The Mugwumps of globalization are not happy that the G20 summit failed to produce any realistic plan for reforming the global financial architecture. They should not be surprised. Hegmons produce global public goods out of self-interest. When the hegemon goes away, so do the goods it supplies. It is easy to criticize the hemegon, but will those who benefitted from the goods it supplied be better off without it? Not likely. The Guardian gets it right:

If you seek a symbolic moment when the United States ceased to command the 21st-century world and ceded its place to the Asian century, this week in Seoul was arguably that moment.

Reflexive anti-Americans will doubtless celebrate this. But they should be very careful what they wish for…

the end of a period of US dominance may mark the start of a period of national and regional indecision that makes solutions to the world’s economic woes more elusive than ever.

Aid will not be effective unless it gives governments an incentive to govern well. Thus, when considering whether or not to adopt a new aid mechanism, the question we need to ask is whether it will provide recipient governments with such an incentive. I think we can simply a lot of the debate about improving aid effectiveness by re-orienting it around this rather simple question.*

* I should note that this applies only to outcomes that are endogenous to recipient government behavior. For example, if the US developed a spray that could eliminate malaria, have no other effects, and deliver it from planes above a country’s surface, politics in the host country would be irrelevant.

Apropos of a recent post, Bill Easterly points out that while non-democratic regimes have some of the world’s fastest growth rates, they also have all of the world’s worst economic growth rates. The reason: can’t get rid of the malevolent dictator. I suppose this points to a question of risk tolerance. If you place more weight on getting the best economic growth rates than on avoiding the worst ones, you would opt for a non-democratic regime. By contrast, if you had a stronger preference for avoiding catastrophe than for breakneck economic growth, you would make the opposite choice.

The lead article in this week’s Economist argues that in the long-run, India’s chaotic democratic capitalism is likely to outperform Chain’s authoritarian capitalism for two reasons. First, due to China’s one-child policy, the country’s working-age population is falling, while India’s far younger population means the workforce is going to grow. Second, information flows much more easily and quickly in India compared to China because the former is a democracy and the latter is not. As a result, India has a big advantage over China in taking advantage of the information revolution. The big takeaway point is centralized planning is probably not the best model for sustaining long-term economic growth in today’s world. Rather, democracy in India, chaotic as it is, is a far better environment for sustaining economic development.

Poverty is rarely a technical problem. More commonly it is a political one. Why this is so hard to understand is not clear to me. To take an obvious example, a USAID food security project will not be effective at preventing famine if the president of a country induces them in order to punish people who do not support him.

Sure, governments in the Middle East could tax their citizens more thereby catalyzing a more efficient bureaucracy, economic development, and political accountability. The first doesn’t sound so bad, the second sounds pretty good, but the third…well, lots of leaders would rather not be accountable, so they stick with inefficient bureaucracies and low levels of economic development. It’s a bad tradeoff for most people, but not those at the top. Bad governance is typically a choice, not an accident.

Chinese style.