The Cold War revisited; elections and policy

Here’s a third-hand recommendation, with a hat tip to Economist’s View: an interesting Paul Krugman article on why capitalism “won” the Cold War. The thesis is this:

“Communism failed because of an inability to provide a sustaining reason for existance; only under crisis could it work…. [it] failed as an economic system because people stopped believing in it, not the other way around.”

The hybrid system of regulated capitalism alongside a centrally planned public sector dominates the modern world. As far as I can tell, a purely capitalist economy is equally difficult to find in history as a purely communist society; perhaps the hybrid reflects some natural impossibility of living at either extreme. The argument that some resources are best allocated, or some goals best achieved, by one mechanism and some by the other is a strong argument – though of course not one immune to counterpoint.

There isn’t a lot of big economic policy debate these days. The dominance of the hybrid system naturally pushes policy debate into a very small subset of all the possible economic policies. That’s not necessarily a criticism; you could, for example, blame either status quo lethargy or status quo satisfaction for containing the debate.

That makes the Krugman article a bedfellow of a recent mini-debate about whether elections matter for economic policy. Economist’s View also covered that one here; it seems to have kicked off with a Tyler Cowen article in the New York Times with the perfectly descriptive title “It’s an Election, Not a Revolution”.

Cowen says:

“This election is certainly important. But based on the historical record, it isn’t likely to result in a major swing in economic policy. Fundamentally, democracy is not a finely tuned mechanism that can be used to direct economic policy as a lever might lift a pulley. The connection between what voters want, or think they want, and what ultimately happens in the economy, is far less direct…. Shifts in economic policy are usually quite moderate.”

The Economist’s View cites a counterpoint from Kevin Grier:

“I see real differences. I don’t see McCain lifting the cap on FICA earnings. I don’t see McCain going for publicly created “green jobs”. I do see both of them “fixing” the AMT. I don’t see McCain as so anti-trade as Obama.”

I’m sorry, but I think I just went in to an apathy coma. Not to be too obnoxious, but if that’s the best we can come up with, I’m taking Cowen’s side all day long: the big questions are not asked. It could be a product of the political system, of apathy, of satisfaction, of something else entirely. Reflexive defense against attacks on the significance of democracy have grounds far larger than just economic policy, but it’s difficult to deny that, for better or worse, we won’t see any seismic shifts any time soon.

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