Free How Capitalism Will Save Us by Steve Forbes Page A

they did corporate crooks like Enron’s Andrew Fastow and Jeffrey Skilling. Fastow and Skilling went to jail. Kanjorski is still in office.
          REAL WORLD LESSON      
    There will be dishonesty under any system. However, capitalism’s dependence on winning the trust of consumers, as well as the rule of law, discourages corruption and encourages the most transparency
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    Q I F CAPITALISM IS MORAL, THEN WHY DID FREE-MARKET REFORMS APPEAR TO INCREASE CRIME AND CORRUPTION IN POST-COMMUNIST RUSSIA?
    A B ECAUSE RUSSIA IS NOT YET A DEMOCRATIC FREE-MARKET ECONOMY .
    F ree-market critics love to hold up the crime and corruption of post-communist Russia as emblematic of the fundamental immorality of unbridled capitalism. Yet Russia’s economy is hardly a democratic free market.
    In 2009 the Heritage Foundation, the noted free-market think tank, gave Russia’s economy a 50.8 percent rating, calling it “mostly unfree.” 18
    Putin’s authoritarian “managed democracy” is more intrusive in the economic lives of its citizens than that of his predecessor, Boris Yeltsin. True, things have improved since the lawless 1990s. The Russian economy is growing. There are privately owned businesses and an increasingly affluent middle class. The tax code has been drastically simplified. Steps have been made toward the creation of Western-style property rights. But there is still not the kind of rule of law and property-rights protections that we take for granted in the United States. Nor does Russia’s court system effectively mediate disputes.
    Russian economist and political leader Grigory Yavlinsky has noted:
    “We do not have independent courts in Russia. … The law enforcement
    system is corrupt and has been transformed into an instrument of revenge and the grabbing of property.” 19
    It is still not easy to launch a new business in that country. According to the Heritage Foundation, getting a new business license still involves plenty of red tape, taking “much more than the world average of 18 procedures and 225 days.” 20
    Small wonder that Yavlinsky, while acknowledging reforms, has derided his nation’s system as “phony capitalism”: success or failure in the Russian marketplace depends on political favors, i.e., paying bribes and protection to officials or their cronies. The contrast with Western-style democratic capitalism, he says, is “stark.”
    We discuss later in this chapter that Russia’s oil wealth has helped to create this appearance of affluence—the “phony capitalism” described by Yavlinsky. Russia’s corruption is the product not of free markets, but of an authoritarian government that hasn’t permitted them to flourish.
          REAL WORLD LESSON      
    Government-dominated “phony capitalism” suffers from the same corruption as other state-controlled societies
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    Q W HY HAVE R USSIA , C HINA, AND OTHER NATIONS FAILED TO DEMOCRATIZE FOLLOWING RECENT FREE-MARKET REFORMS IF CAPITALISM PROMOTES MORE OPEN SOCIETIES?
    A D EMOCRATIZATION OCCURS FASTER IN SOME COUNTRIES THAN OTHERS .
    F reedom House, the nonpartisan organization that monitors political rights around the world, in 2008 announced a disturbing finding: for the first time in years, there had been a “setback in global freedom” in one-fifth of the world’s countries. Yet many of the backsliding nations, such as the former Soviet Union, had instituted free-market reforms. Other countries, like China, continue to have “closed” political systems despite economic liberalization. According to the organization, this decline continued as of 2009. 21
    These and other developments have been held up as evidence that free markets don’t bring free societies after all. The
New York Times
declared that “both liberal and conservative intellectuals, even once ardent supporters, have backed away” from a belief in capitalism as a democratizer.
    Then there are those like Yale law professor Amy Chua who maintain capitalism