2009/11/24

Friedman's misunderstanding of authoritarian rule

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I saw this video in which Thomas Friedman basically asserts that authoritarian regimes as in the PR China can better cope with challenges because of more decisive political action:



Yes, that's the Friedman of the Friedman unit.

He may have some good points in that interview, but he got this one badly wrong.

Authoritarian regimes have been good at focusing resources on large improvement or construction projects. That works especially fine in planning economies - see the industrialization of the Soviet Union during the Inter-War years.

Their problem is that much less spectacular maintenance and renewal activities are usually in neglect under such authoritarian regimes. They don't invent resources, after all - they merely change their allocation, focus the resources on high visibility projects.
Stalin's industrialization was paid for with extremely low consumption even down to famine, for example.

Authoritarian regimes have serious allocation and optimization problems; they're completely dependent on the leadership because there's no powerful bottom-up check to power. A very incompetent authoritarian regime could go on for decades without being changed - see Zimbabwe and North Korea. The Chinese government makes many mistakes and many suboptimal decisions - simply for being made up of humans and having insufficient information flow and pressure bottom-up.


On top of his first misunderstanding is another one:
An at high speed usually keeps moving quickly in Newtonian physics and everyday experience, but economics are different. Even very basic life cycle and golden rule of steady state (Solow) models explain the basic fact that the pas is a poor predictor for the future in regard to economy. It's so at least if you simply lengthen the graph into the future.
A quickly growing corporation or national economy is very unlikely to continue high growth, yet many people (not only Friedman) fall prey to the illusion of continuity.
We tend to overestimate future economic growth systematically in regard to those entities that have grown rapidly in the past.
The utterly predictable and stupid overestimation of growth corporations/sectors in stock markets and the Japan panic of the late 80's/early 90's are good examples.


Friedman's basic line of 'our democracy is too weak in face of this authoritarian, less squeamish authoritarian regime' is no innovation anyway.
I recall a very similar American journal article from the early or mid-80's in which the author argued that the Western democracies were bound to fail in the competition with the Socialist powers because they were too defensive, not decisive enough in their actions and so on.

Well, we know how that played out; that pundit had ignored too many variables and overestimated authoritarian regimes as well.

Sven Ortmann
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4 comments:

  1. Freidman is asserting the US voter is too shortsighted in their political decisions thus limiting the array of choices. While Freidman has made allusions in favor of authoriatrian regimes in the past akin to Jeane Kirkpatrick, his critique of our political discourse is definitely not in favor of authoritarian regimes.
    In the case of the gas tax the issue for voters is clearly one of short term relief without considering the inevitable fluctuations trending upward in the long term.

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  2. Authoritarianism can work "better" (that is, get both faster and more lasting results) than a democratic one if said democracy is corrupt, weak and/or complacent. Hitler's autobahns may be an example of this, 'tho I can't tell whether that's an analogy too far.

    This is not to say despotism ever works particulary "well" in the long run for reasons already mentioned. But neither China nor the US, as far as I can tell, are really on the path to solving the challenges facing them...

    China seem well on the way to strangling itself, and soon perhaps its neighbours, with its obsessive pursuit of growth. A large percentage of what they build, no-one knows how much, is just bridges to nowhere and overcapacity to feed their immense labour market and a rapidly shrinking world market, both fuelled in part by chinese debt and loans.

    The US for its part is caught between a set of rent-seekers and "winners" (leeches really) who are intent on keeping what they can, while a not insignificant percentage of the population mostly seem to wish the world to go away.

    Perhaps this is progress in some two steps forward one step back kind of way. But it sure seem messy.

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  3. Again this Autobahn legend.

    The construction of the Autobahn network began years before Hitler took power and the first one was finalized in 1932.
    Hitler's regime merely took blueprints of Weimar Republic plans, realized these plans (both in regard to infrastructure and rearmament) and added a huge load of idiocy.

    His regime has not proven any capability for good that the Weimar Republic wasn't able to match.

    Some of their propaganda lives obviously on, though.

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  4. Almost figured it would have been something like that. Sort of fits the picture. Detailed planning is no forte of dictators. Puts too much power at lower levels... Gives people ideas. So what idiocies was it that were added?

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