Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

Quarterly Journal of Economics, 1958, vol. 72, no. 2. For the ‘economic’ argument against ownership of ideas, see chapter 6.

29

Daron Acemoglu, the MIT economist, and James Robinson, the Harvard political scientist, put the same point in more academic language. They predict that democracy will become more widespread with globalization, as it will make democracy more innocuous. In their view, globalization is likely to make ‘the elites and conservative parties to become more powerful and democracy to become less redistributive in the future, especially if new forms of representation for the majority – in both the political sphere and the workplace – do not emerge. Thus, democracy will become more consolidated: however, for those who expect democracy to transform society in the same way as British democracy did in the first half of the twentieth century, it may be a disappointing form of democracy’. J. Robinson & D. Acemoglu (2006), Economic Origins of Dictatorship and Democracy (Cambridge University Press, Cambridge), p. 360.

30

A telling example in this regard is an opinion poll before the 2000 US presidential election which revealed that the most important reason cited by the respondents against either of the candidates was that he was ‘too political’. So many people rejecting someone who is seeking the biggest political office in the world on the ground that he is ‘too political’ is a testimony to the extent which the neo-liberals have succeeded in demonizing politics.

31

However, extension of franchise to poor people in European countries in the late 19th and the early 20th centuries did not lead to an increase in income transfer, contrary to what the old liberals had feared, although it led to reallocation of spending (especially towards infrastructure and internal security). Income transfer expanded only after the Second World War. For further information, see T. Aidt, J. Dutta, and E. Loukoianova (2004), ‘Democracy Comes to Europe: Franchise Extension and Fiscal Outcomes, 1830–1938’, European Economic Review, vol. 50, pp. 249–283.

32

See the literature reviews in A. Przeworski & F. Limongi (1993), ‘Political Regimes and Economic Growth’, Journal of Economic Perspectives, vol. 7, no. 3 and Robinson & Acemoglu (2006), chapter 3.

33

A. Sen, Democracy as a Universal Value, Journal of Democracy, vol. 10, no. 3, 1999.

34

One important dimension that we need to bear in mind when understanding the struggle for democracy in today’s developing countries is that universal suffrage now enjoys an unprecedented legitimacy. Since the end of the Second World War, selective franchising – once so ‘natural’ – has become simply unacceptable. Rulers now only have a binary choice – full democracy or no election. An army general who has come to power through a military coup d’etat may easily suspend elections, but he cannot declare that only rich people or only men can vote. Such heightened legitimacy has made it possible for today’s developing countries to introduce and sustain democracy at much lower levels of development than was the case with today’s rich countries in the past.

35

Technically speaking, the blacks in the southern states were disenfranchised not on the basis of their race, but on the basis of property and literacy qualifications. This was because the Fifth Amendment to the US Constitution introduced after the Civil War banned racial restrictions on voting. But they were effectively racial restrictions, as, for example, the literacy test was conducted extremely leniently for the whites. See H-J. Chang (2002), Kicking Away the Ladder – Development Strategy in Historical Perspective (Anthem Press, London), p. 74.

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Their corruption was such that the very definition of corruption was different from what prevails today.When he was accused of corruption in Parliament in 1730, Robert Walpole freely admitted that he had great estates and asked: ‘having held some of the most lucrative offices for nearly 20 years, what could anyone expect, unless it was a crime to get estates by great office’. He turned the tables on his accusers by asking them, ‘how much greater a crime it must be to get an estate out of lesser offices.’ See Nield (2002), Public Corruption – The Dark Side of Social Evolution (Anthem Press, London), p. 62.

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The index should be taken with a grain of salt. As the name makes it clear, it is only measuring the ‘perception’ revealed in surveys of technical experts and businessmen, who have their own limited knowledge and biases. The problem with such a subjective measure is well illustrated by the fact that the perceptions of corruption in the Asian countries affected by the 1997 financial crisis suddenly rose significantly after the crisis, despite having almost constantly fallen in the preceding decade (see H-J. Chang [2000], ‘The Hazard of Moral Hazard – Untangling the Asian Crisis’, World Development, vol. 28, no. 4). Also, what is perceived as corruption depends on the country, thus affecting the expert perception too. For example, in a lot of countries, US- style spoils disbursement of government jobs will be considered corrupt, but it is not considered so in the US. Applying, say, the Finnish definition will make the US more corrupt than is captured by the index (the US was ranked the 17th). Also, a lot of corruption in developing countries involves firms (or sometimes even governments) from rich countries paying bribes, which is not captured in the perception of corruption in the rich countries themselves. So the rich countries may be more corrupt than they appear, once we include their overseas activities. The index can be downloaded from http://www.transparency.org/content/download/1516/7919.

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The marked increase in corruption in post-Thatcher Britain, the pioneer of NPM, is a salutary lesson regarding market-based anti-corruption campaigns. Commenting on the experience, Robert Nield, a retired Cambridge economics professor and a member of the famous 1968 Fulton civil service reform committee, laments that ‘I cannot think of another instance where a modern democracy has systematically undone the system by which incorrupt public services were brought into being’. See Nield (2002), Public Corruption (Anthem Press, London), p. 198.