Comparative Political Economy

Free-marketers often point to the varying success of pairs of countries -- the United States vs. the Soviet Union, West vs. East Germany, Hong Kong and Taiwan vs. China -- to illustrate the benefits of markets over planning, regulation, and socialism. Some even point out the closer but real differences in GDP per capita between the United States and Western Europe. In his 1984 book Endless Enemies (p. 380) Jonathan Kwitny added the less familiar pairs "Morocco versus Algeria, Malaysia versus Indonesia, Thailand versus Burma, Kenya versus Tanzania." Now Rama Lakshmi reports in the Washington Post that we can see the results of two systems of political economy in one country:

It didn't take long for the first athletes arriving in New Delhi last week for the upcoming Commonwealth Games to catch a glimpse of modern India's two faces.

Their gateway to the country was the capital's gleaming new international airport terminal, built by a privately led consortium and opened in June four months ahead of schedule.

But the official wristbands that the visitors were handed at the airport turned out to be an emblem of India's famous red tape and government inefficiency. When the teams reached the athletes' village, the police guarding the facility refused to recognize the IDs, saying that the Games Organizing Committee had not sent the required authorization order.

The jet-lagged athletes stood about under a tree for hours with their luggage, calling their embassies for help, and the problem was not finally resolved for four more days.

To observers, the incident illustrated more than just the well-documented sloppiness that has marked India's preparations for the Games. It also underscored the gap that has emerged between a government rooted in a slower-moving, socialist era and a private entrepreneurial class that is busy building global IT companies, the world's largest oil refineries and spectacular structures such as the $2.8 billion airport terminal.

"It is about two aspects of the India story," said Rajeev Chandrasekhar, an entrepreneur and member of Parliament. "India's private sector has been exposed to competition and therefore has developed capability. Accountability is firmly built into the entrepreneurial mind-set. But the government structure is a relic of the colonial past and continues to plod along."...

For the Delhi [airport] project, [Grandhi Mallikarjuna]Rao said, his company worked with 58 government agencies.

"Our nation is in the process of transition from a command-and-control economic system to a more efficient market-driven structure," he said. "It will take some time till this transition is complete."

Given all this history, the interesting question is why some people in the United States want to continually transfer such vital functions as energy and health care from the competitive, accountable, capable entrepreneurial sector to the slower-moving, plodding, command-and-control bureaucratic sector. (Of course, the already-government-influenced health care and energy industries are not the most entrepreneurial sectors of the economy. But as the examples above demonstrate, even imperfect markets work better than government direction. Nor are the government-run local schools very competitive or accountable, but they are more so than they will be under tighter federal control.)