Orwell’s Rule for Economic Prosperity

I like the Americanism which says, “Good, fast, cheap: Pick at most two.” There is some overlap between any pair of the three but there’s no overlap between all three. Good and fast won’t be cheap; fast and cheap won’t be good; and good and cheap won’t be fast.

With regards to economic prosperity, I have something similiar to that “good, fast, cheap” rule. I call it “Orwell’s Rule for Economic Prosperity” which says “Rules, Leaders, People: Pick at least two.” If a country has good rules, good leadership and good people then its prosperity is guaranteed. That much is clear. But at the very least, you must have two of the three to have any hope of being prosperous.

Rules are very important. Countries differ in all sorts of ways that are salient in various contexts but when it comes to economic properity, rules make the difference. Rules that deny people freedom are bad rules.

Good leadership matters. Deng Xiaoping rescured China from the calamity  it was because of Mao Zedong’s disastrous leadership. A country that is cursed with poor leadership is usually a basket case. More about leadership in a bit.

Then there’s the people. If the people value virtue, freedom, honor and responsibility, and are industrious, honest and just, then they are likely to be prosperous. That’s the influence of culture and history on properity.

I think a country has to have at least two of the three — right rules, competent leaders, good people — for it to have a shot at prosperity. Of course, they are not all independent variables. Rules are generally made by the leaders; leaders are chosen by the people; and people determine their culture as much as they are molded by their culture.

As you may already know, I believe that it’s the constitution of a country that profoundly determines how the economy turns out. But we have to remember that a constitution is a piece of paper with words on it. If the people don’t have respect for the ideas encoded, it’s not worth the paper.

Still the three variables are not rigidly tied and there’s some residual degree of freedom among them. I like the example of Lee Kuan Yew’s Singapore. Right rules and competent leadership. It mattered little whether the people were good or not; Singapore advanced. Same with Hong Kong. Rules made  and administered by the competent British administrator Cowperthwaite, and Hong Kong worked like a charm.

The US at its founding had great leaders and the crafted the best rules imaginable at that time. From an insignificant little European outpost in North America, it became the greatest nation the world has ever known.

I have always maintained that good leaders are a matter of luck. It’s a random draw. If you draw too many poor hands, you lose regardless of how good a player you are. More strictly, if you draw too many consecutive poor hands, you lose. I like a story Rory Sutherland told Russ Roberts in an EconTalk episode that illustrates the point. Here’s a slightly edited version:

There’s a guy called Francis Fulford. His family have occupied the same 10,000 acres in Devonshire that was given to them in something like 1240. And he’s inherited this, and the family still owns it, and they still own the house there by direct descent over about 800 years. And they asked him how on earth he’d managed this achievement. And he points up to the ancestral portraits and says- “Well, if I go back to my ancestors, we’ve had loads of idiots. We’ve had drunken idiots, we’ve had gambling idiots, philandering idiots, idiots who get in prison for treason. But we’ve never had two in a row.

If you have an idiot for a leader once in a while, the enterprise continues to survive because the damage done by the occasional idiot is repaired by the good leaders. But if you have idiots in a row, it spells disaster.

India has had the misfortune of bad rules — the one’s that were right for British colonial India but totally wrong for a free country. Then there was the problem of a continuous series of idiot leaders — Gandhi, Nehru, Indira, Rajiv, Singh (Maino’s proxy), and epitomizing in concentrated form the worst aspects of the entire lot of previous worthless leaders is the current fellow.

Orwell’s Rule is harsh. India never had a chance.

 

 



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