I have no doubt that eventually all countries will become prosperous democratic market societies. Since I am not a wizard with a crystal ball, many readers probably wonder how I can be so confident about the future. It is actually fairly easy. All countries have already made the change from traditional society to oligarchic society. Many of them would not have chosen this path, but it happened anyway. That is because traditional, tribal and aristocrat peasant societies could not possibly feed the number of people that live in modern countries. The flexibility and productivity of a market economy is the only possible way to provide enough food, clothing, and shelter for modern populations.
There are two kinds of market economy societies, oligarchic society and democratic market society. Oligarchic societies are dominated by a small wealthy ruling class that controls the economy and the government. Democratic market societies are much more open with a high level of economic and political opportunity for everyone. They still have a small percentage of very wealthy people, but they do not dominate the entire country. Nearly everyone has a voice in the political institutions and the chance to become a prosperous citizen. This is obviously a preferable situation. The question is, how to achieve it.
Most large democratic market countries made the transition through warfare. In any war most frontline troops are ordinary citizens. If they fight hard and demonstrate their willingness to sacrifice all that they have for their nation, those who return home will have the status of heroes. Win or lose, they will have earned the right to economic opportunity and a voice in political affairs. A single small or medium size war is not enough to transform an entire country. It requires a series of wars, or a very large war, to convert an oligarchic society into a democratic market nation.
For obvious reasons this is not good news. There are over 150 oligarchic countries in the world. If all of them used this method to transform themselves into democratic market societies, it would require more violence than this planet could stand. The world has to find a better way. We must use reason and understanding to solve this problem.
A lot of countries and a lot of people have worked hard to find a substitute for oligarchic society. They have spent millions of man-hours trying to think of a viable socialist form of society. They gave communism a try, and fascism, and religious fundamentalism. All of these social systems originated as efforts to find an alternative to oligarchic society. There are big problems with all of them, and they have all failed.
I can think of only one good solution. The oligarchs, themselves, must lead their people out of oligarchic society. There is a good reason for them to do this. They are the ones who will benefit the most. If they think they are rich now, they ain’t seen nothing yet. After their countries make the transition to democratic market society, they will be a lot richer. By leading the way themselves, they can avoid a lot of pitfalls along the path.
It seems obvious that the way to achieve real democracy is through political reform. Unfortunately, it is not that easy. People who are poor and have no prospect for achieving prosperity are politically powerless. In a market economy society, wealth is power. It has always been that way, and it will always be that way. The shortest path to real democracy is through economic reform.
The best way to avoid a lot of bloodshed is for the oligarchs to open up their economies and find ways to help and encourage the rest of the society to become successful and prosperous in the market economy. This is a big job. Many oligarchic societies have already been working along these lines. Some of them have made a good deal of progress, but for the most part, they have not gone far enough fast enough.
There are a lot of prerequisites to getting the majority of the population to be productive and efficient producers and ready to compete in the market economy. They have to be healthy. They have to be educated. They need skills. There has to be a certain amount of law and order so that the markets can grow and thrive. There needs to be a reliable currency. The money supply, interest rates, banks, and financial markets must be regulated by the best economists available. Ordinary people—who have skills, ambition, and good ideas—must have access to capital so that they can start companies and hire workers. When their small businesses begin to succeed, they must have assurance that they will not be stolen by someone with more political power. It is no good for a country to try to accomplish these things one at a time. They all have to be done together.
This is a long list of requirements, and they all have to be paid for, along with new infrastructure investments. New companies in developing countries cannot generate much tax flow. Old established wealth would have to pay the majority of the bill. That means the oligarchs, and they can come up with just so much. Other government expenses will have to be reduced to the minimum possible.
Developing countries should not pay direct subsidies to business and industry. Large expensive show projects should be avoided. Welfare and pensions must be kept to a minimum. Make-work-jobs and no-show-jobs on the government payroll must be avoided. Large amounts of money should not be borrowed from abroad. That path leads to trouble. The government will have to work hard to get the most value for the money spent.
This is not a project that can be completed in a decade or two. It could take that long for some populations to accept that the government really is serious about helping them to achieve prosperity. But when that happens the country will begin to change. Economic growth will increase and spread through the society. The traditional problems of oligarchic society will be reduced. The crime rate will decline, and stability will increase.
Year by year, as the economy grows, more taxes can be generated. This money should be plowed back into more education, more job training, more infrastructure, more courts, and better economic regulation. The virtuous circle of market economics will begin to spin. More wealth will be generated for everyone.
Beginning in the 1950s the Japanese government began a major push to develop export industries. The economy grew quickly by producing for foreign markets. This idea caught on and has been used by many countries in Southeast Asia and around the world, but it is not always reliable. Sometimes it works, and sometimes it doesn’t.
Developing countries should do everything possible to increase the size of their domestic markets. Most companies are best at designing and producing goods and services for the local market. Export earnings are a bonus that can help domestic growth, but they are not reliable enough to be the primary focus of economic development.
There is a major argument among economists about the usefulness of tariffs to protect and encourage developing industries. Much too often they have been used to provide artificial support to noncompetitive companies. If used properly and sparingly, they may have a useful role to play in economic development.
Any country that puts its primary focus on the kind of economic development program described here will achieve positive results. Economic development that is only for the wealthy is likely to fail. The key to success is to include as many people as possible. An entire population contains a gigantic amount of energy, skill, and ambition. Countries that put all of these resources to work will achieve success. If they keep at it year after year, decade after decade, and generation after generation, they will become wealthy.
Once the majority of the population owns property and has economic interests to protect, real democracy will follow. Public interests groups and political pressure groups will blossom. People will watch the government closely and insist that it protect and promote their interests. Democratic market society will be achieved.
There have been many different variations of tribal, aristocrat peasant, and oligarchic societies. The same is true for democratic market society. There is an American pattern, a European pattern, a Scandinavian pattern, and a Japanese pattern. None of them are static. In the future there will be an Asian pattern, an Islamic pattern, and an African pattern. These too will continue to change and evolve.
Democratic market society is capable of creating wealth on a scale that has never before been imagined. Another major advantage is that democratic market societies do not fight wars with each other. These are good things, but there are also many serious problems that seem to be associated with this new form of society. The worst of these is a breakdown of the traditional family structure.
I believe that we are still in the primitive early stages of democratic market society. There is a lot of room for improvement. No form of society will ever be perfect, but in the centuries to come, democratic market society should get much better than it is today.
There may well come a time when new technologies allow everyone to become self-sufficient in the necessities of life—food, clothing, and shelter. If that happens people may no longer have to depend on markets to distribute these things. Or the world may find a method of economic distribution that works better than markets. Either of these possibilities could lead to the evolution of a new form of society. We can only hope that if that happens the transition to the new kind of society will be much more peaceful than the massive revolution that the world is presently going through.
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