What does Austrian economics imply would be a rational political policy of the U.S. toward Russia? Austrian economics highlights among other things the importance to economic development of secure property rights. If the latter are improved, the economy tends to improve. Hence, if property rights are poor in a country, that country has an incentive to improve them in order to increase its wealth. The political system may block this incentive from happening, but economic forces will impel political changes, even if it takes revolution.
Political roadblocks can eventually be overcome, and they do not need U.S. meddling. That will generally harm property rights by introducing the powers of the U.S. into the foreign land. The U.S. may have dictated a constitution to a prostrate Japan, but that was a far from typical situation; and it’s not going to be replicated.
Russia overcame one huge roadblock when it changed from communism into its current form. However, it has a very long way to go in order to construct a legal system such that property rights are secure and contracts are enforced with a high degree of certainty and stability.
Russia has relatively poor property rights (see The International Property Rights Index 2016). Another index with the same finding is here.
Russia’s property rights had to have improved from the time it was communist, but they are still poor. Russia’s per capita GDP dropped sharply after its revolution (1989-1997). It has since risen to a new high.
Along with the obstacles, Russia has a big incentive to improve, which is the lure of higher incomes and fulfillment of dreams of betterment along many dimensions.
The U.S. government should exercise patience. It should deal with Russia on the basis of friendship. Russia and Russians will on their own migrate to stronger property rights, because this is in their own interest. If they migrated from communism to their present system, they can continue that process. The U.S. doesn’t have to force any issue or attempt to pressure Russia. Russia has its own culture, history and civilization. It will change at its own pace. It will seek better methods when it wants to. China altered its system of property rights by itself. Other countries have done likewise. The American system is by no means perfect. Indeed, our system has been noticeably worsening since about the 1960s.
The national security state didn’t understand the critical role of property rights during the Cold War when it over-estimated the strength of the USSR’s economy. The national security state has a bias to using pressure and force. It typically wants to change a foreign government and control it. It ignores the fact that long-run economic incentives will work very large changes over time. The national security state is staffed by people whose fields of study (politics, law, international relations, military doctrine, history, language) typically ignore the economics of property rights. The study of law might lead them in the correct direction, but it hasn’t, because law has been reduced to the notion that it’s what the state says it is. Important law and economics relations are slighted.
4:03 pm on June 30, 2017
