Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Don't Let the Oligarchs Take Over

Written by johnleemk on 3:02:48 pm May 29, 2007.

One common criticism of many nascent capitalist societies is that they turn into oligarchies, with a select elite dominating the economy. This has led to the fallacious belief that capitalism is inextricably bound up with oligarchism.

One example of a society which has had problems with oligarchy after turning away from socialism and embracing capitalism is Russia. The situation is now so bad that many Russians would prefer socialism, where even though most would be poorer, at least putting food on the table would be easier.

But Russia's problems stem largely from corruption and a state that is unwilling to play the role it should play in a capitalist society. Russia has not become a functioning market economy because it is simply a non-functioning anarchy.

When the government can't even collect the taxes it is owed, you can tell it has a serious problem. Only the most deranged laissez-faire libertarian would call this a success.

Making matters worse is that the Russian government, especially under Putin, has been granting state monopolies to oligarchs and basically prevented the market mechanisms from working. Russia actually is run under something of a socialist system, except the beneficiaries of the state are the oligarchs instead of the people in general.

A similar problem has plagued many Latin American economies. Because their governments choose to embrace a pro-business instead of pro-market agenda, the economy functions almost the same as it would under a socialist society, except it is geared to enriching the rich instead of redistributing wealth.

There are of course examples of states whose economic failures cannot be attributed to such policies. Argentina is one example; it followed economic orthodoxy through and through, but still suffered from a series of wrenching economic failures.

There are normally other explanations for this, however. Paul Krugman, for example, has attributed the Argentinian problem to their policy of tying the value of the peso to the dollar; if their central bank could adjust the money supply to head off recessions, they would not be so hard hit.

When the market is allowed to work, as it is in Chile, the results are often incredible successess. Chile's economic policies were developed by economists from the temple of free market economics, the University of Chicago, and they are one of the few Latin American success stories.

The market is usually not at fault for an economic failure; if it seems like the consumer is not getting a fair deal, the answer may lie more in a suppression of the market.

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Infernal Ramblings is a Malaysian website focusing on current events and sociopolitical issues. Its articles run the gamut from economics to society to education.

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