Dictatorship false path to prosperity

By Graham Cooke

Nouriel Roubini is an interesting character and it’s worth taking a look at the website of Roubini Global Economics www.roubini.com where he claims to understand and promote ‘the logic of the global economy’.

Professor Roubini is an economist pure and simple. Political and social issues do not concern him, except when they get in the way of his theories for economic growth, in which case they should be brushed aside.

As an example, one his writers currently argues that dictatorships have served Brazil well at times in the past - benevolent dictatorships admittedly, but the problem with that they inevitably end up serving the needs of the dictators and their cronies rather than the people over which their authoritarian rule is exercised. Something about absolute power corrupting absolutely.

China is certainly one major economy that would enthusiastically embrace Professor Roubini’s theories, while the professor himself is an unabashed admirer of the way the mandarins in Beijing conduct their affairs.

For instance, he predicts the Chinese yuan will usurp the United States dollar as the world’s reserve currency sometime in this century because of its large current account surplus, focussed government and few of the economic worries that the US faces.

He tends to overlook that its current account surplus is built on the backs of the low wages and appalling conditions faced by its lowest strata of workers – an average of seven miners die every day for instance – that allows it to flood the world market with under-priced goods.

The policy makes a few people very wealthy, promotes a strong middle class of several hundred million, while leaving perhaps half a billion others in conditions that a medieval peasant would recognise. Far from being the communist utopia, China today represents the unacceptable face of capitalism.

There might be more sympathy for a yuan-based world economy if the Chinese Government allowed it to float and find its own level, instead of being artificially pegged in order to ensure China's exports remain riduculously cheap.

Professor Roubini is known as ‘Dr Doom’ for his continuously bleak prognosis of the West’s economic health. What he fails to see are the social problems that China is storing up for itself by retaining an iron grip on its population and giving no outlet to the aspirations of so many of its people.

China is a pressure cooker with no safety valve. It is something the leadership will have to deal with in the years and decades ahead or face a social explosion of its own making.

Professor Roubini and his cohorts may be enchanted by dictatorships, but history demonstrates that dictatorships don’t last for ever, and often end in unpleasant circumstances.