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Tue. October 23, 2018
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'Authoritarian Capitalism' – Where and How Workable, Long Term?
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By Jack Pearce

In two recent editorials I dealt with generic requirements for a long term globally sustainable ecumene ('No More Foreign Affairs') and the problem of wasteful, inefficient and even cruel internal structuring of an antique form of State which possesses a resource economically significant in the geoeconomic webwork (currently, oil) ('Does the World Need a Trusteeship for Saudi Arabia?')

Recently Slavoj Zizek, in a piece in the Financial Times (February 1, 2015) posits that Capitalism has decoupled from democracy, and flourishes in both democratic and authoritarian regimes. He seems to hold up Singapore as an example of a newly successful paradigm of authoritarian capitalism. He also seems to jumble concepts of how communitarian undertakings and capitalism may coexist.

On its face, it seems obvious that markets and capitalistic forms of enterprise can penetrate, or be used by, State structures now termed authoritarian. However, at least three issues lurk under the surface.

The first is parasitism within the State organization. Russia, for example, is notorious for this. Those controlling the instruments of the State funnel capital and economic opportunity to a coterie of power sharers and control sustainers. The result is economically suboptimal, and socially corrosive. Ukraine has had a similar problem, and seems to be trying to escape from it, much to Russia's dismay.

China has the same problem. It's collective, committees, and leadership seem to be attempting to address this problem, with its publicized campaigns against corruption. One hears the claim that the committee-tier mechanism may be more efficient than electoral systems in funneling talent to the upper tiers of governmental coordination mechanisms. If this were so, the issue of then constraining avarice in the talented overseers would remain.

The second major issue is the allocation of capital to what we characterize as economic possibilities. One may think of money, finance, and capital as mechanisms of energy control and allocation.

In robust, efficient capitalistic systems, economic enterprises compete both in soliciting capital, and also in employing capital in economic endeavors in competitive settings. Those economic units which configure their systems well enough to meet economic needs more efficiently yield higher returns on the capital – energy – employed than those which do not, and thus are more successful in attracting capital – and thus, energy, and thus wealth and structure. The net result of this dynamic, continuing process is, or can be, an ongoing close match between resources and needs, capital (energy) flows and returns to those energy flows.  This is both the essence and the utility of market capitalism.

One of the complaints about authoritarian resource allocations, whether by a single head of State or by committee (in China also highly visible at the province and local levels of government bodies) is that they often poorly match collective ambitions and economic possibilities, and thus do not yield optimal returns (e.g.,Venezuela).

Democratic politics are not totally exempt from the issue of collective or political allocation of the benefits of economic activity.  In the U.S. and other countries, regulatory systems have been devised to allocate economic activity by political calculus. In the transport sector, for example, such regulations became effectively bankrupt over time, conceptually and in observable inefficiency.  They were abolished in the United States and diminished elsewhere. Other deregulation activities in the latter half of the 20th Century were designed to allow market forces more room to operate. 

More broadly, in democracies the urge governmentally to allocate economic goods and services that are perceived to be basic to life is a perennial issue (e.g., food stamps and healthcare). But this differs somewhat from collective kleptocracy at the top.  Autocratic organizations may suffer both from kleptocracy and from allocations of resources designed to keep the populace appeased, or bought off; notwithstanding inefficiencies obvious from outside the polity.

The third major issue with the image of authoritarian capitalism bounding ahead is that the constraints on citizen communication and critique of the ruling entities makes the first two problems worse. Those constraints are designed to hide parasitism, and they result in failures to discriminate well between productive and nonproductive allocations of resources. 

The world endures Moscow's antics and awaits long term results from China's experiments. Both Russia and China showed impressive results in recent decades.  But Russia is looking less impressive these days. China is larger and more energetic currently but we will see more about China as it matures. 

For more general context concerning these issues, inquiries into complex dynamic systems indicate that all dynamic systems, or structures, involve both constraints and degrees of freedom. The more complex the system, the more permutations, or combinations, of relational constraint and relational variation per unit of time.

Consider the human body with its complex, interconnected systems.  In political matters, we recognize some of this sort of combination of energy flows and enabling structures when we talk about 'ordered liberties' -- as in laws and liberties, coexistent and complementary.  Our Western democracies, or at least the United States, probably tend to overemphasize our freedoms, without recognizing as fully the requirements of collective action. Recent interplay between Democrats and Republicans evidence some tensions between different preferences between freedoms and communal requirements. But who doubts we have both?

Biological evolution has produced a considerable range of complexity in surviving organisms. Political evolution has also.  There is considerable variation in political form and function extant on this globe today. Thus, in international, or global, terms, the competition between States as a whole, and between different combinations of constraint and competition, centralization and decentralization, continues. Indeed, the competition between States and between models may moderate the foibles of each model. 

So Zizek is correct in asserting that history -- the experimentation with various state organization structures -- has not ended. 'Mixed' models of authority and markets do persist and compete. Who would currently doubt this?

But if one takes into account the total mass of persons and economic activity in the more-democratic and more-authoritarian camps, and the considerations of basic organizational requirements here reviewed, I would not bet that 'authoritarian capitalism' as now generally practiced has won, is winning the day, or sweeping the board in the 21st Century to date.

Jack Pearce has served as Assistant Chief of United States Justice Department’s Antitrust Division's ‘Public Counsel and Legislative’ Section, Assistant General Counsel of Agency for International Development with responsibilities in Near East, South Asia sector, National Insititute of Public Affairs fellowship at Cornell, Deputy General Counsel, White House Office of Consumer Affairs, law practice relating to pro-competitive regulatory reform, and innovator of virtual office system for attorneys and others.

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