Strongman economics aren't working for China and Russia
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Illustration: Natalie Peeples/Axios
In the battle between strongmen and democracies, elected governments are pulling ahead — at least economically.
Why it matters: After the financial crisis of 2008 hobbled the U.S. and much of the West, China's strong economy prompted a flurry of commentary about the benefits of its style of state-led capitalism, which eliminated the inefficiencies that always accompany democracy.
Reality check: More than a decade later, the economic downside of unelected, unaccountable strongmen is on display.
The latest: Russia's ruble dove again on Monday and its central bank sharply raised rates in an emergency meeting Tuesday, as the currency hit the lowest level since the immediate aftermath of Russia's invasion of Ukraine. (It's fallen 37% over the last year. Since Russia's invasion of Ukraine, it's about 20% lower, though at times it's been down by as much as 50%.)
Separately, China's financial system also wobbled Monday, as a major financial entity with ties to the country's troubled housing industry appeared to miss payments to investors, triggering worries of growing financial contagion. China's central bank cut rates in a surprise move Tuesday.
- Turkey's strongman leader, meanwhile, acknowledged in an official statement the crushing burden of inflation in his country, brought on by a 70% collapse in the value of Turkey's lira against the dollar over the last three years.
Between the lines: While all countries go through economic ups and downs, the troubles of Russia, China and Turkey, in particular, appear inseparable from catastrophic decisions made by the strongmen in charge.
- Vladimir Putin's decision to attack Ukraine has made Russia a pariah on the world stage and estranged it from Europe, formerly the main customer for its commodity-based economy. That means it's increasingly forced to pay for massive military spending with large-scale borrowing and by burning through the country's national wealth fund.
- Xi Jinping, who swept aside decades of precedent to install himself as China's leader for a third straight term (and is now expected to rule for life) launched crackdowns on the country's key industries, imposed inhumane COVID-related lockdown policies and shifted the party's focus from prosperity to nationalism — all of which have undermined economic confidence and sapped investment.
- Turkey's Recep Tayyip Erdoğan — in power since 2014, and recently re-elected in a vote widely viewed as engineered for his victory — has watched the country's currency lose three-quarters of its value over the last five years, as his central bank long refrained from raising rates in part because of the president's strange personal theories about inflation.
The bottom line: The U.S. economy isn't perfect. Neither is democracy. But compared to the other systems on offer, having the ability to vote out erratic and ineffective leaders seems to be serving us pretty well.
