Global Terrorism and its types and prevention ppt.
Aligica & Tarko - Possible futures of capitalism
1. Center for Institutional Analysis and Development (CADI) workshop 2012
Possible Futures of Capitalism
Paul Dragos ALIGICA
Vlad TARKO
George Mason University, Mercatus Center
2. Outline
• A puzzle: regulatory capitalism VS. deregulation
• Taxonomy of capitalist systems
• Illustrations of recent historical developments (past
2 decades)
• Non-deterministic long-term history (past 3
centuries)
• What determines the direction in which capitalism
changes at the level of individual countries?
• Globalization and the interaction between state
capitalism and market-capitalism
4. The “Regulatory Capitalism” Thesis
• “…the neoliberal policy package of smaller
government, privatization and deregulation was
never an accurate way of describing what was
happening in the US or UK” (Braithwaite, 2005)
• We are in fact entering an era of “regulatory
capitalism”, “regulatory state” or a regulation-
centered political economy.
5. Number of regulatory agencies (RA) (left) and the
increase in the proportion of regulatory agency niches
filled (right) for 16 sectors across 49 nations, 1960–2002
(source: Levi-Faur in Braithwaite 2008)
7. Budgetary Costs of Federal Regulation,
Adjusted for Inflation
(source: de Rugy & Warren 2009)
8. Number of pages published annually by
the Federal Register per million people
450
400
350
300
250
200
150
100
50
0
1962
1988
1950
1952
1954
1956
1958
1960
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
(source of data: Office of the Federal Register)
10. Number of US states licensing
occupation, 1890 and 1950
in 1950 in 1890
Librarians 9
43
Miners 13
39
Midwives 14
38
Plumbers 17
35
Contractors 19
33
Insurance brokers 26
26
Dental hygienists 29
23
Surveyors 33
19
Real estate brokers 40
12
Funeral directors 40
12
Barbers 46
6
Veterinarians 48
4
Teachers 48
4
Physicians 48
4
Professional engineers 48
4
Embalmers 48
4
Dentists 48
4
Attorneys 48
4
Architects 48
4
Accountants 48
4
(source of data: Zhou, 1993)
11. Regulation of credit, labor and
business, United States
9
8.5
8
7.5
7
6.5
6
5.5
5
1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10 is maximum economic freedom, 1 minimum (source of data: Frazer Institute 2011)
12. Time required to start a business (days)
60
51.1
50
41.6
40
29.1
30
25.0
21.1
20 15.8 14.8 14.1
12.3
10 6 6 6 6 6 6 6 6 6
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Euro area United States
(source of data: World Bank)
13. Cost of business start-up procedures (%
of GNI per capita)
14
11.8 11.4
12
9.9
10
8.2
8 7.5
7.0
6.2 6.4
6 5.4
4
2 1.4 1.4
0.7 0.7 0.8 0.8 0.7 0.7 0.7
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Euro area United States
(source of data: World Bank)
14. The puzzle
• “Freer markets, more rules” (Vogel 1996);
“more capitalism, more regulation” (Levi-Faur
2005).
• An intriguing correlation between increased
regulation and smaller government (more on
this later)
15. Key idea for solving the puzzle
(perhaps)
• Why do governments create independent regulatory
agencies (IRAs)?
– Commitment problem with respect to the long-term
preservation of the regulatory environment
– Politicians need to solve this commitment problem in
order to attract campaign contributions and lobbists
• Regulatory capture problem:
– Instead of capturing politicians special interests can
capture the (quasi-)independent regulators
• Complex dynamic between general
public, politicians, IRAs, and special interests.
17. Taxonomy of economic systems
• Criteria of classification
• Combinations of criteria lead to mapping the
possible (theoretical) systems
• Fitting actual cases on the conceptual map
• Classification => stage theory of historic
transitions
19. Classification criteria
• Number of services provided by the state
– Few
– Medium
– Many
• How regulated the market is:
– Deregulated
– Some regulation (regulation that preserves
competition, albeit in diminished form)
– Strong regulation (favored statuses to firms, monopoly
grants)
20. Classification of economic systems
Number of services
provided
Small number of state Medium number of
by the Many state services
services state services
Type of state
Intervention
Minimal regulation of Free-market
market participants capitalism Neoliberalism Provider state
(deregulation) (Classical-liberalism)
Regulation of activities
Interventionism Regulatory capitalism Welfare state
of market participants
Favored status
(monopoly grants) to Corporate or State
Mercantilism Socialism
certain of market capitalism
participants
22. Operationalization based on the
Heritage index
• Number of state services:
– Size of government: fiscal freedom, government
spending
• How regulated the market is:
– Openness of markets: trade freedom, investment
freedom, financial freedom
– Regulatory efficiency: business freedom, labor
freedom, monetary freedom
23. Operationalization
Size of gov. < 20 20 < Size of gov. < 50 50 < Size of gov.
Free-market
Open of markets >80 capitalism Neoliberalism Provider state
(Classical-liberalism)
Open markets < 80
Interventionism Regulatory capitalism Welfare state
Regulatory eff > 70
Open markets < 80 Corporate or State
Mercantilism Socialism
Regulatory eff < 70 capitalism
32. Stakeholders mapping: Three actors
model
• Actors:
– General public
– Dominant corporations (corporations with large
market share)
– Government
• Each have a distinct preference about the
structure of the economic system.
• The outcome depends on their relative power.
33. Rent-seeking analysis: Who benefits
from the economic system?
Opportunities for
regulatory capture
Free-market
Small capitalism Neoliberalism Provider state
(Classical-liberalism)
Large, small risk Interventionism Regulatory capitalism Welfare state
Corporate or State
Large, high risk Mercantilism Socialism
capitalism
34. Rent-seeking analysis: Who benefits
from the economic system?
(Which one you pick depends on your assumptions about the efficiency of
Opportunities for government provided services)
regulatory capture
Free-market
(Small)
capitalism Neoliberalism Provider state
The public benefits
(Classical-liberalism)
(Large, small risk)
Regulatory
The dominant Interventionism Welfare state
capitalism
corporations benefit
(Large, high risk)
Corporate or State
The government Mercantilism Socialism
capitalism
benefits
35. In what direction is the economic
system moving?
Type of political Direction of
Examples
system economic system
Australia, Ireland,
Free-market capitalism
Democracies with Canada, Switzerland
Neoliberalism
high transparency Britain, Netherlands,
Provider state
Sweden
Democracies in which
United States, France,
special interests are Regulatory capitalism
Germany, Japan
powerful
Autocratic regimes
where governments
State capitalism Brazil, China, Russia
can afford
protectionism
36. How do systems interact?
STATE CAPITALISM AND
GLOBALIZATION
37. What is “state capitalism”?
• “A system in which the state functions as the
leading economic actor and uses markets
primarily for political gain” (Ian Bremmer, 2009)
• More specifically:
– There is a free-market in consumer goods, but a
heavily regulated market in production goods
(“commanding heights” thinking).
– Government-owned enterprises operate on the
international or domestic markets with the purpose
of increasing govt. revenues.
38. The Economist, January 2012
“The crisis of liberal capitalism has been rendered
more serious by the rise of a potent alternative:
state capitalism, which tries to meld the powers of
the state with the power of capitalism. It depends
on government to pick winners and promote
economic growth. But it also uses capitalist tools
such as listing state-owned companies on the
stockmarket and embracing globalisation.”
39. Allan Meltzer, Why Capitalism? 2012
“The high tide of multilateral trade agreements to reduce barriers
to trade is probably past. Currently, the best future hope is that
the US and the EU won’t step up trade restrictions to
compensate for foreign labor and environmental
practices, …, and that China will stop subsidizing or giving other
advantages to Chinese firms. Both seem a vain hope. Trade
protectionists and nationalists everywhere seem eager to end the
regime that brought 60 years of global expansion and rising
living standards.”
40. Our thesis
• The rent-seeking theory of state capitalism =>
state capitalism is nothing but a modern form of
mercantilism
• One can understand state capitalism and project
its potential evolution based on what we know
from previous rent-seeking societies.
41. Classical perspective on mercantilism
“[M]ercantilists, whatever the period, country, or status of the
particular individual, would have subscribed to all of the following
propositions:
(1) wealth is an absolutely essential means to power, whether for
security or for aggression;
(2) power is essential or valuable as a means to the acquisition or
retention of wealth;
(3) wealth and power are each proper ultimate ends of national
policy;
(4) there is long-run harmony between these ends, although in
particular circumstances it may be necessary for a time to make
economic sacrifices in the interest of military security and
therefore also of long-run prosperity.” (Vinge 1949)
42. The rent-seeking thesis: An incentives
driven perspective
• The best way to understand mercantilism is the
“rent-seeking society” theory (Ekelund &
Tollison).
• Real socialism was also a form of mercantilism
(Boettke & Anderson).
• Our thesis: State capitalism merely continues
real socialism in a slightly more liberalized form.
• Family of systems (mercantilism, real socialism,
state capitalism): rent-seeking societies.
44. At the level of individual countries
• The future of capitalism depends on the balance
of power between the general public, the
dominant corporations, and the state.
• Deregulated economies (be they free-market
capitalist, neoliberal or provider states) are the
outcome of transparent and competitive
democracies.
45. At the globalized level: the impact of state
capitalism is uncertain
• State capitalism looks a lot less impressive once
we see it as a form of mercantilism
• Mercantilism has already lost twice against market
capitalism
– The 19th century emergence of liberal capitalism
– The collapse of real socialism in 1980s-1990s
• However, the future of state capitalism ultimately
depends on whether a viable free market
alternative system is actually provided – i.e. do
liberal capitalist countries preserve their system?
46. Implications for globalization
• The current mix of market
capitalism, regulatory capitalism, crony
capitalism, and state capitalism is clearly an
improvement in the global economy mix from
the Cold War past divide.
• However, the bigger interdependence introduces
new and larger inefficiencies within the market
capitalist systems.
• This creates the temptation for protectionism.
47. Bremmer’s and Meltzer’s warnings
against protectionism hold
• “In order to ensure that the free market remains the
most powerful and durable alternative to state
capitalism” liberal democracies should be “leading
by example in promoting free trade, foreign
investment, transparency, and open markets”
(Bremmer).
• “Trade protectionists and nationalists everywhere
seem eager to end the regime that brought 60 years
of global expansion and rising living standards. This
is a major change in the international landscape. It
threatens the main source of higher living standards
everywhere.” (Meltzer)