Scott Sumner  

Right wing doesn't mean pro-free market

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I recently did a post discussing the Indian government's decision not to reappoint central bank head Raghuram Rajan. All indications are that he was pushed aside for speaking out against crony capitalism in India, particularly the tendency of state-owned banks to do sweetheart deals with well connected-industrialists.

Mr Rajan was also criticised by some industry groups for his initial hawkish stance on inflation as they clamoured for lower interest rates, though he has since cut rates by 150 basis points.

Perhaps most crucially, he antagonised some powerful Indian business groups with his denunciation of crony capitalism, and the pressure he put on state banks to get tough with stressed borrowers long accustomed to pliant state banks sweeping their problems under the carpet.

The New Delhi-based analyst says: "He has clearly made some people unhappy in the right wing of the BJP, but that's just a cover -- always look for an economic reason. There are big industrial groups who have been hurt by his policies -- not on interest rates, but on cleaning up the banks, and cleaning up the people who have caused the non-performing assets at the banks."


Unfortunately, Mr. Modi's BJP is not the only right wing nationalist government that is opposed to economic liberalization, the new government in Poland also shows disturbing tendencies:

Poland should buy up banks owned by foreign investors, the country's deputy prime minister has said, as part of a push by the country's rightwing government to reduce the influence of overseas capital in the economy.

Poland's ruling Law and Justice party, which came to power in October on a broadly nationalist and Eurosceptic agenda, has moved swiftly to increase state control over previously independent or apolitical institutions. It has also recently begun a push to increase the state's role in business sectors, startling investors who fear Poland is turning away from free-market principles.

Foreign capital "definitely has too much power" in the Polish banking industry, Jaroslaw Gowin said, arguing the state should act to increase the level of Polish ownership as part of a programme of "economic patriotism".

"We should use the opportunity that some of the foreign banks are in trouble, and move to renationalise them," Mr Gowin told the Financial Times.


Actually, Poland greatly benefited from heavy foreign involvement in their banking industry:

Poland's large and dynamic banking industry, one of very few in Europe to avoid crisis and bailouts after the 2008 financial crisis, is roughly 60 per cent owned by foreign investors. Some, including the local units of Austria's Raiffeisen and Italy's UniCredit, are considering an exit.
I've recently been discouraged to see otherwise sensible commentators like Larry Kudlow become seduced by right wing nationalist politicians. Here's a suggestion: When a politician runs on a platform of opposition to reforming runaway social programs and opposition to free trade and investment, don't assume they are going to implement free market policies if elected, just because they represent the "right-wing" party.

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CATEGORIES: Political Economy




COMMENTS (14 to date)
Michael York writes:

"I've recently been discouraged to see otherwise sensible commentators...become seduced by right wing nationalist politicians." AMEN!

Martin Spencer writes:

Right wing seems to mean creating opportunities for rent seeking. "Deregulation" and "pro-free market policies" usually just end up being a chance for insiders to make a buck. The Chicago parking meter deal is a prime example.

BH writes:

All that people with "right wing" politics have in common is a tolerance for (or appreciation of) of inequality. Libertarians tend to prefer formal egalitarianism, but tolerate large differences in outcomes. More traditional conservatives tend to celebrate various hierarchies as a good in themselves. And, of course, the people on top in any particular system want to keep themselves on top and often aren't too particular about methods.

So, as currently constituted most right wing parties in the West have consisted of libertarians, crony capitalists, and traditional conservatives of various kinds. For a long time the libertarians and crony capitalists were really the ones in charge, but there are a lot of pressures on that. A lot of libertarians are waking up to the fact that a more multicultural society means more ethnic identity politics, including white identity politics, not less.

Scott Sumner writes:

Martin, It depends on who is doing the "deregulating". When it's a government that actually wants to deregulate (as we often saw in the 1980s and 1990s), the results can be good. In cases where the government is corrupt, you end up with crony capitalism.

BH, I think that misses the fact that there are huge difference between various right wing parties. For instance, in the UK the Conservatives are more in favor of free markets than the Labour party. In Poland the left is more in favor of free markets than the right. So you can't generalize about right wing parties, they vary greatly from one country to another.

The coalition you describe does not exist in many countries, although I agree it does exist in the USA.

Edgar writes:

Not sure what planet you are living on Scott. Mr. Modi's BJP party is liberalizing and reforming as fast as it can. Is expanding opportunities for foreign investment extreme nationalism? http://in.reuters.com/article/us-india-fdi-idINKCN0Z60X8

Edgar writes:

And Poland's crime against humanity seems to be it does not have a socialist government and told its state sponsored media that they could not operate simply as advertising campaigns for leftist politicians. I know it would be unthinkable to similarly reign in NPR in the United States, but really, Poland too seems to welcome free trade. Why just this morning I read: http://abcnews.go.com/International/wireStory/chinas-president-xi-visits-poland-boost-trade-business-3998321 Maybe the US hates Poland because Poland reminds us of our betrayal of them following WWII, our de facto renunciation of any intention to honor our current treaty obligations towards them, and our current military impotence. The US clerisy's hatred of Poland is only further embittered by China's effective leadership and dominating role in economic progress in the world today.

Rich Berger writes:

I think you should first define what you mean by right wing.

Miguel Madeira writes:

"In Poland the left is more in favor of free markets than the right."

I don't know if the polish left (the Democratic Left Alliance - the ex-communists - and the Razen - a Syriza/Podemos-style party) is particularly pro-free market; you are not confusing "the left" with the Civic Platform (a centre-right, free-market party who belongs to the European People's Party, like many european right-wing parties)?

Shreyas writes:

I dont know how you formed an opinion on modi but you are somewhat wrong.

This happened yesterday. Check it out
http://swarajyamag.com/economy/major-changes-in-fdi-policy-defence-sector-opens-up

Modi is a mixed bag but definitely a 'yuge' improvement from the previous government

[broken html fixed--Econlib Ed.]

Lorenzo from Oz writes:

A lot of economic liberalising in the 1980s was done by centre-left governments: the Antipodes provided strong examples, but not the only ones.

The reason they did have local bells and whistles (e.g. National Party PM "Piggy" Muldoon had created what was, only half jokingly, referred to as the Western world's only command economy, leaving the NZ Labour Party nowhere else to go but economic liberalising) but the underlying reason was clear enough -- to create a sustainable welfare state.

To the extent they mean anything "left" and "right" are about attitudes to equality. The left puts equality first (at least notionally) and is typically very confident in the ability of political mechanisms to deliver the same. That easily led to a distrust of markets, but it could also lead to an embrace of them if that was needed to pay for the welfare state.

So. no, "right wing" of itself tells one remarkably little about attitude to pro-market policies. Especially since there are so many varieties of "don't put equality first" right.

Scott Sumner writes:

Edgar and Shreyas, Modi and the BJP has failed to carry through on any of its major reform proposals.

Rich, I mean groups that are generally seen as right wing.

Miguel, Good point. I meant the more left-leaning of the two major parties.

Lorenzo, Good points.

ThaomasH writes:

One need go no farther than US politics to see that right wing does not mean free market. Which party decided to nationalize the airport security industry and pay for this new "service" with a new tax?

Khodge writes:

This brings to mind Eisenhower's warning against the military-industrial complex. It seems that no one, then or now, is terribly concerned about it: The left is mostly concerned about using the military to advance their causes; the right seems somehow enthralled or beholden to the growth of the toys provided by cronyism.

Andrew writes:

Hi Scott,
Wondering how this compares to your opinions on situations where foreign or domestic migrants/investors purchase residential properties in substantial volumes, with the concern that this prices out local residents. Is there any value to be figured in when deciding policy of a sort of birthright "my family goes back generations" type deal?

I saw an interesting documentary recently (linked below) detailing this trend, and as a fellow Boston area resident my guess is you'd contemplated the topic.

http://www.sbs.com.au/news/dateline/story/chinas-millionaire-migration

Thanks,
Andrew

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