Wednesday, May 20, 2009

Single party politics and economic stagnation

As part of outsourcing economic criticism in these hard times, I quote from Arnold Kling (on the libertarian economists' blog EconLog) about the possibility of a one-party America and the third-world economy it would bring (emphasis mine):

I am in the middle of reading Violence and Social Orders, by Nobel Laureate Douglass North, John J. Wallis, and Barry R. Weingast (NWW). The theme of the book is that political and economic development is part of the same process, which they call the social order. The developed world enjoys an open-access order, in which both politics and economics are highly competitive. The rest of the world is in a natural state, in which only the members of the governing coalition are fully free to own property, participate in the political process and—most importantly—form durable organizations.

The United States is currently taking a giant step backward in the direction of a natural state. NWW would say that we are still an open-access order. However, the importance of the rule of law is declining, and the importance of political connections to the elite is increasing. I think we will see this trend emerge much more strongly over the next decade, as it becomes clear that the Republican Party is not going to win another national election. Interest groups will lose hope in competitive elections, and instead they will focus on accomodating the Democrats, which in turn will consolidate the power of the ruling party.

In economics this leads to stagnation, as we shift from an economic system dominated by competition and change from the bottom up to a system of rent-seeking and centralized management. There will be less creative destruction and more redistribution.
His fellow EconLog blogger Bryan Caplan disagrees about the likelihood of America becoming a one-party state, but not the consequences if it did happen.

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