Towards an Ideal Form of Government (Version 4) — Frank Li

Ideal government is a synonymous with utopia, meaning "nowhere." "Utopia" is close to "eutopia" meaning "good place." Sir Thomas More coined it and apparently intended it as a pun to suggest the paradox (or contradiction) of the ideal and real. Is an ideal state even possible to realize?

If "ideal state" is understood as realizable as an end-state, it is likely impossible, history so far being cyclical. But as horizon to be pursued, it is a worthy goal, to be realized by reducing systemic dysfunctionality and increasing systemic functionality. A principal challenge is reconciling individuals and the collective.

Frank Li, being a native-born Chinese and naturalized American and longtime resident of the US, present in interesting comparison of the Chinese and American systems of government and points out the superiority of the Chinese system from a systemic vantage.

But he admits that neither system meets the ideal, even if the Chinese system is more effective based on measures of systemic functionality. Of course, some would question that it is. Moreover, as China becomes more capitalistic, its issue also increase. America's problem is that it is both hyper-capitalistic and "bourgeois liberal," which highly politicizes the selection process and also introduces corruption based on the influence of wealth as an avenue to power.

He does bring out a key point in political theory and organization–selection of leadership. China's system is much closer to the corporate hierarchical meritocratic system that was developed from the military model that Rome exploited to conquer much of the known world at the time.

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Towards an Ideal Form of Government (Version 4)
Frank Li | Chinese ex-pat, Founder and President of W.E.I. (West-East International), a Chicago-based import & export company, B.E. from Zhejiang University (China) in 1982, M.E. from the University of Tokyo in 1985, and Ph.D. from Vanderbilt University in 1988, all in Electrical Engineering

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Dalio: I wouldn’t say [capitalism is] broken as much as I’d say it has problems that have to be fixed. As I said, I’m not ideological, I’m mechanical. I look at everything operationally like a machine and what has been shown is that capitalism is a fabulous way of creating incentives and innovation and of allocating resources to create productivity. All successful countries have uses for it. For example, communist China has chosen capitalism, which has been essential to its growth.

But capitalism also produces large wealth gaps that produce opportunity gaps, which threaten the system in the ways we are seeing now. Wealth gaps give unfair advantages to the children of rich people because they get a better education, which undermines the equal opportunity notion. As the number of people who get equal opportunity diminishes, this reduces the possibility of finding talented people in that population, which isn’t fair and undermines productivity. Then the have-nots want to tear down the capitalist system at a time of bad economic conditions. That dynamic has always existed in history and it’s happening now.

The capitalist system is based on profit-seeking being the resource allocation system, which generally works well but doesn’t always. So, capitalism and capitalists are good at increasing and producing productivity to increase the size of the economic pie, but they’re not good at dividing the economic opportunity pie. Socialists are generally not good at increasing productivity and the size of the economic opportunity pie, but they are better at dividing the pie....

We have to be in this together. The system needs to be reengineered to do this....

One of the greatest problems is that everybody’s fighting for their cause. When the causes people are fighting for are more important to them than the system that binds them together, the system is in jeopardy. This seems to now be happening. Everybody has their cause and they’re almost losing sight of the overall picture. Democracy depends on compromise. It’s the notion of compromise and working together and being able to have a negotiation to get what the most people want rather than have one side beat the other. 

Caution: Ray Dalio apparently doesn't understand the contribution of MMT. In looking at the role of government debt historically, he draws no distinction among monetary systems. However, this could be fixed by changing is concern over inability to pay to inflationary bias that affects expectations and influences the exchange rate. Furthermore, RayDalio doesn't mention the effect of ZIRP on asset bubbles that further increase inequality and unequal opportunity, thereby exacerbating social unrest.

In short, Ray Dalio diagnoses the problem but doesn't understand the system mechanics and dynamics well enough to propose a good path toward a solution from the MMT perspective. He is caught in the dilemma of "sound finance" and "capitalism" versus the need for redistibution to address systemic dysfunction in a liberal system.

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This is actually a reflection of the position of the founding fathers, who narrowly circumscribed the franchise to white men of property, a group that was the time predominantly Protestant Christian. In this sense, the US was established on the basis of European bourgeois liberalism and it has remained so. Now as the demographics shift that condition is being challenged and naturally this gives rise to opposition. So expect more conflict, division, and ensuing social dysfunction.

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