Good Capitalism, Bad Capitalism Wealth of Nations -Democracy *Democracies function better economically because dispersed power rejects
oligarchic capitalism and the government has less whimsical control over the economy. *But China proves that democracy is not essential to economic growth. *Economic growth leads to democracy because larger middle classes demand political freedoms. The private business sector also builds skills useful for democratic governments. *Democracies could best promote democratization by promoting the free market overseas and by staying engaged with the developing world The Eastern Bloc economies were both state-directed and oligarchic. Some countries suffering from oligarchic capitalism have reverted to stronger state control (South America and Russia). In Palestine, oligarchic Fatah was popularly overthrown and replaced with Hamas, which has had mixed results. In Iraq and Palestine today and Latin America and Africa 20 years ago, democratic revolutions failed to establish fair societies and economies. Instead, democratic governments created or perpetuated oligarchic capitalist systems. Democracy alone is of little value unless it is liberal democracy, with checks and balances on all branches. Illiberal democracies also give extremists a political voice. Therefore, U.S. insistence on foreign elections should take a backseat to calls for economic liberalization. It may be necessary for some countries to go through an authoritarian stage between oligarchic capitalism and free capitalism. Japan and Europe both suffer from high unemployment and low economic growth. The EU and the Euro were supposed to help European growth, but have been underwhelming. The problems largely stem from the fact that both areas have caught up to the U.S. and can no longer imitate to grow: They must innovate. And this is difficult among big firms.