Bad Samaritans

Markets have a strong tendency to reinforce the status quo. The free market dictates that countries stick to what they are already good at. Stated bluntly, this means that poor countries are supposed to continue with their current engagement in low-productivity activities. But their engagement in those activities is exactly what makes them poor. If they want to leave poverty behind, they have to defy the market and do the more difficult things that bring them higher incomes—there are no two ways about it.

Countries are poor not because their people are lazy; their people are 'lazy' because they are poor.

Gore Vidal, the American writer, once described the American economic system as 'free enterprise for the poor and socialism for the rich'. Macroeconomic policy on the global scale is a bit like that. It is Keynesianism for the rich countries and monetarism for the poor.

As water flows from high to low, knowledge has always flowed from where there is more to where there is less. Those countries that are better at absorbing the knowledge inflow have been more successful in catching up with the more economically advanced nations. On the other side of the fence, those advanced nations that are good at controlling the outflow of core technologies have retained their technological leadership for longer. The technological '', between backward countries trying to acquire advanced foreign knowledge and the advanced countries trying to prevent its outflow has always been at the heart of the game of .

History shows that, at earlier stages of economic development, corruption is difficult to control. The fact that today no country that is very poor is very clean suggests that a country has to rise above absolute poverty before it can significantly reduce in the system. When people are poor, it is easy to buy their dignity—starving people find it difficult not to sell their votes for a bag of flour, while under-paid civil servants will often fail to resist the temptation to take a bribe. But it is not just a matter of personal dignity. There are also more structural causes.

The foundation of economic development is the acquisition of more productive knowledge.

The historical picture is clear. ing was not invented in modern Asia. When they were backward themselves in terms of knowledge, all of today's rich countries blithely violated other people's patents, s and copyrights. The Swiss 'borrowed' German chemical inventions, while the Germans 'borrowed' English trademarks and the 'borrowed' British copyrighted materials—all without paying what would today be considered 'just' compensation.

Corruption exists because there is too much, not too little, market.

Unlike what neo-liberals say, market and democracy clash at a fundamental level. Democracy runs on the principle of 'one man (one person), one vote'. The market runs on the principle of 'one dollar, one vote'. Naturally, the former gives equal weight to each person, regardless of the money she/he has. The latter give greater weight to richer people. Therefore, democratic decisions usually subvert the logic of market.

Democracy is acceptable to neo-liberals only in so far as it does not contradict the free market.

Rich countries have 'kicked away the ladder' by forcing free-market, free-trade policies on poor countries. Already established countries do not want more competitors emerging through the nationalistic policies they themselves successfully used in the past.

Democracy and markets are both fundamental building blocks for a decent society. But they clash at a fundamental level. We need to balance them.