DWA 227 · Authoritarianism in the Age of Globalization · Week 4 · Tue Sep 15

Capitalism under
Democracy and Dictatorship

Quiz 1 · 1:20–1:35

Quiz 1

• Handwritten, closed notes. Fifteen minutes.
• Part I — five multiple-choice items. Part II — one paragraph.
• Name on both pages.
• “Ideas count, penmanship doesn’t.”

Thursday Sep 17 · guest

Sergii Glebov

“Russia’s War on Ukraine and European (In)Security”

• 12:00–1:00 pm — public talk, Choi Auditorium (Young Initiative)
• 1:20 pm — visits this class, Johnson 104
• Wed Sep 16, 8 pm — Connector/Applier discussion-question post due in the shared doc
• Visiting Associate Professor, UC Irvine; Associate Professor, Odesa I. I. Mechnikov National University

A framework for the week · three texts, one relationship

Who checks whom

Argument 1 · Friedman · two ways of coordinating

“Fundamentally, there are only two ways of co-ordinating the economic activities of millions”

“Exchange can therefore bring about co-ordination without coercion.”

Friedman 1962, ch. 1 (excerpt p. 4).

Argument 1 · Friedman · concentration and dispersion of power

There can be many millionaires in one large economy. But can there be more than one really outstanding leader, one person on whom the energies and enthusiasms of his countrymen are centered? … there seems to be something like a fixed total of political power to be distributed. Consequently, if economic power is joined to political power, concentration seems almost inevitable. On the other hand, if economic power is kept in separate hands from political power, it can serve as a check and a counter to political power. Friedman 1962, ch. 1 (excerpt p. 5)

Argument 1 · Friedman · the cases he lists

“Economic arrangements that are fundamentally capitalist and political arrangements that are not free”

• Fascist Italy · Fascist Spain · Germany “at various times in the last seventy years”
• Japan before World Wars I and II · tsarist Russia “in the decades before World War I”
• “in each, private enterprise was the dominant form of economic organization”
• “I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market”

Friedman 1962, ch. 1 (excerpt p. 2). Thesis of the chapter: “a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom” (excerpt p. 1).

Context · Hobbes · the state of nature

In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; … no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short. Thomas Hobbes, Leviathan (1651), ch. XIII, “Of the Naturall Condition of Mankind, as concerning their Felicity, and Misery”

Not assigned this week (assigned: Narrow Corridor 1–2, Friedman ch. 1, Olson 1993, Martínez 2022). Public-domain text; cited by chapter, the standard convention, since pagination varies by edition.

Context · Locke · the ends of government

The great and chief end, therefore, of men’s uniting into commonwealths, and putting themselves under government, is the preservation of their property. John Locke, Second Treatise of Government (1689), §124

Discussion: as you read Olson, which problem is he solving — Hobbes’s (any power sufficient to end the war of all against all) or Locke’s (a power confined to preserving what people already hold)?

Not assigned this week. Locke glosses “property” broadly, as “Lives, Liberties and Estates” (§87, §123). Cited by section, the standard convention for this text.

Argument 2 · Olson · “the first blessing of the invisible hand”

the rational, self-interested leader of a band of roving bandits is led, as though by an invisible hand, to settle down, wear a crown, and replace anarchy with government. Olson 1993: 568. Example on the same page: the warlord Feng Yu-hsiang, 1920s China, “noted for the exceptional extent to which he used his army for suppressing bandits” and for defeating the roving bandit White Wolf.

Diagram: schematic of Olson 1993: 567–569 (“encompassing interest,” p. 569). Not data.

Argument 2 · Olson · “the grasping hand”

The revenue-maximizing tax rate

Tax receipts will — if we start with low taxation — increase as tax rates increase, but after the revenue-maximizing rate is reached, higher tax rates distort incentives and reduce income so much that tax collections fall. The rational self-interested autocrat chooses the revenue-maximizing tax rate. Olson 1993: 569–570

Schematic of Olson 1993: 569–570 (citing Schumpeter and Ibn Khaldun); not data. Worked example on p. 570: with a revenue-maximizing rate of one-third and a majority earning one-third of national income in the market, the autocrat “just breaks even on this last dollar of tax collection,” while a majority at the same rate “would lose two dollars.”

Argument 2 · Olson · “long live the king”

• “At the limit, when an autocrat has no reason to consider the future output of the society at all, his incentives are those of a roving bandit and that is what he becomes.” (571)
• “the promises of an autocrat are never completely credible” (571)
• “There is no private property without government!” (572)
• “History provides not even a single example of a long and uninterrupted sequence of absolute rulers who continuously respected the property and contract-enforcement rights of their subjects.” (572)

Olson 1993, page numbers per item.

Argument 2 · Olson · democracy, individual rights, and development

the conditions that are needed to have the individual rights needed for maximum economic development are exactly the same conditions that are needed to have a lasting democracy. Olson 1993: 572

“Though experience shows that relatively poor countries can grow extraordinarily rapidly when they have a strong dictator who happens to have unusually good economic policies, such growth lasts only for the ruling span of one or two dictators.” (572)

Olson 1993. Closing line of the article: “The moral appeal of democracy is now almost universally appreciated, but its economic advantages are scarcely understood” (575).

Argument 2 · Olson · “the improbable transition”

autocracy is prevented and democracy permitted by the accidents of history that leave a balance of power or stalemate — a dispersion of force and resources that makes it impossible for any one leader or group to overpower all of the others. Olson 1993: 573

• England, 1689: “There were no lasting winners in the English civil wars” — Parliament, an independent judiciary, a Bill of Rights (574)
• “it was in Britain, not very long after the Glorious Revolution, that the Industrial Revolution began” (574)

Olson 1993, page numbers per item.

Argument 3 · Acemoglu & Robinson · three Leviathans

Schematic after Acemoglu & Robinson 2019, chs. 1–2 (book not in the course folder; axis and region labels paraphrased — verify the authors’ figure before quoting). Quoted lines: stateless societies “are quite capable of controlling violence and putting a lid on conflict, though as we’ll see this doesn’t bring much liberty” (p. 11); “Life under the yoke of the state can be nasty, brutish, and short too” (p. 12).

Argument 3 · Acemoglu & Robinson · the Red Queen

it takes all the running you can do, to keep in the same place Lewis Carroll, Through the Looking-Glass (1871), as quoted in Acemoglu & Robinson 2019: 41

• “capable states matched by capable societies” (66)
• “Once the Leviathan is shackled, society may choose to give it a long leash and allow it to increase its reach so that the state uses its capacity for things that its citizens want and need” (72)
• Norms in weak-state places “also create a cage, imposing a different but no less disempowering sort of dominance” (19)

Acemoglu & Robinson 2019, page numbers per item, as reproduced in published reviews (McCloskey; Dixit). Book not in the course folder.

Arguments 2 and 3 · how the balance arises

Discussion: argue that the two passages describe the same balance — then argue that they do not.

Left: Olson, APSR 87(3). Right: The Narrow Corridor, as quoted in McCloskey’s review; book not in the course folder.

Evidence · Martínez · nighttime lights against reported growth

Martínez 2022, as summarized in the BFI research brief (bfi.uchicago.edu, Jul 15 2021): satellite nighttime lights as a manipulation-resistant proxy for economic activity; “a genuine 2% growth rate is reported as 2.7%.” Bars illustrate that worked example only.

Evidence · Depth readings · does democracy cause growth, or does growth sustain democracy

Przeworski & Limongi 1997: 156 — democracies “may be more likely to emerge as countries develop economically, or they may be established independently of economic development but may be more likely to survive in developed countries. We call the first explanation ‘endogenous’ and the second ‘exogenous.’” Sen 1999: 6 — “the Lee hypothesis,” after Lee Kuan Yew.

Discussion · China against the week’s arguments

Pei, “China: Totalitarianism’s Long Shadow,” JoD 32(2), 2021 (page numbers per cell; cf. Week 3 deck, slides 16–24). Row 3 label paraphrased from Acemoglu & Robinson 2019, chs. 1–2. Further viewing: Chenggang Xu, “How China’s Economy Actually Works” (Institute for New Economic Thinking, 2021).

This week and next

• Wed Sep 16, 8 pm — Connector/Applier post in the shared doc
• Thu Sep 17, 12–1 pm — Sergii Glebov, Choi Auditorium; 1:20 — Glebov in class
• Tue Sep 22 — Week 5, Spin in Practice: Spin Dictators middle chapters; Miłosz, “Ketman”; Applebaum, “The New Propaganda War” (Atlantic, June 2024)
• Thu Sep 24 — Jason Bell in class; midterm question pool circulated

Per the course syllabus of record.