Lawlessness and Economics
I borrowed Ballad of the Whiskey Robber from a friend. It is a highly enjoyable and amusing tale about a bank robber in post-Communist Hungary.
For all the humor in the story, it does have a serious side as well in highlighting the failures of economic transformation in the former communist nations. The same challenges will be faced in Iraq, Afghanistan, Lebanon and other areas as they try to make a switch from totalitarian rule to a free market society.
It is apparent that aside from the obvious flaws of a totally corrupt privatization scheme other problems, perhaps much more damaging to the economy as a whole, were (and are) endemic in these societies. One thing we often take for granted is a relatively honest, competent and uncorrupt police force. This forms the foundation that allows for private property and entrepreneurial activities. Its lack means economic stagnation and endless cycle of poverty. To a large extent, we can see this even in the inner cities in our own nation.
It is obviously very difficult for an ex-totalitarian state to build an honest police force. The cops from the previous regime are probably not suitable by the very fact that they were enforcers of a totalitarian state. New recruits, while hopefully idealistic, will obviously be untrained and inexperienced. Endemic lack of funds will make these problems even more difficult to overcome.
Beyond that though, the culture created by the totalitarian regime will create further difficulties. Corruption tends to be tolerated and expected, which undermines the basic legitimacy of the system. Civilians have been conditioned to fear police and police powers.
One of the reasons I oppose the ‘war on drugs’ is that it creates similar (if lesser) conditions, especially within the inner cities, to that of a totalitarian state. A large number of people don’t see drug use, particularly marijuana use, as an inherently immoral activity. Unlike robbery or murder, the victim of these crimes is unclear. Increasingly this alienates police from the populace. That has the effect of making the police less effective and often corrupt. Lacking the esteem of the community, the motivations for police work tend to be more of power and control than to ‘serve and protect’. This in turn can create increasing lawlessness, and harmful economic consequences result.
Development economists talk of “institution-building.” It’s more than just honest cops. It seems to me that the fundamental difference between economies that do well and economies that don’t is that people in the former feel comfortable doing business with people they’re not related to when they’re not in the same place at the same time. When you feel comfort at that level, you can execute contracts, feel secure in your property rights, extend and receive credit, and pool resources or capital for productive enterprise.
What confers these advantages? A regime of contract and property law, a definition of liabilities in ways that make a corporate entity meaningful, and a neutral and somewhat reliable medium of exchange.
Corruption at all levels that are common in former Communist regimes have impeded the development of these institutions. Some have pulled away better than others; Russia is muddling through these days by the sheer weight of oil revenues.
By the way, I disagree with your characterization of Lebanon as a totalitarian regime. Lebanon is a fractured country, with Maronite Christians, Sunnis, Shi’a, and Druse, was wracked by civil war from 1975 to 1990, and has been under occupation by Syria since then — but a Syria that garners support from various factions within Lebanon jockeying against each other. Maronite Christians as well as Shi’a have been at some time local supporters of Syria’s position there. Lebanon has had a contentious parliament throughout. To equate Lebanon with Iraq under Saddam or Iraq under Mullah Mohamed Omar is to drain totalitarianism of meaning.