The problem

by on January 13, 2011 at 1:31 pm in Economics, Political Science, Religion | Permalink

Via Bob Cottrell:

"This is the place," he says. "The economy is booming and there's a real vibe. My son and I went to Ukraine recently and everyone was saying to us: 'Can we have the Belarus president in charge here for a year?'"

It's not difficult to see why. Unlike Ukraine and Russia, Belarus's economy is not dominated by billionaire oligarchs. There is no underclass: according to UN figures, Belarus has one of the lowest levels of social inequality in the world. Lukashenko wins elections not through fear, but because he has delivered social protection and rising standards of living. Growth now stands at 7 per cent.

The danger, some feel, is that a move towards a more market-oriented economy will destroy these achievements, and leave Belarusians sharing the same bitter-sweet jokes as their fellow eastern Europeans.

The full article is here.  But look here for per capita income:

Belarus: $1248.60 per person (update: correction here)

If you want proof that F.A. Hayek is a brilliant and important thinker, there it is.  On the brighter side, not everyone lives in Belarus.  

Fact Check January 13, 2011 at 10:28 am

The un-sourced web page that you grabbed that stat from probably isn't the best place to go looking for data. The World Bank, IMF, and CIA all place Belarus at a much higher PPP-adjusted per-capita GDP (=GDI). Notably, all three have Belarus far ahead of Ukraine and other comparable but more market-liberal eastern European countries:

Wimivo January 13, 2011 at 11:01 am

According to the CIA World Factbook,

Russia – $15,100 per capita GDP, 15.8% below poverty line, Gini-coefficient 53th most equal in the world

Belarus – $12,500 per capita GDP, 27.1% below poverty line, Gini-coefficient 11th most equal in the world

Ukraine – $6,300 per capita GDP, 35% below poverty line, Gini-coefficient, 105th most equal in the world.

Also, Sweden, Norway, Luxembourg, Germany, Austria have something to say about the whole "low Gini-coefficient, low income" thing you seem to be suggesting.

Woofcat January 13, 2011 at 2:00 pm

I realize the New Statesman is a socialist magazine, but surely that article is a joke? Nobody who's ever been to Minsk would dream of calling it a "booming" city, and even the most epistemically closed minds would have trouble explaining why Lukashenko "wins elections" without chortling.

Bernard Guerrero January 13, 2011 at 2:31 pm

"I have seen the future and it works."

Dave Barnes, +1. Good Lord but people are consistent in their foolishness.

Chuck January 13, 2011 at 2:57 pm

So the idea is that they are happy but they are fools because they don’t make all that much?

Sometimes I feel like the points libertarians make are always inside ‘jokes’ – something you only get if you are already in the clique.

Here’s what I take away – they are happy with how things are going. (I don’t see any info indicating that this is not true…)

Am I missing something? Is that the point? What is the role of Hayek here?

Flip the coin over – libertarians are frequently saying that America’s poor should be happy to be poor in America cause they are still richer than everyone else they’ve never met…

Blackadder January 13, 2011 at 3:24 pm

Also, Sweden, Norway, Luxembourg, Germany, Austria have something to say about the whole “low Gini-coefficient, low income” thing you seem to be suggesting.

I believe the connection Tyler was drawing was “less markets, lower income.”

I have not been to Belarus, but I did know some Belorussians when I was studying in Poland in 2004. Their description of life in Belarus was, shall we say, at odds with that given by Mr. Clark. On the other hand, when western journalists travel to authoritarian countries and come back praising how well things work, these assessments never ever turn out to be inaccurate. So I guess we have to take Mr. Clark’s word for it.

Dave Barnes January 13, 2011 at 3:32 pm

I have seen the future and it works.

8 January 13, 2011 at 4:18 pm

The young people don’t want to stay and they already have bad demographics.

ohnopirates January 13, 2011 at 4:39 pm

“How could I have known that I was off by an order of magnitude!!!!????”

I, like a previous poster, am left to wonder if libertarian comments are some sort of inside joke. Is the fact that their per capita income is lower than another nation some sort of criticism in and of itself?
Wouldn’t factors like standard of living and happiness, both of which, from the report (whether true or not, it is the basis of Tyler’s “problem”) are much higher than in similar areas…

RD January 13, 2011 at 8:30 pm

I didn’t get the cryptic reference to Hayek either.

Serghei Zagaiciuc January 14, 2011 at 12:32 am

I live in Moldova, which is the poorest country in Europe and also one of Belarus neighbours. I can say that the absolute majority of my fellow citizens would change the democracy and more or less free elections we have now to a Belarus style dictatorship.

Belarus works great at redistributing available resources, it does incredibly well at public goods, i.e. it has one of the best roads and medicine in the region. Maybe you won’t see so many Bentley’s in Minsk as you’d see in Russia, Ukraine and even Moldova, but most people don’t have money to buy Bentley’s anyway. I really believe that lower Gini makes people happier than high Gini+high GDP, and I also believe that Mr. Lukashenko is indeed popular in his country to win free elections.

He would probably even win free elections in many of the neighbouring countries too.

Sergey Kurdakov January 14, 2011 at 1:40 am

The story of Belarus is really has different meaning.

1) Belarus has the one hightest growth ( higher than in Russia ) in former USSR countries since 1990s.
2) Since Lukashenko is in power – Belarus has very good growth figures ( before him market reforms made a huge plunge in level on income ).
3) the most intresting side – that one of well known liberal economist was invited to preesidential administration to discuss future liberal economic reforms.

I cannot say much about how Hayek relates to the story of Belarus, but what happened in Belarus shows – that what happened in former USSR actually could be less harmful to it's population if there was not push for 'what Hayek said' and yet, in the end – move these economies to be free and well functioning.

I cannot see how intentional humiliation of people( for example having uni degree with honors I had to be a street seller for few years to feed myself, Lukashenko shows – there was no need in such experiments ), putting wealth of country into hands of few oligarchs is better, than what Lukashenko does. As in the end – Belarus would be most developed and prosperous market economy in former USSR.

Tyler is exceptionally erudite and intelligent person, whom I read with great respect, but I hardly see, how in spite of facts ( that life in Belarus is no worse than in Ukraine or most of Russia (except oil derived income recipient regions, including Moscow ) ) it goes that Hayek is relevant here ( even with amendment ).

Chris Durnell January 14, 2011 at 8:03 am

Some very important things are being left out.

First, Belarus is completely dependent on energy subsidies from Russia. Not only does that cheap energy allow Belarus' inefficient industries to keep going, it also provides hard currency because Belarus can sell its subsidized Russian gas for market prices. Without that subsidizaton, Belarus would be in a very difficult situation. So the benefits that Belarus enjoys has less to do with Lukashenko, and more to do with being given free energy. I'm sure lots of countries could do well if they too were given free energy. At some point, reality will catch up, and Belarus will then pay the transition costs to a modern economy at that time.

Second, one can admire "stability" in another country from one man rule as long as the hammers are only crushing someone else's skull, and not yours. Belarus, Ukraine, and Moldova have all seen mass protests against the government, but only in Belarus has it ended in violence and repression.

Much of Ukraine's instability is not a result of democracy per se, but reflects the struggle between ethnic Ukrainians who want to integrate with the West, and ethnic Russians who want the country to be aligned with Russia.

I'm very surprised by the Moldovan comment by Serghei as except for very recently, Moldova was more or less ruled by the Communists for most of its independence (albeit they were freely elected) and power did not change hands. It's only recently that they have lost power. To me, that indicates that people wanted to change the government, which would not have been possible in a Lukashenka style dictatorship. I'm fairly confidant that Moldovan politics will continue to mature and integrate into the West. Democracy had very little to do with Moldova's economic collapse. If Moldova had gotten free energy, I'm sure its inefficient industries could have continued to be maintained. Instead, it has paid the transition costs to a modernized economy and is creating real wealth. Its future is much brighter than Belarus'. If it was not for the issue of Transdniester, Moldova would probably have already been integrated into the West and be more like other eastern European members of the EU which would be far better than anything comparable to Belarus or Ukraine.

Justin January 14, 2011 at 12:41 pm

Yeah I’m glad others were just as confused by the reference to Hayek.

Are you trying to say that Authoritarian capitalism works?

I don’t think too many people would disagree at least for a while, but the real question for me is about freedom.

Democracy doesn’t claim to be efficient and this is where the often mentioned link between captialism and democracy for me breaks down.

Yes they often go together, but they don’t have to.

Democracy is about being governed in a legitimate way, not about economic growth.

Sergey Kurdakov January 14, 2011 at 4:05 pm

to Chris

I would repeat again. Lukashenko is not against economic freedom ( though he did not implement any meaningful reforms ), and even amount of state ( about 55% of the economy ) is on the same level as in Denmark and there are signs that he might go into radical reforms ( he might not, but still he very probably could ).

I have friends in Belarus who have IT companies. what I can say – they are quite happy as Lukashenko patronages such kind of activity ( but still I know that my friends express their uneasy with him being too ‘peasant-like’). I also know people who emigrated from Belarus to Germany or to Canada ( most favorite places of emigration for them as far as I know ) .

But most important – is that Belarus economy is more dynamic than Russian one, is less dependent on natural resources and this situation is about to keep. It is not theory it is a reality.

It is like Mises once wrote on those who measure angles in triangles insisting that those should be idiots, still it is what was done by astronomers – after they measured angles in space triangle they concluded that space could not be described with Euclidian geometry. And I could point out – that not astronomers are idiots.

And I see the existence of Belarus regime as important set of angles in triangle for miseans. For that they did not take their ‘theorems’ for having much of real meaning.

Of cause – free economies and democracies are stable and relatively prosperous.

But Belarus will be there. It is just what most of people with your point of view does not want to see. But you will see in future.

It is just because of experience.
It is better to have peasantly minded leader, that live in almost fascist state like russia – there are more formal freedoms, but much more manipulations in public information space, and other vices. Of cause it is even more better to live in a country like Estonia, but if to select what is better and which country has better future – modern Belarus or modern Russia – I would put my vote on Belarus, the same goes for Ukraine ( I have friends there too and know something about them too ) I think that Belarus is a way ahead despite being autocratic.
And when there is an experience – then logical conclusions that autocracy is always worse looks a little bit different.

I hope that someday this would have a simple but understandable explanation, so that people like you would not make decisions which among other things ( due to consultants and ideological pressure which ussr had from outside ) affected that russia went not a ussr/belarus style of development ( it was possible in 80s ) but actual russian way. And again – it was much worse for most of population than the way Belorussians passed and will go in future.

Sergey Kurdakov January 15, 2011 at 5:07 am

to Tom:

there are two factors to take account 1) chernobyl and decisions of parents to have children in contaminated areas 2) in 91-95 they had a democratic government which made all the ills, since Lukashenko come to power he was just fixing the things which left from initial leaders of Belarus.

to the one who looks into statistics it is int interesting that most successful economies were those which changed soviet system just a bit – Belarus and Uzbekistan ( they are both not most rich, but both showed most relative growth ) – and again, it is what to think about – and not to blame those, who thinks that there is something in observed facts besides commonly accepted dogma.

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