are no doubts in the author¶s mind that a state-run economy is a recipe for

inefficiency and failure. ³China's success in navigating the economic crisis, wrote Fukuyama,



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was based on the ability of its authoritarian political system to "make large, complex decisions

quickly, and ... make them relatively well, at least in economic policy.´ (Karon)

A dictatorial government such as China¶s only responsibility is to keep its citizens

content enough that they do not rebel. Alternately, they need only to keep solid support from one

segment of the population. ³The discussion is either of a Republic which wants to create an

Empire, as Rome, or of one which is satisfied to maintain itself... [such as] Venice and Sparta.´

(Machiavelli 31) What Machiavelli says here and in the following passages is that if one should

wish to expand their nation, the commoners is who the power should be invested in. Conversely,

power should be invested in the ³Nobles´ of a nation to maintain itself. For example, the while

Rome was a Republic, many of its citizens sought to prove themselves by success in conquest.

However, these citizens eventually became powerful enough to usurp power from the Senate of

Rome and become permanent (Roman) Dictators. Caesar became popular through his conquest

of Gaul, Tiberius with his conquests of Pannonia, Dalmatia, Germania, and Raetia. (Lendering)

At this point in the game, political power in China is held by its upper-class (Nobles) and

so is holding strong and maintaining its hegemony while the US votes itself into oblivion,

unlikely to cease its spending habits. China needs only to play its hand quietly whilst Europe and

the US drive themselves into the ground.

In a democratic society (such as the US or the countries of Europe), politicians are able

to make the promise of improving one group¶s lives and fulfill their promise by taking another

group¶s resources (taxes) and sharing it amongst the politician¶s constituents. This accomplishes

both withering the politicians¶ opponents and enriching their supporters. And so the results of

raising taxes and distributing ³free´ funds to avaricious groups become entrenched. The

American writer Robert Heinlein surmised:



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There is an old song which asserts that "the best things in life are free". Not true! Utterly

false! This was the tragic fallacy which brought on the decadence and collapse of the

democracies of the twentieth century; those noble experiments failed because the people

had been led to believe that they could simply vote for whatever they wanted« and get

it, without toil, without sweat, without tears." (Heinlein 98)

Alternately, these democratic countries can borrow money and mortgage the future. The results

of such practices can already be seen in Greece; Italy, Ireland, and Portugal are also in more debt

than their annual GDP. (The Economist) Continuing on the previous point, these groups that receive those pillaged funds watch

the laws carefully, similar to regulatory capture. For example: Farmers like subsidies. Both of the

Bushes and Clinton tried to cut farm subsidies with no success. (Hanson) Those who receive

³benefits´ watch like hawks, knowing that all they need for their free lunch is to ensure its

siphoning from the others; a useful concept, since the beneficiaries can put on more political

pressure and pay more attention than the benefactors. So dead-weight civil servants, ³welfare

distribution overseers,´ and welfare recipients accumulate like so many barnacles; barnacles

made of personally invested bureaucrats and thieving bandits, agressive in attaching and difficult

in removing.

For example, the Ohio Civil Service Employees Association fights against any attempts

to cut government spending. Just check the front page of their website: http://www.ocsea.org/. At

the time of writing, the first notice was ³Right to Work: SB5 in sheep's clothing,´ and the third

bulletin of four was ³Take action! Stop federal push to privatize state transportation work.´

Government employees, being more intimately knowledgeable of the political landscape through



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their entrenchment in the system, can more effectively fight for their survival; whether or not

their function is useful or necessary to taxpayers being a different matter entirely.

So the democracies implode, eventually, each one brought down by an economic

catastrophe: Debt, war, disease, etc. Their currency is likely useless and populace receives a

sudden lesson in economics. This is where a dictatorship comes into its prime. They can plow

over the people at will, holding no blows to keep the ³republic´ or ³oligarchy´ functioning. ³It

can ride roughshod over the lives of its citizens (e.g., building a dam that requires the forced

relocation of 1.5 million people who have no channels through which to protest).´ (Karon) As

well, the middle class which rises through these prudent economic and infrastructural policies

and, seeing the light, usually supports the government¶s efforts; as seen in China: ³But the

regime claims solid support from the Chinese middle class, and hedges against social explosion

by directing resources and investment to more marginal parts of the country.´ The system is self-

supporting until representation of the people ensues and the ³Tragedy of Democracy´ repeats

itself. Democracy rises, succeeds spectacularly, and then snuffs its own flame out.

It could easily be argued that China grows so fast because it is poor, and this is very true.

However, many African nations are also crushingly poor. ³Across the sub-Saharan African

countries Gallup surveyed, median GDP per capita (PPP) increased from $1,315 in 2007 to

$1,610 in 2010.´ (Gallup) For reference, China¶s current per-capita GDP is $8,400. (Factbook)

However, government nationalization and frequent, violent turmoil hamper any appetite

investors may have in the region. ³[Were the chrome and platinum mines nationalized,] foreign

capital would rush out of the country, bringing an immediate collapse«´ (Cohen) If anything,

nationalization is a rush backwards in economic progress. The same argument can be made in

developed countries where the government subsidizes health care, bans hemp (Roth-Li), or



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imposed unwarranted regulations on the economy. Taxes must be raised, opportunities wasted,

and/or friction added to a businesses¶ operation system. The costs are passed onto businesses and

individuals. It¶s no secret that China has looser environmental and labor regulations than the US,

let alone European countries.

But what about India? India¶s economy is growing quite quickly as well, 8.2333% annual

GDP growth per year on average for the last three years (Factbook). Likewise, its population is

impoverished; India¶s per capita GDP is $3, 700 (Ha lf o f China ¶s) . However, even being a

supposedly nimble democracy, India¶s labor laws are mortifying.

As soon as a company hires more than 100 employees, it is impossible to fire anyone

without government permission« Companies must keep 6 attendance logs and 10

separate accounts for overtime wages, and file 5 types of annual returns. There are at

least 11 definitions of the word "wage." Other rules regulate« how often a building must

be lime-washed, and how many sand-filled buckets must be on hand to put out fires.

(Srivastava)

But what prevents China¶s leaders from turning on and cannibalizing its industry and

economy for their own personal gain? China¶s leaders recognize that economic power translates

into overseas and diplomatic power. China may not have a blue-water navy, but power can be

flexed with money as well as the military. One example of economic power can be seen in the

Arab Oil Embargo. While eventually causing the cartel to fall apart (Srivastava) and

strengthening enhancing the power of other oil-producing nations (Landgren), the improper

reaction of the US government with rationing and price controls (Trumbore) can be seen as a

success for OPEC and the Arab Oil Cartel. Given that going to war with Israel worked out poorly



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for the Arab nations in the Yom-Kippur War, economic and diplomatic warfare were seen as a

viable alternative to Israel¶s enemies. China can also be seen putting on the screws.

Whatever it takes, naked bullying or its tremendous buying muscle, China will not

hesitate to intimidate others to submission Australia, like India, remains befuddled how to

deal with China, which uses its massive bargaining power not only to have the best trade

deals, but also to advance its global diplomatic agenda«´ (Batra)

It is very likely that China is preparing itself for its future position as the world¶s primary

superpower. ³China has been establishing listening posts, bunkering facilities at friendly ports

and, in some cases, developing altogether new harbours to protect ocean routes and sea lanes to

ensure an uninterrupted flow of goods and materials with its trading partners.´ (Batra) China¶s

future is a certain one, where the West¶s is not: Economically.

the conservation of a dictatorship’s economic environment

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