5 min read

The dictator advantage

There is no dictator advantage; Xi Jinping likes breaking the rules; government debt servicing costs are getting scary; and how does the Russo-Ukrainian War end?
The dictator advantage
Authoritarian regimes appear to grow faster than free countries. Source

1—The dictator advantage

Authoritarian regimes appear to overstate the success of their economies. Source.

Authoritarian regimes tend to grow faster than democracies (see chart at top). But how much of that is due to the 'dictator advantage', and how much of it is simply bullshit? Luis Martínez crunched the numbers by comparing reported GDP with night-time light recorded by satellites from outer space, which unlike GDP "are largely immune to manipulation":

"The results suggest that autocracies overstate yearly GDP growth by approximately 35%. Adjusting the data for manipulation leads to a more nuanced view on the recent economic success of autocracies."

If true it means the size of China's economy has been overestimated by trillions of dollars. You can read Martínez's full paper here, or an earlier working paper version (no paywall) here, in which he concludes that cumulative GDP growth between 2002 and 2021 in countries "not free" should be cut roughly in half, from 147% to 76%.

2—Breaking the rules

Xi Jinping was relatively young on his way to the top. Source.

Xi Jinping is seeking a third term as China's President. But given he's already 69 years of age, to do so he'll have to "break a rule established two decades ago by outgoing President Jiang Zemin: a retirement age of 68".

How it all plays out will be answered at next week's party congress. If, as expected, Xi gets a third term, it won't be the first rule he has broken since assuming power:

"When he took power in 2012, Xi inherited a party packed with officials selected by his predecessors and other political patrons. The anti-graft campaign changed that. The 33 cadres removed from the Central Committee during Xi's first five years in power was by far the most during the three-decade period reviewed by Bloomberg.

Those vacancies, combined with mandatory retirements and some early departures, gave Xi dozens of seats to fill with proven loyalists. In all, 65% of the Central Committee was replaced in 2017, the most since at least 1992. The Politburo also saw two-thirds of its members replaced."

Xi has spent many years working towards this point, eliminating threats and promoting allies along the way:

"The result has been a Central Committee that's probably more homogeneous than ever in terms of age and experience. Members in their mid-50s and 60s occupy most of the seats on the body, which had only six cadres in their 40s. With fewer "rising stars," the party is less likely to protest as Xi prepares to rule China into his 70s."

You can read the full feature by Bloomberg here, which goes on to list other rules broken by Xi, such as his failure to appoint a clear successor, along with possible threats to his rule.

3—Spending cuts or tax hikes?

For how long can governments increase borrowing to solve their problems?

4—How does the Russo-Ukrainian War end?

That's the title of an article by Timothy Snyder, who lays out "just one plausible scenario that could emerge in the next few weeks and months":

"Of course there are others. It is important, though, to start directing our thoughts towards some of the more probable variants. The scenario that I will propose here is that a Russian conventional defeat in Ukraine is merging imperceptibly into a Russian power struggle, which in turn will require a Russian withdrawal from Ukraine. This is, historically speaking, a very familiar chain of events."

The war is not going well for Russia and it has changed "changed his [Putin's] position in Moscow":

"Holding on to power in Moscow is what matters, and that does not necessarily mean exposing himself to further risk in Ukraine. Once (and if) Putin understands that the war is lost, he will adjust his thinking about his position at home.

Through the summer, that position was simpler. Until very recently, probably until he made the speech announcing mobilization in September, he could simply have declared victory on mass media, and most Russians would have been content. Now, however, he has brought his senseless war to the point where even the Russian information space is beginning to crack. Russians are anxious about the war now, thanks to mobilization (as opinion polls show). And now their television propagandists are admitting that Russian troops are retreating. So unlike the first half-year of the war, Putin cannot just claim that all is well and be done with it. He has to do something else."

Putin is facing increasing criticism from inside Russia, especially from "[t]wo prominent Russian political figures, Ramzan Kadyrov and Yevgeny Prigozhin". If Putin's invasion continues to flail and:

"...the instability created by the war in Ukraine comes home, Russian leaders who wish to gain from that instability, or protect themselves from it, will want their power centres close to Moscow.

If this is what is coming, Putin will need no excuse to pull out from Ukraine, since he will be doing so for his own political survival. For all of his personal attachment to his odd ideas about Ukraine, I take it that he is more attached to power. If the scenario I describe here unfolds, we don't have to worry about the kinds of things we tend to worry about, like how Putin is feeling about the war, and whether Russians will be upset about losing. During an internal struggle for power in Russia, Putin and other Russians will have other things on their minds, and the war will give way to those more pressing concerns. Sometimes you change the subject, and sometimes the subject changes you."

You can read Snyder's full post here, which also deals with Russia's (unlikely) nuclear threat and cautions that many other outcomes are also entirely possible.

5—Further reading...

👩‍🌾 "[T]he world's croplands, which have claimed vast ecosystems, cover less than half an acre per person on the planet. Producing enough biofuel to power one typical passenger car, meanwhile, requires more than 1.2 acres."

🚀 The The Double Asteroid Redirection Test (DART) worked more than 25 times better than NASA had hoped, in what was "humanity's first time purposely changing the motion of a celestial object and the first full-scale demonstration of asteroid deflection technology".

🥽 This will become an MBA case study for how founder-controlled companies can implode: "Investors were not impressed by Facebook's latest product reveals, which included, among other things, the launch of avatar legs — showing that the company still has a ways to go before Wall Street feels better about its costly push into building the metaverse."