Ignorance, all is ignorance

Guardian headline:

The markets distrust democracy. Just ask the masters of Beijing and Moscow

Why is the democratic world faring so much worse in this crisis than its authoritarian rivals?

One Freedland J goes on to say:

Given that it is the markets who call the tune, the question then becomes one\’s ability to dance to it most nimbly – and in that endeavour democracy is an impediment……..Why is the democratic world faring so much worse than its non-democratic rivals in the current storm?…….None of these headaches press the same way on the masters of Beijing or Moscow. \”Vladimir Putin is the most powerful human being in the world,\” says the political scientist and head of the Eurasia Group, Ian Bremmer. \”He can change his country on a dime\” – unrestrained by the rule of law or by any meaningful democratic checks…….Similarly China\’s rulers can switch national budgetary priorities in a heartbeat, spending trillions on stimulus with a stroke of a pen………Indeed, it is democracy itself that the markets seem to despise…….

So, let us take a look at how the markets price this democracy shit shall we? Government bond yields are the best measure we have.

UK    2.18%.

US    2.07%

Germany 1.78%

Sweden 1.62%

China? 3.67%.

Russia? 6.0%.

So I think we can tell Freedland to bugger off there. And this is just jaw droppingly stupid:

The larger problem of democracies\’ weakness has not been caused by the economic crisis, so much as revealed by it. The growth statistics for the pre-crash decade tell a revealing story. The EU, US and Japan did OK, clustered together in the low single digits. But China and Russia enjoyed figures nearly twice as high. The best performing economies were the most authoritarian states.

Err, no, the best performing countries were the poor c0untries. As we\’d expect: it\’s harder to invent the new stuff when you\’re already at the production frontier, a lot easier to copy what has already been discovered and invented.

Idiotic twattery the man is spouting.

14 comments on “Ignorance, all is ignorance

  1. For the interest of anyone who doesn’t know, I think he wrote “Bringing Home the Revolution: The Case for a British Republic”.

  2. I can offer an egg throwing service at Guardian twats … I work near their building and recognise some of their “journalists” walk past my 1st floor window on their way to get lunch from the nearby grocery store. I charge cost of eggs + 25% risk fee in case I get arrested, payable in advance as I have to stock up on eggs. Pictures of egged twats supplied in return of course 😉

    I suspect my venture would be a failure though as the most odious specimens probably work from their homes.

  3. Note the sly reification in the use of language. Markets are not distinct forces with decision-making powers: the word “market” is just shorthand for a collection of human agents that choose to interact for certain purposes (trade). In that sense, a “market” cannot “thwart” a government, rather, it is the network of persons who, by their behaviours, who are preventing a government from doing as much as it would like to do.

    Of course, with collectivists of the left and right, it is important to treat a network of individuals as some sort of concerted mass, in order to mess around with it.

  4. Russia’s growth is a factor of oil prices. If oil prices fell to $25 per barrel does anyone believe that Russia would be in good shape?

    Chinese growth is the equivalent of the extra floatation someone gets when you remove their concrete wellies. To rephrase a well known saying, only communism was capable of making a nation of Chinese poor. The subsequent growth is simply the result of lessening the state led stupidity.

    As for Russia & China being the the epitome of markets…..what planet do these people live on?

  5. Most wealthy countries are democracies which as Tim points out, means that the poorer – and therefore on average faster growing – are more likely to be dictatorships or other nondemocracies.

    The question crossed my mind – what is the world’s wealthiest nondemocracy? But of course that is skewed by oil-rich countries. Are there ANY relatively wealthy nondemocracies right now apart from those whose wealth is based on natural resources? Am sure 25 years ago there were quite a lot but they’ve tended to democratise.

  6. Singapore and Hong Kong. They might have democratised a bit recently, but it wasn’t and isn’t democracy that makes them rich.

    But the same goes for England. It wasn’t and isn’t democracy that makes up rich. It is only through restraining democracy that we can have a larger private sphere. (Democracy inevitably leads to socialism.)

    What do you say to someone who points out the correlation between democracy and prosperity? Well, the correlation is not causal — Singapore and Hong Kong prove that. So why the correlation? My preferred theory is that democracy is poison. Only the countries with the strongest polities can withstand it (i.e. the most productive ones) — and the others… stop being democracies! So they are never counted; the countries that tried democracy and failed.

    http://intellectual-detox.com/a-formalist-history-of-the-world/

  7. And another factor in the markets / democracies discussion is that politicians like to bribe voters with their own money, and when that runs out, then they start borrowing…

    However the lefties take that a whole step further into bloody statism etc, which strangely enough doesn’t work and requires a lot of borrowing.

    You may as well make the case that lefties are malevolent arses, and judging by the EU don’t like democracy very much anwyay…

    To argue it’s market’s being too strong is myopia of an Olympic standard…

  8. Hugo – I’m being a bit of a cheek and discounting HK as a country (it’s an SAR after all). SG is fascinating – clearly not a western liberal democracy but some type of democracy nonetheless. Worth bearing in mind that Japan has had long periods of one party rule during a period usually described as ‘democratic’ so it’s not just that (SG is certainly more authoritarian and less liberal).

    But not long ago Taiwan, S Korea, Chile, Argentina even Greece, Spain, Portugal were relatively well off (even if not top tier in wealth league) nondemocracies. Where are their equivalents today?

  9. I’ve said it before: the law of diminishing returns is one of the more difficult to grasp concepts (not only in economics)

  10. MyBurningEars, thanks for the response. I’m not sure I understand your question.

    Singapore *is* fascinating: as far as I can make out, the ruling party always gets reelected because it has indoctrinated the populace into its ideology. For example, children are taught at school, “no one owes you a living”. When a beggar (rare) was quoted complaining in the newspapers, the authorities quickly found out that she was actually a landlord, and discredited her.

    They do not have PC at all, which allows them to do sensible policies and say things like this: http://foseti.wordpress.com/2011/10/20/singapore-island-of-hbd/

    Their civil service is extremely efficient, small and very highly paid. My prediction, given all this efficiency, is that they are one of the few for-profit govts in the world. Hong Kong and other colonies were/are the only other examples I can think of.

    Profit-making govt! It works.

  11. Hugo: to clarify, I’m very wary of overgeneralisations, either that “progress, democracy, economic progress, and the markets go hand in hand” (the sort of Fukuyama/End Of History argument) or “the markets don’t get on well with inconvenient democracy, whereas less-constrained undemocratic countries do better” (the Freedland argument).

    Freedland’s attempts of mustering evidence in support of his cause are correctly demolished by Tim above. One issue is the confounding variable, “being rich already”. Countries that are already well-off tend to grow more slowly than developing countries. They are also vastly more likely to be democratic (with some exceptions, notably resource-rich countries) so comparing democratic and non-democratic countries is not comparing like with like.

    If we wanted to test Freedland’s hypothesis that non-democratic states with market economies fare better than democratic states with market economies, then as Serf points out above it’d be wise to exclude states making a transition from planned to market economies, and states whose growth has been driven by resources like oil. And to try to reduce the impact of that confounding variable, since our market-democratic group will tend to be pretty well-off, we should probably look for market-nondemocracies of comparable wealth.

    Now timewarp back to the 1970s or 1980s and we could pluck out a decent cohort of relatively well-off (let’s say, at least mid-ranked in global terms) non-democracies with market economies and without reliance on oil exports – depending on timeframe, Argentina, Chile, Greece, Portugal, Spain, S Korea, Taiwan. If Freedland is correct, this lot should have outperformed comparatively-wealthy democracies because their governments were able to follow the whims of the market without being hindered by the constraints of popular opinion. Experiment fails of course: rather than the two groups diverging, those countries simply join the democratic group (which I think is one of those things that Fukuyama got all excited about).

    Now the fact that the wealthiest countries on earth tend either to be liberal democratic market economies, or just lucky enough to be sitting on black gold, is prima facie evidence against Freedland’s claims. But it would be more convincing to take two groups (dem and non-dem) and see how they get on with the markets: in fact Freedland’s attempt to verify his hypothesis by comparing growth in Russia/China to the West had the germ of the right idea, just holed by poor comparator-selection, ignoring confounding, and selective choice of statistics (looking only at growth, only at one year, only in this world-economic situation).

    So suppose we wanted to do this exercise properly. Among low-income countries we probably could find two cohorts of comparable democratic and non-democratic countries, and see how their development progresses over time, although lessons learned in that context may not be applicable to wealthier nations. But in the higher-income world, where is the tranche of non-democratic countries occupying similar roles to S Korea or Taiwan et al in 1980? Point taken re HK or SG (clearly not full or “liberal” democracies) but I’m struggling to name many others.

  12. This demo0cracy you talk about. Did it not have more than voting. It had ( real) representatives of the people as well.
    What country has these nowadays?

  13. Super Sam – “I suspect my venture would be a failure though as the most odious specimens probably work from their homes.”

    ….in Tuscany.

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