Wednesday, March 16, 2011

Tragedy in Japan

Donate for a noble cause and do you part in helping Japanese people overcome the misery brought by the earthquake and tsunami. Donate to The Nippon Foundation, an NGO working in a wide range of domestic and international activities, including health and welfare projects, educational and social issues, maritime development, and protection of the marine environment.

[FYI: My friend Shota Nakayasu is working in The Nippon Foundation.]

Political system and economic liberalization

Giuliano, Mishra and Spilimberg argue that economic reforms may scare politicians, but democracy and economic liberalization generally go hand in hand. Political liberalization and domestic financial, capital account, product markets (electricity and telecommunications), agriculture, and current account transactions tend to move together. But, look at political liberalization and trade. Trade seems to have increased, irrespective of political liberalization. Up until 1990, decrease in political liberalization actually boosted trade. Then political liberalization increased but trade performance continued increasing.

The bottom line is that democracy is good for structural reforms, but the reverse is not true—economic liberalization introduced by autocracies does not cause a move to democracy. Moreover, there is no foundation for politicians’ fear that voters will punish policymakers who implement financial sector reforms or reduce fiscal deficits.