Submerging Economies

Mixing politics with economics is like mixing whiskey with wedding chapels. The results can be embarrassing (just look at Saipan’s mess!).

Consider this dingbat myth: Democracies and free markets are somehow necessarily the same thing.

Well, they’re not. Democracy is a political concept, pertaining to how a government is selected. Free markets are an economic concept, pertaining to systems in which individuals retain rights to own and exchange labor, capital, and land. There’s nothing that says that ownership and exchange rights will exist in a democracy.
Many democracies in Europe, for example, are socialist, in which governments, not individuals, hold the economic cards.

The prosperity-follows-democracy myth is easy to debunk if we look at the world’s two most populous nations, China and India. These two countries account for about one-third of the world’s total population.

Did democracy put India on the road to wealth? Hardly–the nation instead opted to roll in the economic gutter. India’s per person economic output (“Per Capita Gross Domestic Product”) is a wretched $387 per year. I don’t have the data to boil that down into average wage rates, but I suspect something like 40 cents per hour would be close to the mark.

China, meanwhile, is not a democracy, and has a per capita GDP of $738, which isn’t anything to brag about, but it’s about twice what India’s is. And the gap is widening: China’s economy is growing faster than India’s is (8.3 percent vs. 5.8 percent per year, respectively).As an aside, you’ll note that a Chinese worker making the minimum wage in

Saipan makes almost ten times China’s per capita GDP every year. If you were to make the equivalent of ten times the U.S. per capita GDP this year, you’d pull down a cool $299,500. (With that kind of money, you could afford to occasionally take newspaper columnists to dinner at the Aqua Resort Club, don’t you think?)

Turning from money to mortality, life expectancy in China is fully nine years longer than in India, where at 62 you can expect to be buried before your first retirement check ever arrives– assuming, of course, that you can ever retire on 40 cents per hour.

Would China’s economy be bigger if the country was a democracy? If the democracy led to freer markets, then sure. And, in China’s case, I suspect that would happen, given that Taiwan and Singapore–which are largely ethnic Chinese–are such economic success stories.

But for many democracies, where endemic corruption and mob envy rule the roost, free markets don’t stand a chance. Human nature can’t be escaped: The globe’s teeming hoards are not inclined to study economics before forming opinions on the subject. Superstition is a more common denominator than thought is.

A few economies have managed to resist the entropy of mob dynamics, but they are the exceptions, not the rule. Wealth–its creation and its preservation–will remain concentrated in the few corners of the earth where thoughts and deeds are on a plane higher than gutter level. This fact has startled a lot of people lately, who have wondered why so many “emerging” economies demonstrated a penchant for self-immolation, burning a lot of investors in the process. They’re learned the lesson the hard way: Confusing politics with economics is playing with analytical fire.