Paragraph of the day
The Wall Street Journal the other day ran a piece titled State Funds May Not Bolster Democracy. This sums up what it was about:
Free traders have long argued that expanded trade is a force for political freedom abroad, and point to South Korea and Taiwan as proof.Here's the sentence, though, that really caught my attention:
In both places, exports boosted living standards for millions of workers, while expanded imports and foreign investment helped to break up entrenched elites. Autocratic governments eventually gave way to democracies.
But will sovereign-wealth funds do the same for democracy? Fans of the trade-produces-political-change argument doubt so.
In many of the nations with sizable wealth funds, the money stuffs the pockets of rulers who spend on patronage or repression. A few years back, Dubai, a part of the U.A.E., gave government workers tradable vouchers, valued at more than $100,000, for discounts on condominiums being erected in massive construction projects, says Marcus Noland, who studies Arab economies at the Peterson Institute for International Economics in Washington, D.C. "The short-term effect is that you buy people off," he says.There are a couple of points of interest. First - regarding the housing market - was it generally known that the government was in effect pumping up demand for its own building projects? Second - regarding politics - is it possible in the UAE to avoid the development of a democracy? In the case given of South Korea a middle class developed and it demanded political rights and a breakup of the autocracy. In the UAE a middle class made up of citizens is not developing; that role is taken by ex pat workers. UAE citizens are very well off and may have no desire to rock the boat as long as the rulers share the oil wealth as they have.