Special interests weigh down America's economy, while Vietnam's young capitalism booms.




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So I guess we won that war after all. According to the Pew Global Poll, 95% of people in Vietnam agree that most people are better off under capitalism, even if there is inequality.
By contrast, only 70% of Americans believe the same thing. (America is out-performed by such other less developed countries as Nigeria, China, Turkey, Malaysia, the Philippines and India). Maybe, quipped an Internet commenter, the Vietnamese should send us some advisers.
But there are some lessons to be learned here, one of which is that history plays out slowly. (Though it's probably a myth, Chinese premier Zhou Enlai supposedly once said about the French Revolution, it's "too early to say" how it has turned out.) Had you asked people in 1974 about support for capitalism in Vietnam 40 years later, few would have predicted that 95% of Vietnamese would support capitalism today. The lower level of support in America might have surprised some folks, too, though maybe not.
But the Vietnamese view of capitalism is based on their experience, while the American view, sadly, may be based on our own. The Vietnamese have their recent experience with the lies and deprivation that always accompany communism to contrast with the growth and opportunity that a newly opened free market has provided. Many Americans, on the other hand, look at our free market and see that it's not all that free sometimes, and that a lot of what passes for capitalism is really what Jason Mattera calls Crapitalism, a politicized crony-capitalism in which insider connections and government subsidies and compulsion play a bigger role than they should.
Vietnam has a flat tax that makes life easy for small businesses; America has a convoluted code that requires professional help to understand — and that is administered by a politicized IRS that people don't trust anymore. The Vietnamese see small businesses as essential to the country's future; the American government is made up of politicians who meet objections to their policies by saying things like "I can't be responsible for every undercapitalized entrepreneur in America."
But the Vietnamese advantage may boil down to this: Free markets are new there, whereas America has had them for a long time. Scientist Thomas Ray once said that every successful system accumulates parasites, and the free market in America has been successful for a very long time. Established businesses get tied down with regulations that keep out new innovations — like Michigan's GM-backed anti-Tesla law that bars car makers from selling directly to the public — while politicians line up to line their pockets with taxes and fees and campaign contributions.
This phenomenon probably explains why most of the growth and innovation in the U.S. economy has been in the Internet or Internet-enabled sectors where regulation has been light, though even there the politicians are cracking down. Ultimately, the political system doesn't like anything to go on unless it has control — and a chance for politicians to wet their beaks and look after their own.
In his book, The Rise and Decline of Nations, economist Mancur Olson argues that established economies develop a web of special interests that gradually chokes off economic growth. Vietnam's advantage is that its own parasites haven't had a chance to start spinning much of a web yet. Ours, on the other hand, have been at it for decades.
Olson wrote that — as with the German and Japanese booms after World War II — it takes a major calamity, such as a war or a revolution, to cut through that web and allow economic growth to take off again. I've argued in the past that massive democratic change — a "wave" election — might accomplish the same end.
Since I don't want a war or a revolution, I hope I was right about that. Perhaps we'll find out, next week.
Glenn Harlan Reynolds, a University of Tennessee law professor, is the author of The New School: How the Information Age Will Save American Education from Itself.