Saturday, May 02, 2009

Rules are for Suckers?

David Dayton at Silk Road makes a few observations about China:

This isn’t a slam on China—this is just what really happens here. Rules are considered to be for people that are being watched. Rules are for people that don’t have the ability to get around them.
His observations very much mirror my experience. While often comical, this lackadaisical enforcement and attitude towards the law will be one of the key impediments to China's development. Selective enforcement quite easily fuels corruption. Further, without the rule of law, there is uncertainty for business making it a more hostile environment for investment and expansion by businesses. People start spending more resources currying political favor than they do creating value. This isn't only a threat however to China.

Back in the US, Greg Mankiw quotes a WSJ article:
"Like many others I made the mistake of buying what I believed was 'value,'" Mr. Gwin says, adding that investors who bought at the time believed the loans were worth more than their market price. "We did not contemplate having our first liens invalidated by a sitting president," he adds.
It should be of extreme to all that, as Mankiw notes, "politics may start to trump rule of law." Yesterday, we even saw US President Obama state that he would choose a replacement for Supreme Court Justice Souter that would be more "empathy and understanding" (AP). Times are a changing, but I'm afraid that they may not be for the better.

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