Naked Economics: Undressing the Dismal Science pdfdrive com

Can authoritarian or oligarchic states join the ranks of the world’s wealthy,
and even gain global economic primacy? Or is political change a prerequisite?
Okay, those aren’t actually my questions. A Wall Street Journal columnist posed
them in 2011.
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But I would have asked something similar. When the Berlin Wall
came down in 1989, our assumption was that two systems had emerged
ascendant: market capitalism and liberal democracy. The two systems were
thought to be inextricably linked; one guaranteed free people and the other was
an economic system built on the free flow of goods, services, labor, and
information. In 1989, Francis Fukuyama wrote a now famous article entitled

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“The End of History?” He argued that with the collapse of communism, we had
experienced “an unabashed victory of economic and political liberalism.” The
ideological battles of the twentieth century were over, and there was a clear
winner. Fukuyama wrote:
What we may be witnessing is not just the end of the Cold War, or the
passing of a particular period of postwar history, but the end of history as
such: that is, the end point of mankind’s ideological evolution and the
universalization of Western liberal democracy as the final form of human
government.
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Almost exactly twenty years later, China’s President Xi Jinping, sitting
unelected at the top of the world’s largest economy, effectively became ruler for
life when the People’s Congress (often described as a “rubber-stamp
legislature”) removed presidential term limits from the constitution.
The point is that we began the twenty-first century with the belief that most
of the world was moving steadily toward democracy and capitalism and that the
two systems were natural companions to one another. China is now putting that
belief to the test. As the Wall Street Journal noted, “China’s combination of
authoritarian rule, state-directed investment, and limited capitalism has become
the new alternative model.” Some economists are skeptical that China’s model
will work beyond a certain level of development. History suggests that countries
without highly sophisticated institutions, including impartial courts and universal
property protections, find it hard to grow past middle income status, around
$15,000 per capita—right about where China is now. Two French economists
who studied this question call that development barrier, not without irony, “The
Great Wall.”
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Given the importance of information and knowledge in a modern
economy—and the ability to share both quickly and freely—one has to assume
that China’s Internet restrictions will cause economic friction at some point.
Maybe China will figure out a way to harness the benefits of a market
economy without the messiness and inefficiencies of democracy. That would
certainly be a noteworthy postscript to “The End of History?” Or perhaps
China’s robust growth will peter out. It’s possible that having a president for life,
a rubber-stamp legislature, and limited personal freedoms will begin to impose
more economic costs than benefits. And then what?
I suppose there is a third possibility, which is that the Chinese model
continues to generate rapid growth, but a richer population begins to demand
more freedoms. That, too, would be politically destabilizing, but for a different

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more freedoms. That, too, would be politically destabilizing, but for a different
reason.
The point is that something interesting is going to happen, probably in my
lifetime. I just don’t know what it is. That’s why it’s in the questions section.
Those are just my questions. My hope is that by now you have more of your
own. The remarkable thing about economics is that once you’ve been exposed to
the big ideas, they begin to show up everywhere. The sad irony of Econ 101 is
that students too often suffer through dull, esoteric lectures while economics is
going on all around them. Economics offers insight into wealth, poverty, gender
relations, the environment, discrimination, politics—just to name a few of the
things we’ve touched upon. How could that possibly not be interesting?
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And now they have!

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Notes