I am a big fan of Liu Xiaobo and the Charter 08.  It’s mostly about political liberalization, but here are a few points that relate to economic policy:

8.   Rural-Urban Equality. The two-tier household registry system must be abolished. This system favors urban residents and harms rural residents. We should establish instead a system that gives every citizen the same constitutional rights and the same freedom to choose where to live.

14.  Protection of Private Property. We should establish and protect the right to private property and promote an economic system of free and fair markets. We should do away with government monopolies in commerce and industry and guarantee the freedom to start new enterprises. We should establish a Committee on State-Owned Property, reporting to the national legislature, that will monitor the transfer of state-owned enterprises to private ownership in a fair, competitive, and orderly manner. We should institute a land reform that promotes private ownership of land, guarantees the right to buy and sell land, and allows the true value of private property to be adequately reflected in the market.

15.  Financial and Tax Reform. We should establish a democratically regulated and accountable system of public finance that ensures the protection of taxpayer rights and that operates through legal procedures. We need a system by which public revenues that belong to a certain level of government””central, provincial, county or local””are controlled at that level. We need major tax reform that will abolish any unfair taxes, simplify the tax system, and spread the tax burden fairly. Government officials should not be able to raise taxes, or institute new ones, without public deliberation and the approval of a democratic assembly. We should reform the ownership system in order to encourage competition among a wider variety of market participants.

16.  Social Security.  We should establish a fair and adequate social security system that covers all citizens and ensures basic access to education, health care, retirement security, and employment.

Update:  A few comments.  This post is not an endorsement of the “Peace” Prize, which obviously has little to do with promoting world peace.  Rather, this award provides publicity for the Charter 08, which I see as classical liberalism at its best.  The charter basically reflects the pragmatic neoliberal ideology of publications such as The Economist magazine.  It’s good publicity, even if for the wrong reason.

The term ‘economic reform’ implicitly meant more government between 1875 and 1975, and has implicitly meant less government since.  That’s how we can tell whether or not we are still in the neoliberal era.

When the recent financial crisis first hit I was worried that it would push us toward statism, just as in the 1930s.  And indeed that seems to have occurred in the US.  By the spring of 2009, however, I noticed that the rest of the world seemed to be moving in the opposite direction.  Parties of the left kept losing in places like India (the communists), Argentina, and Germany.  At the time many commenters said I had things wrong, that I was misinterpreting complex local conditions.

Now I think we now have enough information to know I was right.  The financial crisis has turned out to be a huge problem for parties on the left.  Here’s a recent headline on the election in Sweden:

(Reuters) – The crash of Sweden’s long-ruling Social Democrats to their worst defeat since 1914 highlights the decline of socialist parties in much of Europe, drained by social change, economic crisis and the rise of new issues.

Obviously Sweden will continue to be far more social democratic that the US.  But the effect of the crisis has been for countries like Sweden, Denmark and Holland to trim back government.

Look at how envious the British are of Sweden:

For decades, conservatives have played an important role in Swedish politics: they are there to be defeated. They advocate lower taxes, and are duly accused of planning savage cuts. So the voters traditionally stick with the Social Democrats who have held power for seven of the last eight decades. Every other decade Swedish conservatives come on for some light entertainment, before being booted out after a term. Never in modern Swedish history has a conservative prime minister been spared this fate. Until now.

This week Fredrik Reinfeldt, a bald and deeply dull 45-year-old who communicates with David Cameron by text message, is celebrating the first re-election in history of his party, the Moderaterna. He is also celebrating the success of an extraordinary experiment. His response to the recession was to cut taxes, a move his critics said the country could not afford. The European Commission warned him it would end in tears. But instead, the lower taxes were a spur to growth and Sweden now has the fastest-growing economy in the Western world.

When elected four years ago, leading a four-party coalition, Reinfeldt had a striking slogan. ‘We are the new workers’ party,’ he said, meaning he would cut taxes for those in employment, but not for those on benefits. When faced with protests about how the poorest would be paying a higher marginal tax rate, he appealed to voters’ innate sense of fairness – and resentment at the high level of welfare dependency. At every stage, his ministers would explain the basics of low-tax economics. Cut tax on wages, and you increase the incentive to work. ‘This will increase employment,’ Reinfeldt said. ‘Permanently.’

Not that he was believed – at first, anyway. The party fell 20 points behind in the polls, and braced itself for the ritualistic electoral ejection. It carried on regardless, with tax cuts for cleaners and baby-sitters (most home helpers were paid ‘black’, as the Swedes say, because the tax was so high). Tax on low-paid jobs fell sharpest. Nursing assistants, for example, saw their tax bill drop by a fifth. The aim was to make work compete more aggressively with Sweden’s famously generous welfare state.

Taxes for the rich also came down. Reinfeldt abolished the notorious wealth tax, which took 1.5 per cent a year from any Swede worth over about Skr1.5 million (£125,000). Anders Borg, the finance minister, faced predictable protests about a Bush-style tax cut for the rich. He replied: ‘The big winners are, in the long term, all Swedes, because we must create conditions for companies to match global competition.’ So while the Tories were endorsing Gordon Brown’s plan to increase the tax on the rich, the Swedes were cutting the tax rate – in order to collect more from the well-paid.

When the recession came, Sweden was badly hurt, as one would expect from an export-orientated economy trading with a stricken continent. But the damage was limited because Sweden had properly regulated financial institutions (having been stung by a serious financial crisis in the 1990s. Banks which had embarked on misadventures in the Baltic cleaned up their own mess. The government entered the recession with a surplus. A Gordon Brown figure would have been impossible in Sweden because its laws prohibit politicians running up the national debt in boom years.

Like most of Europe, Sweden launched a stimulus, but Reinfeldt set aside two thirds of his for a tax cut. Corporation tax fell from 28 per cent to 26.3 per cent [the US rate is over 40%], taxes on jobs were cut further still while income tax thresholds were raised. Determined not to let a crisis go to waste, he declared the tax cuts permanent. So while Brown was planning to increase National Insurance, the Swedes were doing the reverse and explaining why. ‘If you tax work higher, you will get fewer people in work,’ said the education minister, Jan Björklund. ‘But if you tax work less you will get more in work.’ This was a battle of ideas, and it was a battle that Reinfeldt and his coalition allies were winning.

In April last year, his party pulled ahead in the polls for the first time since his election. As election day approached, it became clear just how effective his tax cuts had been. Unemployment never hit the forecast 10 per cent – it was 8 per cent in July and 7.4 per cent in August. Two think tanks have confirmed Reinfeldt’s assessment that his tax cuts have created some 100,000 jobs. The deficit was tumbling as the economy recovered. Extraordinarily, Sweden has now overtaken the United States and reached second place in the World Economic Forum’s yearly competitiveness rankings.

Ask about the recession in Sweden now and you are met with a blank stare. Consumer confidence is at a ten-year high. Its recession was steep, but shorter than its downturn after 9/11. In fact, this had come to worry Reinfeldt. ‘Our medicine may have been just too effective,’ one of his state secretaries told me over the summer. ‘Voters don’t think about the economy now. The recession is becoming a distant memory.’

It helped that the deeply unpopular Mona Sahlin was leading the Social Democrats. It also helped that her party was intellectually exhausted. The left has had to embrace ‘free schools’ (the model adopted by Michael Gove) because they are now so popular among parents. The Social Democrats spent much of the campaign trying to persuade voters to forget they ever opposed them. ‘Pupils should choose schools,’ ran one of its posters, ‘schools should not choose pupils.’

The Social Democrats’ main economic argument – that tax cuts mean vicious spending cuts – was exposed as false by the Reinfeldt recovery. Ms Sahlin did not dare to propose reversing what had been the sharpest tax cuts in Swedish history.

And finally, a little comic relief from The Economist:

But Maria Wetterstrand, the Greens’ co-leader, demurred, saying her party could not support a government that “kicks sick people off health insurance, does not have a climate policy and wants to build ten new nuclear power plants.”

PS:  Why did we go the other way from the rest of the world?  I’ve always thought our liberals were motivated by unfinished business.  We never really completed the welfare state, leaving millions without health insurance.  Matt Yglesias says that now that Obama has finished the job, the real need is efficient neoliberal reforms, not even bigger government than currently forecast.

A few months ago Statsguy did a post arguing that the Heritage Index of Economic Freedom was in many respects measuring good governance, not small government.  I agree, but it’s also true that much of the index does measure small government.  It gives credit for (lack of) taxes, spending, price regulation, entry regulation, trade barriers, investment barriers, etc, etc.  So the index very definitely is biased toward the more laissez-faire economies.  Not surprisingly, Hong Kong comes in number one.

Here I’d like to develop a sort of post-ideological good governance index.  An index that focuses not on how much governments do but rather how well they do it.  A few days ago Matt Yglesias linked to the World Economic Forum’s Global Economic Report.  My initial reaction is the same as Yglesias’s:

I don’t particularly want to vouch for the methodology behind the World Economic Forum’s “Global Competitiveness Report” since ordinal lists are a little silly and competitiveness is a bit of a weird concept but just think of this as a reflection of something international businessmen think . . .

Yes, the term ‘competitiveness’ is rather vague.  But I was intrigued by the countries at the top of the list:

1.  Switzerland

2. Sweden

3. Singapore

4.  U.S.

5.  Germany

6.  Japan

7. Finland

8.  Holland

9. Denmark

10.  Canada

11.  Hong Kong

12  U.K

13.  Taiwan

14.  Norway

15.  France

16.  Australia

Number 17 was Qatar, at which point I lost interest.  In a paper entitled “The Great Danes” I described three models of neoliberalism, and in each case an outstanding example was provided:

1.  Hyper-egalitarian neoliberalism (Denmark)

2.  Hyper-economistic neoliberalism (Singapore)

3.  Hyper-democratic neoliberalism  (Switzerland)

Given that Sweden is pretty similar to Denmark, it looked to me like these three models did well in “competitiveness,” whatever that is.  Then I looked at the 12 categories used by the WEF:

1.  Institutions

2.  Infrastructure

3.  Macroeconomic environment

4.  Health and primary education

5.  Higher education and training

6.  Goods market efficiency

7.  Labor market efficiency

8.  Financial market development

9.  Technological readiness

10.  Market size

11.  Business sophistication

12.  Innovation

It seemed to me that many of those categories measure “good governance” more effectively than the Heritage Index (which doesn’t tend to measure the output of services traditionally provided by governments (infrastructure, health, education, etc.)  But market size seemed irrelevant to me, and I noticed it partly explained the high scores of the US, Germany and Japan.  And I also thought the last two categories were unrelated.  Innovation would reward countries that happened to have a comparative advantage in tech industries, and what the hell is “sophistication?”  So I averaged the first 9, and here’s what I got:

1.  Singapore   5.852

2.  Switzerland 5.799

3.  Hong Kong  5.696 5.778

4.  Sweden  5.696

5.  Denmark  5.602

6. Finland   5.584

7.  Holland   5.513

8.  Canada   5.509

9.  Australia   5.452

10.  Norway   5.444

11.  Germany   5.361

13.  U.K.   5.358

13.  Taiwan  5.271

13.  France   5.271

15.  U.S.   5.187

16.  Japan   5.147

Actually the WEF list is far longer.  I did not re-compute all of the index numbers; a few other smaller European countries would probably have overtaken the US and Japan if I had.  Here are some reactions to the new list:

1.  Small countries are better governed.

2.  The list has something for both those on the left and those on the right.  Most of the top scorers are the sort of European welfare state beloved by liberals.  France overtakes the US in this list.  On the other hand the top three are usually regarded as pretty capitalistic places, and even if you throw out the two Asian city-states (which I’d oppose) Switzerland is often called the most capitalist country in Europe.

It seems to me this list is exposing a perspective that is orthogonal to the tired left/right debate over big government.  It suggests multiple paths to nirvana.  To explain why, let me return to the three models of neoliberalism discussed in my ‘Great Danes’ paper.  I see those three models as providing answers to the three basic questions of governance:

A.   What values should government policies embody?

B.   What policies effectively deliver those values?

C.  When there is a dispute about which policies work best, how should the dispute be resolved?

The first question is moral, and the answer I give is “utilitarianism.”  Unlike 99% of people in the humanities, I regard utilitarianism as a radically egalitarian value system—where people put the best interest of society ahead of their own narrow self-interest.  The second question is scientific, and my answer is ‘economistic’ policies, those that are implemented by people cognizant of the (counter-intuitive) way taxes and regulations often distort decision-making.  The sort of fiscal regime you get if 100 Martin Feldsteins sat down and designed a country on a pad of paper.  In other words—Singapore.  The third question is political, and my answer is democracy.  And I don’t mean just having elections; I mean a system where the people actually govern.  Where every school is a separate school district.  Where taxes must be approved by referenda.  Where every decision is made at the lowest feasible level of government.

Low and behold, all three of these models are represented in the top 5 of my list.  What are the odds of that?  Even better, the other two countries (Sweden and HK) are nearly as good examples of hyper-egalitarian and hyper-economistic neoliberalism as Denmark and Singapore.  So here’s my point.  These countries don’t at all resemble each other.  You can’t get much more different than Hong Kong and Denmark, at least by the criteria used by most people on the left and right.  But they all do at least one thing extremely well.  They all are exceptionally good at one of the three attributes of a highly successful neoliberal society.  Either they are highly civic-minded (Denmark, Sweden), or highly aware of the sorts of policies that produce economic efficiency (Singapore, Hong Kong) or highly democratic.  Switzerland had more national referenda in the 20th century than the rest of the world combined.  And it also seems that all three have very good governance.

Because I am a right-wing liberal who thinks incentives matter more than progressives believe they do, I’d vote for the Singapore/HK low tax model, not the Danish/Swedish high tax model.  I was glad to see Hong Kong scored number one in the world in the infrastructure category.  So much for Galbraith’s “private wealth, public squalor.”  But unlike many right-wingers, I believe the Nordic approach is also pretty successful.  And I attribute their success to extremely effective governance, which overcomes the drag of high taxes and transfers.  Sweden has an educational system that every US right-winger can only dream about—100% voucherized, and even for-profit schools qualify.  They were the first to adopt a system of Social Security, but now have taken George Bush’s advice and started privatizing it through personal accounts.  Denmark even has privately run fire departments–you can’t get much more “public good” than fire-fighting, can you?  In other words, these countries have economic systems that would horrify the fashionable leftists in the U.S. and U.K. who regard terms like ‘profit’ as ‘privatization’ as dirty words (at least when applied to services traditionally in the public sector.)  BTW, there are many other examples I could provide of privatization of traditional government activities in the Nordic countries.

This list also highlights the “small is beautiful” point I keep making.  The top six countries all have fewer people than Los Angeles County.  I’m guessing they don’t spend $550 million dollars on new high schools (as LA just did.)  The Economist noted that America is spending $11 billion on its census ($36 per person) whereas Finland spends a measly $1.2 million (20 cents per person.)  It’s no surprise that the bigger countries fell sharply down the rankings, as soon as bogus categories like market size and “sophistication” were removed.  Huge size didn’t hurt us much in the US as long as we were a fairly small and laissez-faire government.  But as our government gets increasingly active (think health care) the large size and diversity of the US becomes an increasing drawback.  What works in Minnesota doesn’t work in McAllen, Texas.

So why has the US been so successful?  Because good governance isn’t everything; it turns out small government also helps a lot.  The early studies of the supply-side effects of high taxes (Lindsey, Feldstein, etc) showed the effect was powerful.  Revisionist studies by Slemrod, Saez, Goolsbee, etc, suggested the effects were rather small.  But I didn’t find the methodology of either group of studies to be at all convincing, as they measure immediate effects, whereas the important effects probably occur very gradually.  This is especially true of human and physical capital formation, which is slowed by high MTRs.  Imagine a scenario where people are only willing to put in the hard work of becoming a doctor if the pay is twice as high as other professionals—say $200,000 instead of $100,000.  If you put a 50% tax on income above $100,000, fewer people will go to medical school until salaries rise to $300,000.  Note that patients pay 100% of that tax in higher prices.  (So much for all those articles on distributional effects of taxes.  That’s right, they are all worthless.)  But the effect doesn’t occur immediately.  It takes a long time to study medicine, and the cost is sunk once the courses are completed.  The tax probably won’t stop people who are already doctors from continuing to practice.

These insights suggest that cross-sectional tests of the sort Ed Prescott did are best.   And those suggest a strong Laffer curve effect.  Despite much higher tax rates, most European countries raise about the same amount of revenue as the US does (in PPP terms.)

Here’s a prediction.  Take the 20% of GDP raised by the Federal government in 2000.  Now draw a trend line from 2008 going forward assuming a very modest 2.5% RGDP growth.  I say Obama won’t be able to raise any more than 20% of that trend RGDP in revenue, even if he pushes Federal taxes up to 22% or 24% of GDP.  That doesn’t mean 20% is the top of the Laffer curve for an efficient tax system, like what they have in the Nordic countries.   But for our ramshackle tax system, 20% Federal and 30% total (federal, state and local) are probably close to the top of the Laffer curve.   We could get a higher share of GDP, but only at the expense of reducing RGDP growth.

In my view the left/right debate is this country is so vicious because we are debating second best policies in a policy-making regime that is profoundly dysfunctional.  Thus Matt Yglesias and I probably disagree strongly about extending the Bush tax cuts for the rich, but we both favor a simple progressive consumption tax as the ideal.  I see these small countries with good governance as models that point the way forward, past our stale ideological debates.  The question is whether we will pay attention to the lessons they are providing.

1.  Unlike Germany, it now has a legal minimum wage.  Plans to enact legislation limiting working hours.

2.  Much of the property market is controlled by the government

3.  Government bought lots of shares of stock to boost economy during recession.  Still owns many shares.

4. Introduced deposit insurance in 2008.

5.  Stopped accepting foreign doctors in 1997 (unless locally-certified.)

6.  Established anti-trust laws.  As elsewhere, policymakers ignore government-connected monopolies and go after purely private firms.

7.  Government first regulated the 4 stock and derivative exchanges, then forced a merger, then became largest shareholder, then prevented new entrants.

8.  Unlike the Nordic countries, the government is taking over formerly private infrastructure such as tunnels.  Huge new projects are now built and run by the government.

9.  The government is increasingly involved in “industrial policies” despite the ineffectiveness and corruption of its initial forays into planning.

Obviously I’m describing what is almost universally viewed as the most laissez-faire country entity on Earth—Hong Kong.

A few comments:

That’s why I wasn’t impressed a few months back by arguments that Adam Smith did not favor laissez-faire, merely because he favored a few government interventions.  It’s all relative.

Commenters frequently question my assertion that Singapore is the second most neoliberal economy—pointing to all sorts of government intervention.  If Hong Kong is number one despite all the intervention listed above, you can imagine how little laissez-faire is required to come in second.

I’m actually not too concerned about these actions, although I agree with The Economist, which is mostly skeptical of how well the new interventions will work.  Indeed they are even critical of a new food labeling law that I didn’t mention.  But this reflects the increasingly democratic nature of Hong Kong.  In my research on neoliberalism and culture, Hong Kong was somewhat of an outlier—much more free market-oriented than you’d expect given it’s not particularly civic-minded culture.  So it’s merely reverting to its natural position.  And there is a lot of ruin in a nation.  Hong Kong will probably continue to come in number one in the various free market rankings for quite some time.  But I expect it to eventually be overtaken by Denmark.

In the long run the challenge is to change culture so that governments respond to the general interest, not special interest.  And the other challenge is to change economic worldviews so that well-meaning government officials (no, not always an oxymoron) understand that free markets are more effective at promoting the general welfare than most people currently believe.  I’m not going to change cultures, but I’m trying to change worldviews.

Under Mao Zedong China had a communist system so rigid it made the Soviet Union seem positively capitalist by comparison.  Since then, the Chinese government allowed farmers to control their own plots of land, allowed private rural enterprises, then welcomed $100s of billions in private foreign investment, then allowed private urban entrepreneurs, then privatized urban dwellings, then privatized many state-owned enterprises, and then set up two stock markets.  That’s a lot of capitalism.  Yet it’s also true that the Chinese state still dominates many parts of the economy, owns all the land, and has lots of controls that make it far less market-oriented than a place like Hong Kong.

Let’s suppose neoliberalism works.  What should have happened as a result of all those Chinese reforms.  Here are three choices:

1.  China stays as poor (in relative terms) as in 1976.  Comparable to central Africa, or Bangladesh.

2.  China grows rapidly, but even in 2010 remains much poorer than Mexico.

3.  China grows at explosive rates, and became a fully-developed country by 2010.

Which would be the outcome that would vindicate neoliberalism?  And which would refute it?  I could imagine reasonable people saying #2 would vindicate the neoliberal reforms.  That’s what I’d say, and that’s what happened.  I could imagine someone hostile to capitalism insisting that only #3 would count as success.  But I must admit that until I read this book review from John Gray, I could never have imagined someone arguing that only outcome #1 would vindicate neoliberalism.  At least that’s what I think he is saying.  See what you think:

Disdainful or ignorant of the past, Ridley is uninterested in the forces that shape events. He writes hundreds of pages about the wealth-increasing virtues of free markets, but allots post-Mao China only a few lines. This brevity is symptomatic, as China falsifies Ridley’s central thesis; the largest burst of continuous economic growth in history has occurred without the benefit of free markets. Wealth has been created as never before, not as a result of evolutionary change, but as a product of revolution and dictatorship.

Am I misreading Gray, or is he actually saying that all that growth that followed Mao’s death is evidence that market reforms don’t work?  If I met him I’d love to ask him what sort of outcome for China would count as success for their neoliberal reforms.  I’ve noticed that when people have a strong aversion to a particular ideology, the answer is often a null set.  Is it just me, or do you guys think that if China was still as poor as sub-Saharan Africa, Gray would be using that fact as evidence neoliberal reforms don’t work?

At the opposite extreme, this is from an excellent book review written by Ronald McKinnon:

John Williamson (1990) did all a great favor by writing down the rules for what he called “The Washington Consensus” for developing countries to follow to absorb aid efficiently:

1. Fiscal policy discipline.
2. Redirection of public spending from subsidies (“especially in discriminate subsidies”)
toward broad-based provision of key pro-growth, pro-poor services like primary
education, primary health care, and infrastructure;
3. Tax Reform””broadening the tax base and adopting moderate marginal tax rates:
4. Interest rates that are market determined and positive (but moderate) in real terms;
5. Competitive exchange rates;
6. Trade liberalization””with particular emphasis on the elimination of quantitative
restrictions; any trade protection to be provided by low and relatively uniform tariffs;

7. Liberalization of inward foreign direct investment;
8. Privatization of state enterprises;
9. Deregulation””abolish regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions.
10. Legal security for property rights.

To provide perspective on these ten rules, the year 1990, when Williamson wrote, is important. It was just after the fall of the Berlin Wall and the complete collapse of confidence in Soviet-style socialism. The rules reflect the hegemonic confidence that most people then had in liberal market-oriented capitalism””think Ronald Reagan and Margaret Thatcher. But, 20 years later, should the meteoric rise of socialist China””both in its own remarkable growth in living standards, and in the effectiveness of its foreign “aid” to developing countries, undermine our confidence in Williamson’s Washington Consensus?

Surprisingly, no. The Chinese economy itself has evolved step-by-step (feeling the stones) into one that can be reasonably described by Williamson’s 10 rules!

At first glance McKinnon can seem just as out of touch as Gray, albeit in the opposite direction.  After all, we all know that China is following its own “Beijing consensus” which is much more state-led that the US system.  That’s partly true, but McKinnon makes a good case that China is gradually moving in the direction of the Washington consensus, even as we move in the opposite direction.  The book review (which is quite long) also has some very interesting information about China’s involvement in Africa.

McKinnon may be a bit over-optimistic, but he’s much closer to the truth than Gray.  And Gray isn’t just wrong about the China’s economy, he also misses important changes in China’s political system, which is much less based on the whims of a single dictator than Gray suggests.  This book review from The Guardian does a nice job of showing what happens when you really do give absolute power to a single man:

The book’s title is somewhat misleading. Horrific as it was, with its cannibalism and people eating mud in search of sustenance, the famine generated by the Great Leap’s failure and the diversion of labour from farming was only part of a saga of oppression, cruelty and lies on a gargantuan scale. Initially launched to enable China to overtake Britain in steel production, Mao’s programme took on a deadly life of its own. At the apex of the system, the chairman refused to recognise reality, spoke of people eating five meals a day, insisted on maintaining food exports when his country was starving and indulged in macabre throwaway remarks such as: “When there is not enough to eat, people starve to death. It is better to let half of the people die so that the other half can eat their fill.”

.   .   .

Finally, somebody had to confront the leader. As China descended into catastrophe, the second-ranking member of the regime, Liu Shaoqi, who had been shocked at the conditions he found when he visited his home village, forced the chairman to retreat. An effort at national reconstruction began. But Mao was not finished. Four years later, he launched the Cultural Revolution whose most prominent victim was Liu, hounded by Red Guards until he died in 1969, deprived of medicines and cremated under a false name.

The Cultural Revolution is widely remembered, the Great Leap much less so. Having gone through those two experiences, not to mention the mass purges that preceded them and the Beijing massacre of 4 June 1989, it is little wonder if the Chinese of today are set on a very different course that rejects ideology in the interests of material self-advancement.

In my view the most important engine of human progress is not science, but rather the growing acknowledgement that governments should be at least somewhat utilitarian.  Not chasing grand dreams of one sort or another, but rather focused mostly on the well-being of the average person.  China’s hardly a model in that regard, but despite all its problems it is definitely moving in that direction.  It’s a pity that Gray doesn’t understand that the dramatic progress he describes has occurred precisely because China is far less dictatorial and far more market-oriented than in the 1970s.

Another person who doesn’t seem to get it is Adam Phillips, who seems positively disdainful of the “pursuit of happiness.”  Oddly, he seems to think the monsters of the 20th century were not out fanatically pursuing glorious crusades, but rather merely engaged in the mundane task of making the German, Russian, Chinese and Cambodian people more comfy:

What exactly might it mean to have an “unalienable right” to “the pursuit of happiness”, given that it is fairly obvious that the pursuit of happiness is so morally equivocal – could be, among other things, a threat to the society that promoted it? At first sight it seems to be a pretty good idea; if we are convinced of anything now we are convinced that we are pleasure-seeking creatures, who want to minimise the pain and frustration of our lives. Or at least a “we” could be consolidated around these beliefs. We are the creatures who, possibly unlike any other animal, pursue happiness. But the pursuit of happiness, like the pursuit of liberty – the utopian political projects of the 20th century – has legitimated some of the worst crimes of contemporary history across the political spectrum.

Think about it.  Do you really think Hitler, Stalin and Pol Pot were trying to make people happier?   Does the description of Mao’s reaction to the famine sound like he’s a utilitarian?

One guy who does get it is V.S. Naipaul:

Familiar words, easy to take for granted; easy to misconstrue . . . This idea of the pursuit of happiness is at the heart of the civilization to so many outside it or on the periphery.  I find it marvelous to contemplate to what an extent, after two centuries, and after the terrible history of the earlier part of this century, the idea has come to a kind of fruition.  It is an elastic idea; it fits all men.  It implies a certain kind of society, a certain kind of awakened spirit.  So much is contained in it: the idea of the individual, responsibility, choice, the life of the intellect, the idea of vocation and perfectibility and achievement.  It is an immense human idea.  It cannot be reduced to a fixed system.  It cannot generate fanaticism.  But it is known to exist; and because of that, other more rigid systems in the end blow away.  (Talk given in 1991)

That’s right, the key word isn’t happiness, it’s ‘pursuit.’  Life should be a sort of adventure.  The philosopher kings that are disdainful of markets and democracy want society to embody their ideas.  The utilitarian says “let 6.7 billion adventures bloom.”

HT:  John Taylor, Tyler Cowen, Robin Hanson