Thursday, February 23, 2017

Which is worse, crony capitalism or crony socialism?

Writing for Bloomberg, Matthew A Winkler compares the economies of neighbors, Malaysia and Indonesia. Both have problems with their people. In Indonesia the Chinese Christian governor of Jakarta is facing allegations of blasphemy, while in Malaysia loans at low interest rates to native Malays maybe creating a debt bubble. With 30 million people Malaysia always enjoyed an economic advantage over Indonesia with 250 million people. No longer. Prime Minister Najib Razak faces charges of stealing $681 from the 1Malaysia Investment Fund, or 1MDB, of the government. This was "just a portion of the more than $3 billion that was stolen from 1MDB and laundered through American financial institutions in violation of US law," said the then Attorney General, Loretta Lynch. "Unfortunately and tragically, a number of corrupt officials treated this public trust as a personal bank account." As a result global investors are shifting business from Malaysia to Indonesia. Indonesian rupiah has strengthened 26% against the Malaysian ringgit since 2014, the Indonesian economy has expanded 0.71% faster than Malaysia since 2014, the Jakarta stock exchange has gained 287% in the last 10 years, compared to 95% of Malaysia and Indonesian government bonds have given a return of 100% since 2010, compared to 30% in Malaysian bonds. If Malaysia is an example of how crony capitalism harms the economy, what about crony socialism? Nobody knows how bad the economy of Venezuela is because the government has stopped publishing figures. "The central bank stopped publishing inflation data in December 2015, and gross domestic product hasn't been updated in more than a year. The finance ministry's last report on federal fiscal accounts was in 2013," wrote Mac Margolis. "The government doesn't even pretend not to hide the homicide rate, and the poverty rate is anyone's guess." As people starve the security forces shoot to kill on government orders. That makes President Nicolas Maduro a criminal who is hanging on to power by killing protesters, substituting judges with his cronies and arresting opposition politicians. Only when the army refuses to shoot citizens will he face justice, as happened to Ceausescu of Romania in 1989. Romania used to be a communist country and the old communist party is in power in its new avatar as the Social Democratic Party, or PSD. It tried to pass a law to legitimize corruption but was soon facing angry protests by tens of thousands of protesters. News of protests in Romania has been completely blacked out in India. Not one newspaper or television channel has reported it. Why? India is a land of scams so politicians do not like protests. India is a socialist country with lots of social schemes to win elections, and lots of very rich business people who are best friends with politicians. We are blessed with both crony capitalism and socialism. So lucky.

No comments: