The Grand Illusion
As I’ve often tried to point out in my novels, the greatest evil lies in extremism, and that especially applies to governments and the economic systems they foster.
Tsarist Russia economically wasn’t all that different from the time of the Robber Barons in the United States and, just before World War I, had the fifth largest economy in the world, even with a government best described as monarchist-authoritarian with some democratic window-dressing. With the Russian Revolution, the Russian equivalent of the Robber Barons, the monarchy, and the democratic window dressing (mostly) got thrown out and Russia ended up with pretty much a straight autocracy. At present, it bears an eerie modern-day resemblance to Tsarist Russia, except that the head autarch makes the last of the Romanovs look like an incompetent milquetoast by comparison. And it’s still an autocracy with an economy hobbled by the requirements of surviving in an autocracy.
This is a problem that the Chinese recognize, and what they’re attempting to do is to create a sort of semi-free market circumscribed in various degrees by an authoritarian government.
On the other hand, true capitalistic free-market systems are efficient at producing massive amounts of goods, but extremism in capitalism tends toward excessive concentration of wealth and power, which, if unchecked, isn’t that much different from an authoritarian government in repressing wages and in creating unhealthy workplaces, except that the autarchs are the business owners and not the government. Also, without strong government oversight, capitalistic systems tend to create continual boom and bust economic cycles and to neglect creating strong infrastructure on a national basis, as well as underfunding national defense.
At the same time, too much regulation/regulatory control in a capitalistic economy has a hobbling effect similar to that of an authoritarian government, as unfortunately the state of California is beginning to demonstrate.
History demonstrates, pretty conclusively, in my opinion, that countries dominated by the extremes of authoritarian governments or of free-market capitalism are pretty miserable places to live for anyone but the elites, but that’s something that the elites always rationalize away.
My view of the ideal model for governments vs. private economic entities is that of stones in a can. The government sets the outer limits beyond which businesses are not allowed to go (environmental protection, product safety, security of contracts via honest courts, protection of workers, limits on fraudulent advertising & claims, etc.) but within that “can” the stones of free enterprise are perfectly free to rattle around however they like.
The key problem is unhealthy relationships to power.
People hoard it, and use it to change what others know or can do. They do so via religion (“only Catholic priests can understand the Bible”), via media (“controlling people’s thoughts, that’s our job”), via ideology, via money, etc.
It makes sense from an evolutionary perspective. All life is subject to entropy, therefore hoarding resources and power seem like good strategies to avoid premature death. However the consequences of one person controlling everything do not show up as a negative in the evolutionary landscape, and therefore no instinct to moderate one’s behavior has evolved. Power only seems good to evolution. Genghis Khan had many children.
This is however a problem on a planet with our level of technology. Only wisdom can moderate our behavior, and that seems to be in short supply. “Homo sapiens” should probably be renamed “Homo callidus”.
I’m curious if you have a specific example (regulation/hobbling) that you would like to share as to California. This is conventional wisdom from many conservatives I know, but they can never come out with anything concrete; usually the examples they do provide are a rich person moving somewhere else because of high taxes, which is a different form of policy consequence, but not the same thing.
The best-known example is that of the comedian Bill Maher, whose publicly documented installation of a solar power system for his house took 1,131 days, and, as he pointed out, if it took that long for him, how long does it take for those without money and connections. Another example just comes from Colorado, where a wildfire destroyed hundreds of homes, but Colorado law for rebuilding those homes won’t allow a straight replacement of what was destroyed and mandates so many upgrades that the insurance of the owners, many of whom are senior citizens, won’t come close to covering the cost of the required rebuilding.
While I understand the point about not being able to rebuild a house as it was being a burden, I think that is a burden that should be expected (and should be built into insurance coverage). If a home was built in 1925 with knob and tube wiring, allowing it to be rebuilt that way is a very poor idea.
Building codes changes for a reason, and the state insurance commission should require insurers to offer full code upgrade coverage (instead of just 10% extra to cover code upgrades).
Hernando De Soto wrote a very insightful book (The Mystery of Capital) on just how excessive regulation can siphon off straight economic efficiency in a capitalist system. Your Bill Maher example brought it to mind because the experiment De Soto runs in his book is having a bunch of grad students attempt to start businesses in Latin American countries and then catalogue the number of visits to government offices and bribes
required to get things off the ground. There’s definitely a tipping point where assets start becoming less liquid once there is so much red tape required to do anything.
Your point about the economic weaknesses of authoritarianism is well taken except that there is ample evidence autocratic states can keep chugging along with lots of workarounds. Trashing their own economy is not enough to get them removed from office. A command economy eventually failed in the Soviet Union–but it took a *long* time. Indeed, there is also lots of statistical evidence that autocrats who stay in office long enough are able to consolidate their power, becoming almost impossible to unseat (a scholar by the name of Milan Svolik wrote one of the definitive recent articles on this). So, while coups are the most common ways dictators get replaced, that tends to be less of a threat against old established autocrats. Economic turmoil certainly increases the probability of removal, but after a consolidation period, even this isn’t a huge factor, historically speaking. Then again, who knows, maybe Putin will manage to screw up in Ukraine so royally that he’ll be an outlier that shifts the numbers in the next study.
re California; the best measures of vitality for a place, whether a city, state, country etc are the population and capital inflows/outflows and in 2021 Califonia was the leading domestic outflow state though that was compensated to some extent by a large international migration flow, while anecdotally the US capital flows moved out, though it is true that foreign money from Russia, Middle East and China definitely moved in, so basically US-based money and people are flowing out,dubious international money and poor people are flowing in (same with NY which was the leading percentwise domestic outflow state); so there is a mixed message, and definitely there is some dynamism to Califonia still but imho it is much more dependent on global politics now, rather than internal US factors