With the European Union mired in crisis and the United States struggling to recover, it’s easy to conclude that capitalist democracies’ engines of economic growth have run out of steam. While their elected politicians make myopic decisions to score political points, state capitalist leaders like China’s build infrastructure and plan for the long term. Is it time to admit the superiority of a new kind of economic system?
That’s the question many economic and political thinkers have been asking in the years since the global financial crisis began, most notably Ian Bremmer in his book, The End of the Free Market. And they’re asking with good reason – with voters going to the polls as often as every two years, politicians in democracies can’t seem to focus on anything except winning reelection. As a result, they neglect the long-term investments that could help their economies to grow; making those investments would incur costs today for benefits that might appear long after the politicians left office. Meanwhile, leaders of state capitalist countries from Singapore to Saudi Arabia stay in power for a decade or more, carefully guiding their economies through years of stable growth.
These distinctions are fairly obvious, but there’s one that’s a bit more subtle. A state capitalist government has zero accountability; unseating it requires a full-on revolution. By contrast, the frequent elections in democracies offer plenty of accountability. The problem in democracies is one of preferences. The voters themselves are shortsighted, so it’s no surprise that their leaders are as well.
If voters rewarded politicians who planned for the long term, then the economic policies of democracies would look very different. The genius of democracy is that this shift could occur without a costly change in the political system. Democracies can have it both ways – accountability and farsighted planning – as long as their voters are focused on the long term.
That’s not true of state capitalist systems, which will never be accountable to their citizens except in moments of national upheaval. Such upheavals can be devastating in the short term; they plague economies with uncertainty, reduce investment, and waste resources on unproductive activities like killing people. In other words, all that long-term planning could go for naught if your system lacks accountability. There are exceptions, of course: South Korea, Taiwan, and others have managed to shift from state capitalism to democracy in relatively peaceful ways. Yet for countries like China – where unrest is already manifest – the risk of upheaval remains.
In the meantime, the challenge for democracies is to become just as farsighted as the state capitalist systems that have drawn the world’s envy. It will be tough – factors ranging from our own narcissism to the increasing complexity of the global economy are making it harder to plan for the future. But while we try to bring about this small revolution in our thinking, the state capitalists may be dealing with a much bigger revolution of their own.