Statecraft is a 2002 political volume written by former British Prime Minister Margaret Thatcher, who served from 1979 till 1990. Her legacy has faced both strong support as well as opposition, yet it stands out that she left a lasting mark on Western democracies and their economies and emerged victoriously out of the Cold War. The book covers a range of topics, from Cold War challenges to domestic issues in the UK, human rights and wrongs, and post-Soviet crisis situations in Eastern Europe. This note focuses on Chapter 11 named 'Capitalism and its Critics'.
following model is based on her definitions of a suitable framework for free-enterprise capitalism:
- Presence of private property
- Rule of law
- Culture of curiosity, imagination, ingenuity, application and risk-taking
- Diversity of independent and competing countries
- Encouraging framework of tax and regulation
The next question is how these are best measured in econometric terms and whether linear or logarithmic variables should be used. A resulting five-factor model that can be plotted over time could be used then for further measurement. We would add to Rule of law an interacting sixth variable that accounts for State-Capture, in such a way that the parameter value for Rule of Law equals 1 when there is no State Capture, and factored down when there is State-Capture, which demonstrates its negative and corrosive effect on Rule of Law. A similar interaction with the other four variables should be established to highlight this point even further, and doing so would be consistent with earlier findings and remarks on 'Ergodicity' in relation to economics.
The five factors mentioned are not so far-fetched, yet the interaction with state capture, based on available theory, would add a relevant contribution to this model following recent developments, such as the increasing pressure on the Cold War economic consensus, the rise of illiberal leaders on both the left and right, Money Laundering issues and the bureaucratic burden that many EU countries are facing in economic conduct. An example would be the volumes of illicit funds that have escaped EU authorities' attention (and other countries too) while simultaneously enforcing rigid limits on cash amounts that qualify for a Suspicious Transaction Report, adding costs to SMEs (and large banks alike).
There already exist initiatives for measuring political freedom, press freedom and property rights on other internet pages, such as the https://internationalpropertyrightsindex.org/. Yet it is more difficult to find a page that incorporates all five into a harmonised model, it therefore seems a good research opportunity.
Add comment
Comments