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Russian Capitalism: A Work in Progress


The Russian people appear to be discovering that, in practice, "Chicago School" capitalism owes at least as much to Al Capone as it does to Friedrich Hayek ("Russia," Cover Story, Aug. 4). History shows that giving entrepreneurs free rein can greatly increase a society's wealth. But a lot of this wealth can become concentrated in the hands of a few entrepreneurs, who exploit every angle on both sides of what is generally regarded as "legal." They end up having undue influence over government.

A better alternative may be Hong Kong's approach to capitalism. Hong Kong is widely regarded as having the world's freest economy. But few people are aware that a major reason for its success is that entrepreneurs are encouraged to concentrate on producing and distributing discretionary goods and services. Hong Kong's government surrounds its free-market economy with a protective cocoon of "socialistic" programs designed to ensure that the demand for nondiscretionary goods and services is met in an equitable fashion.

This is why, for example, more than half of Hong Kong's residents (not just its low-income minority) live in housing built by the government, with their monthly housing costs linked to their incomes. Among other things, this liberates private real estate developers to concentrate on meeting the discretionary demand for upscale housing through the free market in a purely profit-maximizing manner, free of any social welfare baggage.

President Vladimir Putin may want to take a look at Hong Kong's "capitalism with Chinese characteristics" as he struggles to contain the worst excesses of Russia's freewheeling plutocrats.

Edward S. Seeley Jr.

Brooklyn, N.Y. I liked "What'll it be, Sweden?" (European Business, Aug. 4), especially the part about how wonderful Stockholm is in the summertime. But I didn't see what I wanted to see about the coming vote on the "single currency." The big issue is not the euro, but the economic independence of this country. How would you like it if the Federal Reserve system were transferred to Mexico City or Ottawa -- which would also mean that U.S. monetary policy and the value of the U.S. dollar were determined in those places. In addition, the use of fiscal policy by the U.S. government would be restricted by a "stabilization pact."

As you mentioned, the Swedish Prime Minister strongly backs the euro. He backs it, however, because he wants to become President of the entire European Union, and he is not the only member of the Swedish government or bureaucracy who dreams of a high-salary, tax-free nonjob in Brussels or Frankfurt.

Ferdinand Banks

Uppsala, Sweden I'm not a regular reader of BusinessWeek -- maybe that is why I was taken aback by Stan Crock's article "Iraq: After the shootout" (American News, Aug 4). The fact is that we bombed, invaded, and then took control of another country. We are telling them who can be elected, and we control the proceeds from the sales of their assets (oil). Should we therefore be surprised when they fight back? Crock quotes Michael P. Hitchcock, vice-president of London's Control Risks Group, as saying "we'll see civilians being targeted."

If I were Iraqi, I would see them as illegal immigrants (do they have visas?) who are stealing my assets. If some Iraqis are "anti-American insurgents who could make trouble in the future," it may be because we've destroyed their country.

Martyn Whitaker

London

There is no doubt that the kind of personnel required to invade a country and the kind needed to pacify a nation are two different breeds. In Iraq, as mentioned, our military was highly successful, but our further handling has foundered by sacrificing the goodwill engendered by deposing Saddam Hussein and his thugs.

Unfortunately, the U.S., while being generally successful in its military campaigns, has been shortsighted in the peace aftermath. The old saying that we have never lost a war (although questionable because of Vietnam) and never won a peace may be repeated if we are not careful. We need capable administrators as well as the military in the war's aftermath.

Nelson Marans

Silver Spring, Md. Now that the accounting profession is rediscovering its relevance in matters of financial reporting and internal control, it's also time to rethink budgetary controls ("Brands in an age of anti-Americanism," Special Report, Aug. 4).

BusinessWeek's annual ranking of the world's most valuable brands demonstrates that the top 10 brands represent over 30% of the market capitalization for these prestigious companies. Many of my marketing colleagues will agree that it is time to reload the depleted marketing budgets and enhance brand equity.

Randy R. Williams

Syracuse, N.Y. In your review of Merchants of Immortality: Chasing the Dream of Human Life Extension, your headline "Who wants to be a 150-year-old?" (Books, Aug. 4) demonstrates that most people miss the key issue on life extension: the real human life cycle. We are born incomplete and continue to grow until we are physically complete at age 16 to 18 or so. From 18 to 30 we live at a physical plateau. At about age 30, the body starts dying (most visible in professional athletes who are forced to retire from their careers in their 30s). This can take 50 or more years for an increasing number of people.

Despite the dramatic extension of human life expectancy, it is really merely an extension of the dying process. The real goal of extending human life is to arrest or suspend the beginning of the process. It's what happens at age 30 that is the key.

Robert Piller

Geneva Repeating something often enough does not make it true, even when the assertion emanates from a fellow at the Hoover Institution ("How to level the playing field for young black men," Economic Viewpoint, Aug. 4). Gary S. Becker's recitation of the mantra that competition is the solution to educating African American males, whom government schools have failed, is flatly contradicted by the best empirical evidence available.

Every country that has experimented with the kind of open educational marketplace that Becker advocates has found to its dismay that hard-to-teach students are precisely those that competition shortchanges the most. That's because these students demand disproportionate amounts of time, energy, and money to educate. As a result, few schools, either new or existing, willingly enroll them -- even when the law makes their action illegal.

To start with, Becker needs to study the results of educational competition in New Zealand and Chile. The experience of these countries is the most dramatic, but it is not unique by any means. Australia, Britain, China, South Africa, and Sweden have also reported similar findings.

Walt Gardner

Los Angeles


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