Innovation,
the
Bane
of
the
Authoritarian
State
_________________________________________________________________________________
An
essay
on
the
unsustainability
of
authoritarian
capitalism
Written
for
the
2010
Hayek
Essay
Competition
for
the
Mont
Pelerin
Society
By:
Jessica
Wright
May
2010,
United
States
3,567
Words
(excluding
footnotes,
abstract,
bibliography)
Innovation,
the
Bane
of
the
Authoritarian
State
Abstract
The
question
is
the
following:
Examine
whether
authoritarian
capitalism
is
a
viable
alternative
to
its
Western
liberal
version,
to
promote
long
term
growth
and
development.
My
answer
is
no,
it
is
not
a
viable
alternative.
In
this
paper
I
provide
two
main
reasons;
first,
economic
and
political
liberties
are
intertwined,
and
thus
an
authoritarian
model
that
suppresses
political
liberties
necessarily
impinges
upon
economic
liberties,
creating
a
system
that
is
not
sustainable
in
the
long
term.
Second,
state
power
and
growth
are
dependent,
in
large
part,
on
innovation.
Decentralized
states
foster
creativity
and
innovation
productively,
something
that
centralized
states
are
unable
to
do.
I
will
provide
evidence
throughout
this
paper
for
these
two
arguments,
referring
to
the
“China
Model”
as
the
exemplar
of
authoritarian
capitalism.
_______________________________________________________________________________________________________
Introduction
Communism
in
the
former
Soviet
bloc
was
bound
to
fail
with
its
highly
centralized,
state‐
run
economies,
abolition
of
a
rational
structure
of
prices,
and
communalization
of
private
property.
Since
the
downfall
of
the
red
menace1,
people
the
world
over
have
engaged
in
the
liberal
free‐market
discourse
that
has
become
the
preeminent
ideology.
Academic
treatises
declared
“the
end
of
history”2,
and
public
commentators
celebrated
competition
on
the
global
market,
declaring
that
“the
world
is
flat”3.
While
classical
liberals,
liberal
Democrats,
and
various
other
branches
of
the
liberal
enterprise
have
disagreed
on
important
specifics,
it
was
clear
at
the
time
that
the
world
had
been
won
over
by
the
basic
principles
of
Western
democracy
and
capitalism.
Some
argue
that
liberalism’s
inherent
philosophical
superiority
toppled
Communism
and
always
would
have,
while
others
claim
1
A
term
used
during
the
Cold
War
to
describe
the
Soviet
Union
2
See
Francis
Fukayama’s
The
End
of
History
and
the
Last
Man
3
See
Thomas
Friedmans’
The
World
Is
Flat:
A
Brief
History
of
the
Twenty­First
Century
2
that
the
United
States’
logistical
maneuvering
ensured
its
preeminence4.
In
either
case,
freedom,
markets,
and
the
American
way
have
together
served
as
the
shibboleth
of
the
post‐Soviet
world
order.
But
that
was
not
the
end
of
history,
and
we’re
not
at
the
end
of
history
now.
As
we
know
well,
new
chapters
have
been
written,
and
new
chapters
will
continue
to
be
written.
With
China’s
dramatic
rise
in
the
past
thirty
years5,
during
which
time
its
economy
grew
by
an
astonishing
factor
of
ten6,
there
is
an
acknowledged
challenger
to
the
American
hegemon
and
its
democratic
allies.
The
league
of
authoritarian
capitalist
states7,
most
notably
China,
quietly
build
economic
powerhouses
as
the
din
of
Western
democracies
occupy
the
spotlight
on
the
world
stage.
Instead
of
partisan
infighting,
the
noisy
but
necessary
demands
for
democratic
accountability,
and
the
messy
business
of
checks
and
balances,
the
“China
model”8
rules
with
single
party
efficiency.
The
regime
ensures
that
its
citizens
are
happy
consumers,
that
their
standard
of
living
is
not
too
low,
and
that
possible
dissenters
have
a
range
of
choices
on
a
buffet
of
plush
state
jobs.
No,
their
citizens
do
not
have
political
liberties
or
freedom
of
information,
or
any
kind
of
meaningful
individual
rights,
but
China
doesn’t
care,
and
frankly,
it
doesn’t
seem
to
matter.
In
addition,
they
offer
low‐interest
loans
to
investors,
set
up
Confucian
Institutes
around
the
world,
build
up
poor
countries’
infrastructure,
and
buy
bonds
en
masse.
Authoritarian
capitalist
states
have
plenty
of
powerful
international
friends,
and
continue
to
grow
at
an
unprecedented
rate.
By
these
standards,
the
China
model
states
have
been
resounding
successes.
They
have
effectively
declared
and
lived
by
the
motto
of
Malaysia’s
former
Prime
Minister
Mahathir
Mohamed:
“let
us
not
be
slaves
to
democracy”
(Roy
241).
The
pertinent
and
important
question,
thus,
is
if
the
authoritarian
capitalism
of
China
and
its
adherents
is
a
viable
alternative
to
the
Western
liberal
version,
and
if
it
can
promote
4
“Thus
contingency,
not
inherent
advantages
of
liberal
democracy,
played
a
decisive
role
in
tipping
the
balance
against
the
non‐democratic
capitalist
powers
and
in
favor
of
the
democracies.
The
most
decisive
element
of
contingency
was
the
United
States”
(The
Return
of
Authoritarian
Capitalist,
The
New
York
Times).
5
Since
the
rise
of
Deng
Xioping
6
See
Erich
Weede’s
paper
in
the
bibliography
for
sources
7
See
Roy’s
“Singapore,
China,
and
the
‘Soft
Authoritarian’
Challenge”
8
Used
throughout
this
paper
as
the
exemplar
of
an
authoritarian
capitalist
state
3
long‐term
economic
growth
and
development.
Unlike
the
wayward
experiments
in
communism
and
socialism,
China
has
a
viable
and
working
economic
plan
which
complements
that
of
Western
democracies,
one
that
has
unsurprisingly
propelled
it
into
the
realm
of
the
top
ten
world
economic
powers9.
It
functions
as
a
stable
international
partner
in
commerce
and
trade
to
other
states,
and
successfully
quells
the
dissent
of
its
citizens,
mostly
by
non‐violent
means.
China’s
authoritarian
capitalism
is
a
model
that
supports
a
variation
of
economic
freedom
while
exercising
nearly
total
political
repression.
So,
is
authoritarian
capitalism
a
viable
alternative
to
Western
liberalism?
My
answer
is
no,
and
for
two
main
reasons
that
I
will
explore
in
this
paper.
The
first
argument
focuses
on
the
inseparability
of
economic
and
political
liberties.
Contrary
to
the
China
model
consensus,
economic
and
political
liberties
must
work
in
tandem.
This
is
both
a
theoretical
and
economic
assertion.
I
will
argue
first,
that
a
sustainable
economy
depends
on
recognizing
the
importance
of
basic
individual
rights,
truly
liberal
enterprise10,
and
functioning
free
markets,
for
myriad
reasons.
Second,
that
allowing
for
liberty
in
one
main
sector
and
repression
in
another
distorts
proper
market
functionality,
creates
quasi‐commerce,
and
builds
a
system
that
is
not
liberal
or
sustainable
in
the
long
term.
The
second
major
argument
against
authoritarian
capitalism
is
the
strongest,
and
focuses
on
innovation
and
creativity.
I
will
show
that
it
is
nearly
impossible
to
sustain
or
continue
economic
growth
in
a
state
that
fails
to
stimulate
and/or
allow
for
innovation,
and
that
the
centralized
state
structure
is
itself
improperly
suited
to
these
functions.
As
the
causal
chain
stipulates,
then,
a
state
that
does
not
continue
to
innovate
will
not
continue
to
grow.
As
a
result,
it
will
not
be
able
to
assert
global
power11,
and
does
not
then
pose
a
threat
or
serve
as
a
viable
alternative
to
the
Western
model
of
liberal
democracy.
9
China
is
ranked
third
in
terms
of
GDP
(if
the
Eurozone
is
included)
by
the
World
Bank
and
the
International
Monetary
Fund
figures
for
2008
and
2009.
10
Many
scholars
claim
that
China’s
authoritarian
capitalism
involves
extensive
economic
interventions.
11
It
may
remain
a
regional
power,
but
this
is
disputed.
4
One:
The
Inseparability
of
Political
and
Economic
Freedoms
_______________________________________________________________________________________________________
The
Communist
Party
of
China
(CPC)
rose
to
power
in
the
mid‐20th
century
following
decades
of
civil
war,
starvation,
and
a
breakdown
of
the
state.
The
Japanese
invaded
in
1937,
furthering
complicating
the
political
and
economic
crisis
in
the
country.
Under
Mao’s
direction,
the
communist
regime
fell
far
short
of
its
economic
promises,
and
the
social,
and
political
chaos
caused
by
the
Cultural
Revolution
left
China
in
a
desperate
situation.
Deng
Xiaoping
took
power
after
Mao’s
death
under
the
banner
of
the
CPC,
and
started
to
improve
living
conditions
and
institute
order.
Since
this
transition
from
chaos
to
relative
stability,
the
Chinese
people
have
allowed
the
development
and
perpetuation
of
an
authoritarian
regime,
and
both
inside
and
outside
the
country,
China’s
economic
success
has
bolstered
its
standing
and
given
it
credibility.
The
economic
portion
of
the
China
equation
is
relatively
simple,
and
I
cite
at
length:
“open
up
the
doors‐
kai
fang­
and
let
in
foreign
capital,
technology,
and
management
skills,
guiding
the
foreigners
to
use
China
initially
as
an
export
base.
Engage
with
global
markets.
Let
your
manufacturing
and
distribution
sectors
compete
with
the
best.
Give
farmers
control
over
their
own
land,
and
support
the
prices
of
staples.
Do
everything
you
can
to
lift
living
standards.
Give
your
middle
class
an
ownership
stake
in
the
newly
emerging
economy
by
privatizing
most
of
the
government
housing
stock
for
well
below
the
market
price.
Corporatize
as
much
of
the
state
sector
as
you
can,
and
then
list
minority
stakes
on
the
stock
market
to
provide
an
outlet
for
savings.
But
don’t
let
the
central
bank
off
the
leash;
use
it
to
maintain
a
hold
over
the
currency
exchange
rate
and
other
key
policy
levers.
Keep
ultimate
control
over
the
strategic
sectors
of
the
economy;
in
China’s
case,
these
include
utilities,
transportation,
telecommunications,
finance,
and
the
media”
(Callick
2007)
As
we
know,
this
model
has
worked
well
for
China.
Its
government
has
been
able
to
satisfy
the
majority
of
its
citizens,
and
has
attracted
investment
and
trade
partners
from
all
over
the
world.
China
is
now
the
world’s
third
largest
economy
and
its
gross
domestic
product
(GDP)
is
now
somewhere
in
the
range
of
$4.91
trillion12.
Given
these
figures
and
the
12
Again,
reference
World
Bank
and
International
Monetary
Fund
numbers.
5
resurgent
relevance
of
Arrow’s
impossibility
theorem13,
we
now
have
proof
that
government
as
an
aggregator
of
preferences
will
not
necessarily
be
democratic.
Freedom
House14
rates
China’s
level
of
political
freedom
at
6.5
along
with
Saudi
Arabia,
while
the
United
States
is
rated
at
1.
While
the
U.S.
still
maintains
its
hegemonic
status
and
functions
as
the
insurer
of
democracy
the
world
over,
some
believe
that
China’s
unprecedented
growth
rate
of
9.5%
from
1991
to
1995,
and
nearly
10%
in
2009,
is
proof
enough
that
authoritarian
capitalism
will
soon
become
the
more
attractive
system
and
replace
Western
democracy.
In
1962
Milton
Friedman
stated
that
“economic
arrangements
play
a
dual
role
in
the
promotion
of
a
free
society.
On
the
one
hand,
freedom
in
economic
arrangements
is
itself
a
component
of
freedom
broadly
understood,
so
economic
freedom
is
an
end
in
itself.
In
the
second
place,
economic
freedom
is
also
an
indispensable
means
toward
the
achievement
of
political
freedom”
(Friedman
1962).
With
the
China
model
in
mind
we
can
take
the
inverse
of
this
statement
and
say
that
political
freedom
is
indispensable
for
the
achievement
of
economic
freedom.
The
proof
is
in
the
details.
Even
after
thirty
years
of
open
door
economic
policy,
China
remains
only
selectively
open,
the
regulatory
hurdles
to
register
companies
and
small
businesses
are
dense
and
opaque,
and
negotiation
rather
than
competition
governs
business
practice.
China’s
banking
system
costs
Beijing
approximately
30%
of
its
annual
GDP
in
bailouts,
and
India’s
companies
deliver
rates
of
return
on
investment
that
are
80
to
200
percent
higher
than
Chinese
companies
(Pei
2006).
Why
are
these
negative
indicators
appearing
in
what
seems
to
be
a
thriving
economy?
Pei
says
it’s
because
“Beijing’s
brand
of
authoritarian
politics
is
spawning
a
dangerous
mix
of
crony
capitalism,
rampant
corruption,
and
widening
inequality”
(Pei,
34).
Contrary
to
popular
opinion,
China’s
authoritarian
capitalism
is
something
of
a
misnomer;
competition,
private
property,
and
independent
wealth
creation
are
not
valued
or
recognized.
In
addition,
the
response
from
Beijing
to
“potentially
13
Kenneth
Arrow,
social
choice
theory,
the
theorem
states
simply
that
when
voters
have
three
or
more
options,
no
voting
system
can
be
“fair”
where
fair
must
satisfy
specific
criteria.
14
An
independent
watchdog
organization
that
“supports
the
expansion
of
freedom
around
the
world”.
They
can
be
found
at
www.freedomhouse.org
6
troublesome
private
sector
business
people”,
is
to
recruit
them
“into
the
National
People’s
Congress
and
the
Chinese
People’s
Political
Consultative
Conference”
(Callick
4).
The
Chinese
are
adept
at
recruiting
the
most
qualified
citizens
into
its
ranks.
In
short,
the
entire
economic
system
functions
on
a
Chinese
principle
known
as
guanxi,
that
is,
the
reliance
on
special
favors,
protections,
and
connections
to
maintain
economic
order
and
stability.
China’s
authoritarian
political
tactics,
a
combination
of
“nationalism
and
a
form
of
Confucianism,
in
a
manner
that
echoes
the
‘Asian
values’
espoused
by
the
leaders
who
brought
Southeast
Asian
countries
through
their
rapid
modernization
process…”
(Callick
4)
works
well
to
silence
dissent
and
absorb
uncertainty
into
the
system.
And
though
the
Chinese
people
may
be
forever
content
with
their
ability
to
consume,
their
relative
freedom
and
security,
and
their
lack
of
political
rights,
an
economic
system
cannot
function
sustainably
while
being
subverted
by
the
cronyism
and
protectionism
vital
to
the
regime’s
existence.
The
political
and
the
economic
are
not
separable.
Where
“effective
freedom
of
exchange”
(Friedman
1962)
is
not
maintained,
the
central
feature
of
market
organization
is
void.
Where
there
are
no
political
freedoms,
there
can
be
no
real
long
term
economic
growth
because
a
free
economy
“gives
people
what
they
want
instead
of
what
a
particular
group
thinks
they
ought
to
want”
(Friedman
1962).
Though
the
Chinese
have
done
well
in
predicting
and
supplying
their
citizenry
with
what
they
want,
individual
freedom
is
not
a
throwaway
concept
that
can
be
relegated
to
the
realm
of
the
political
alone.
Lack
of
individual
freedom
corrodes
the
economic
sector.
This
corruption
may
or
may
not
be
enough
to
stifle
China’s
growth
in
the
coming
years,
but
the
massive
efforts
necessary
to
remain
in
power
via
arm
twisting,
pay‐offs,
and
bribes
does
not
seem
a
sustainable
alternative
to
democratic
capitalism,
however
slow
and
weary.
Evidence
continues
to
stack
up
against
“China‐skeptics”15
who
argue
as
I
have
that
China
cannot
remain
competitive
with
its
authoritarian
system
of
corruption.
Only
time
will
tell
if
Beijing
can
continue
to
propel
growth
while
suppressing
political
liberty.
Though
the
15
See
Gordon
Chang’s
“The
Coming
Collapse
of
China”
2001
7
skeptic’s
argument
seems
reasonable,
it
is
far
from
certain
that
the
current
China
model
will
fail
or
that
democracy
must
necessarily
follow
if
it
does.
But
a
second,
perhaps
more
convincing
argument,
is
that
China
will
not
continue
its
ascent
and
serve
as
a
sustainable
political
and
economic
model
because
it
fails
to
match
up
to
its
competitors
in
the
areas
of
creativity
and
innovation.
This
is
the
subject
of
the
following
chapter.
8
Two:
The
Importance
of
Creativity
and
Innovation
_______________________________________________________________________________________________________
When
scholars
focus
on
the
China
model,
they
look
at
the
state’s
incredible
ability
to
grow
at
10%
a
year
while
handling
its
rights‐bereft
citizenry
and
satisfying
world
economic
partners,
all
at
the
same
time.
Indeed
it
is
an
impressive
balancing
act.
Surely
economic
growth
is
important
to
state
power
standing,
and
based
on
the
numbers,
Western
scholars
are
worried
about
the
prospects
of
a
China‐centric
world.
I
would
like
to
shift
the
focus
now
to
a
different
sector
of
state‐building,
and
that
is
innovation.
Surprisingly,
even
though
“the
importance
of
technological
innovation
to
economic
growth
is…
undisputed
by
economists”
(Drezner
3),
not
much
attention
has
been
paid
to
an
authoritarian
state’s
ability
or
inability
to
foster
innovation.
Indeed,
the
China
model
is
lacking
in
its
inability
to
match
up
when
it
comes
to
creativity
and
innovation.
Without
these
two
essential
components,
China
“may
have
to
resign
itself
to
remaining
a
net
importer
of
new
technologies,
and
a
manufacturer
under
license.
It
has
failed
to
produce
a
single
global
brand
to
compare
with
its
neighbors”
(Callick
2007).
Not
one
Chinese
company
is
on
the
Interbrand16
annual
listing
of
top
100
global
brands,
and
in
some
ways,
this
is
not
surprising.
“The
controls
China
deploys
on
the
use
of
the
internet,
the
battles
it
wages
with
its
artists
in
every
field,
the
focus
of
its
education
system
on
rote
learning….
all
of
these
inhibit
lateral
thinking
and
invention”
(Callick
9).
The
fact
that
innovation
matters
to
the
development
and
growth
of
the
nation‐state
has
been
discussed
in
the
economic
and
political
sectors17
as
well
as
in
the
international
relations
sector.
The
basic
argument
runs
as
follows:
“the
governance
structure
of
a
nation‐state
is
crucial
to
determining
the
effectiveness
of
national
innovation
policies,
and
a
decentralized
state
structure
is
a
necessary
…
condition
for
a
nation‐state
to
maintain
technological
leadership.
For
countries
at
the
technological
frontier,
a
centralized
state
16
Interbrand
is
company
dedicated
to
creating
and
managing
brand
value
and
its
global
brands
list
is
ranked
the
third
most
influential
benchmark
by
CEOs.
It
can
be
found
at:
http://www.interbrand.com/best_global_brands.aspx
17
See
How
the
Rest
Grew
Rich
by
Rosenberg
and
Birdzell
and
The
Rise
and
Fall
of
Great
Powers
by
Kennedy
and
“Long
Waves,
Technological
Innovation,
and
Relative
Decline”
in
International
Organization
by
Thompson.
9
structure
will
lead
to
policies
that
retard
innovation”
(Drezner
5).
This
is
one
of
he
most
powerful
arguments
offered
that
detracts
from
the
viability
of
the
China
model.
As
we
know
from
our
own
Western
political
systems,
“if
a
unitary,
central
actor
is
responsible
for
public
investments
into
innovation,
the
decisions
will
be
biased
towards
status
quo
interest
groups”
(ibid).
More
importantly,
“centralized
states
face
a
greater
handicap
in
the
natural
tendency
of
governments
to
stick
with
policies
even
as
their
utility
declines
over
time”
(ibid).
In
contrast,
of
course,
more
decentralized
states
reward
innovation
and
welcome
experimentation.
More
specifically,
we
should
look
at
what
innovation
is
exactly,
and
why
centralized
states
are
unable
to
compete
with
their
decentralized
state
fellows.
Drezner
defines
innovation
as
one
of
three
types
of
activities,
“(1)
The
introduction
of
a
new
product,
or
a
new
quality
of
an
established
good;
(2)
The
introduction
of
a
more
efficient
production
process;
(3)
The
introduction
of
a
new
organizational
type
for
production
and/or
distribution”
(Drezner
6).
Regimes
do
not
deny
the
importance
of
technology
to
economic
growth,
they
just
differ
in
their
approach.
After
all,
“innovation
is
the
holy
grail
of
economic
growth
because
it
raises
the
level
of
output
while
using
the
same
number
of
inputs,
thus
increasing
productivity”
(ibid).
While
there
are
still
disputes
about
whether
conquest
pays18,
a
great
power19
has
historically
gained
hegemonic
status
via
a
near‐monopoly
on
innovation
in
leading
sectors
(Drezner
2001).
With
its
current
political
model,
China
or
any
authoritarian
state,
would
have
to
devise
a
way
to
promote
innovation
without
ceding
their
hold
on
political
liberties.
The
first
thing
an
authoritarian
government
could
do20
would
be
to
implement
a
“demand‐pull”
scheme
and
reduce
innovation
risks21.
In
this
way
the
government
controls
what
innovators
focus
on
and
also
guarantee
the
initial
demand
for
the
product.
Second,
the
government
can
invest
in
basic
public
goods
that
are
related
to
innovative
activity.
Drezner
gives
the
18
See
Does
Conquest
Pay?
By
Peter
Liberman.
19
A
nation
that
can
exert
influence
on
a
global
scale
and
possesses
economic,
political,
military,
diplomatic,
and
cultural
strength.
20
Any
form
of
government
can
use
these
methods
to
try
to
stimulate
innovation
21
See
Jacob
Schmookler’s
“Economic
Sources
of
Inventive
Activity”
in
Journal
of
Economic
History.
10
example
of
spending
on
public
education
so
that
private
funds
can
go
toward
more
specific
projects.
Third,
the
state
can
create
a
framework
with
rules
within
which
innovation
is
profitable.
This
all
sounds
well
and
good,
and
a
sure
route
to
innovative
success,
but
decentralized
states
are
always
more
innovative.
Why?
There
are
three
main
reasons.
First,
despite
knowing
that
it
should
give
to
basic
and
general
funds,
the
state
will
always
want
to
allocate
resources
to
specific
projects.
“It
is
an
iron
law
of
interest
group
politics
that
leaders
will
prefer
transferring
large
rewards
to
targeted
groups
over
small
rewards
diffused
throughout
society”
(Drezner
8).
So,
instead
of
creating
basic
frameworks
and
foundations,
politicians
satisfy
their
constituencies,
or,
where
there
are
no
interest
groups
as
in
China,
satisfy
other
political
demands
before
pledging
allegiance
to
broader
foundational
goals.
This
reversal
is
harmful
and
stunts
innovative
development.
Second,
despite
knowing
that
a
particular
project
is
not
profitable,
governments
will
persist
longer
than
businesses
in
keeping
an
unprofitable
project
alive.
Governments
are
much
more
sensitive
to
political
pressures,
and
as
Rosenberg
makes
clear,
they
have
little
incentive
to
admit
error:
“Any
central
authority
will
have
a
strong
motivation
for
withholding
financial
support
from
those
who
are
bent
on
proving
that
the
central
authority
made
a
mistake,
or
on
imposing
on
the
central
authority
the
cost
of
scrapping
splendid‐looking
facilities
whose
only
fault
is
that
some
interloper
has
devised
more
productive
facilities
or
discovered
that
the
work
done
in
the
facilities
can
be
accomplished
more
cheaply
in
some
other
country—or
perhaps
not
be
done
at
all”
(Rosenberg
in
Drezner
9).
Individual
politicians
become
invested
in
particular
projects,
lowering
the
possibility
of
abandonment.
In
addition,
state‐funded
projects
are
more
likely
to
be
perpetuated
with
the
addition
of
supposed
improvements,
instead
of
being
phased
out
as
would
be
appropriate
in
the
competitive
marketplace.
Third,
states
have
less
incentive
than
business
to
invest
in
pathbreaking
technologies.
As
Olson
argues,
“if
nations
experience
a
long
period
of
stability,
pressure
groups
can
form
11
that
focus
on
increasing
their
relative
share
of
existing
benefits
rather
than
increasing
overall
economic
growth”
(Drezner
9).
In
contrast,
decentralized
states
allow
for
competition
among
innovators
and
regional
governments,
and
create
a
system
of
learning
by
which
different
regions
can
take
on
the
successful
application
of
innovative
ideas
from
others.
“Governments,
democratic
or
autocratic,
are
concerned
with
maintaining
their
power.
This
does
not
bode
well
for
innovators”
(Drezner
9).
In
other
words,
putting
new
projects
to
a
vote
or
leaving
them
in
the
hands
of
one‐party
states
will
not
result
in
innovative
and
creative
flourishing.
There
are
several
historical
cases
that
fall
in
line
with
the
innovation
hypothesis.
For
example,
Germany’s
rise
as
a
technological
leader
in
Europe
can
be
attributed
to
its
success
in
developing
a
competitive
technological
sector.
“The
German
state
invested
heavily
in
advanced
education
in
both
the
universities
and
the
technische
hochschule,
or
polytechnics…
(and)
the
decentralized
structure
of
the
German
government
contributed
to
the
provision
of
the
necessary
public
goods
for
innovation”
(Drezner
16,
17).
In
addition,
the
decentralized
German
state
structure
in
the
19th
century
allowed
for
competition
between
regions
and
the
possibility
for
the
production
of
varying
resources.
Even
after
the
system
was
unified,
the
central
German
government
played
a
minor
role
in
directing
innovation.
On
the
other
hand,
take
Japan,
a
promising
country
that
surprisingly
failed
to
surpass
the
United
States
technologically.
This
can
be
attributed
to
the
fact
that
the
Japanese
“bureaucracy
intervened
too
much
in
the
innovation
process
and
guessed
wrong
about
the
future
innovation
trajectories”
(Drezner
24).
In
1989,
the
Economist
touted
Japan’s
innovate
strengths:
“Japanese
firms
now
have
a
virtual
stranglehold
on
the
technologies
used
for
making
cars,
cameras,
semiconductor
memory
chips,
video
equipment,
fibre
optics,
robots,
quality
steels
and
composite
materials.
Japanese
firms
are
responsible
for
almost
half
of
the
patents
being
filed
around
the
world.
All
this,
and
they
are
only
just
getting
into
their
stride”
(The
Economist
in
Drezner
18).
With
such
a
promising
future,
what
went
wrong?
It’s
quite
simple,
“Japan’s
centralized
state
structure
was
ideally
suited
to
accelerating
growth
through
the
acquisition
of
foreign
technologies.
In
the
process
of
12
catching
up,
however,
the
Japanese
state
left
institutional
legacies
that
hampered
its
ability
to
promote
innovation”
(Drezner
20).
Technological
dynamism
matters
to
state
power,
it
drives
the
economy
forward,
and
makes
its
development
sustainable.
Given
the
historical
successes
and
failures
of
states
to
promote
and
retard
innovation,
and
the
restrictions
of
a
heavy
handed
one
party
system,
it
is
highly
unlikely
that
China
and
other
authoritarian
capitalists
states
will
be
able
to
coordinate
and
direct
innovation
in
a
manner
that
gives
them
a
leading
edge.
13
Conclusion
_______________________________________________________________________________________________________
China’s
prowess
in
the
short‐term
is
dependent
upon
how
innovative
it
is
able
to
become,
and
in
the
long‐term,
on
how
well
its
mixed
political
and
economic
system
will
continue
to
perform.
Whether
or
not
China’s
centralized
state
structure
can
command
innovation
while
keeping
a
firm
hold
on
its
people
and
the
quasi‐free
economy,
goes
to
the
heart
of
the
question
concerning
authoritarian
capitalist
states,
and
only
time
will
tell.
It
is
foreseeable
that
China
will
continue
to
act
as
a
regional
power
and
a
rising
world
power
in
the
near
future,
but
its
infamously
seductive
virtues
have
to
be
able
to
stand
the
tests
of
time.
This
is
highly
unlikely.
Principally,
a
market
economy
must
be
comprised
of
free
actors
who
work
to
maximize
profits
in
a
variety
of
ways.
While
the
authoritarian
capitalist
model
allows
this
to
an
extent,
its
increasing
interventionist
undertakings
will
continue
to
diminish
its
productivity.
Most
importantly,
it’s
clear
that
innovation
is
the
bane
of
authoritarian
states.
Creativity
is
a
menace
to
power,
and
to
allow
the
former
would
be
to
cede
the
latter.
Any
authoritarian
state
must
therefore
make
a
choice
if
it
wishes
to
create
or
maintain
economic
prominence:
ride
the
orchestrated
economic
wave
to
eventual
obscurity,
or
lay
the
groundwork
for
innovation
and
free
exchange
in
all
sectors.
It’s
up
to
China
and
similar
authoritarian
states
to
change
or
be
changed.
14
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