Modern authoritarian regimes forsake isolationism

In the centrally planned socialist autocracies of the past century, the state was in charge of everything, with only a few exceptions though: beginning with national defense and economic policy and ending with the production of irons and school uniform. Unlike buyers of second hand cars, individuals in the socialist block were well aware of the characteristics of the consumer goods produced in the country and the quality of public goods such as medical or education services offered by the regime.

At the same time, they were much less aware of the characteristics of public goods and consumer goods offered in the countries which were considered ideological adversaries to the ruling socialist regimes. Which consumer goods basket can afford a typical Frenchperson? Whether Canadian medical services are better or worse? How good is education at universities in Finland?

The socialist autocracies institutionalized isolationism, reducing the opportunity of the individuals to come to conclusions on their own about the quality of their life. The individuals in the isolated states only could guess whether the "car" they owned is good or bad.

To be able to compare, the individuals most often had to rely on what the government told them. The government did its best to convince them that the people in the capitalist world were plagued with inequality and poverty, whereas the socialist part of the world created high-class living standards. The socialist leadership could enjoy a relatively great popularity for a certain period of time. In other words, the regimes sought a political rent by using isolationism to create information asymmetry.

However, this policy lacked cost-efficiency: not only did the reliance on isolation result in less information of the living standards in the developed countries, but it also hampered considerably imports of cutting-edge technologies from advanced economies and provided catastrophically low opportunities to obtain high-quality education in other countries, as well as purchase equipment there. The economic backwardness and relative poverty entrenched deeper and deeper by virtue of institutional flaws of the socialist (centrally planned) system. Since all socialist countries had catching-up economies whose development was extremely sensitive to the transfer of knowledge and experience from more developed countries.
However, not only does the relative poverty caused by development standstill play a bad-result role, but it also can create more serious problems.
Unlike rich countries which can relatively easily meet losses from major shocks, poor economies tend to experience much more painful effects, if not catastrophic consequences. Falling prices of the principal export commodities, military conflicts or major natural disasters like earthquakes can be more dangerous, because the resulting relative losses are , if a country is poor, much higher than the damage any rich country may sustain from a similar shock. If a typical consumer earns $1500 a month, then with $500 per capita losses he/she cannot afford a new furniture or a car. If the average income of an economic agent is only $600, then the same $500 per capita expenses would force his/her family to starve. The price shock which in the mid-1980s lowered substantially the price of the mineral resources exported from the Soviet Union, caused a huge damage to the Soviet economy and catastrophically reduced the support to the communist regime.

Therefore, not only did isolationism fail to save the socialist autocracies from accumulated problems and the need to undertake reforms, but it also created more difficulties. The isolation was most likely backed up the mounting support to communist parties. In the long run, however, when the known shock developments took place, the regime encountered very large-scale problems and the political support was lost.

Perhaps, the modern authoritarian regimes don't rely, with only a few exceptions, on isolationism given the Soviet-block's historical experience.

Ivan Lyubimov, senior researcher.

The comments are based on Ivan Lyubimov's article published in Vedomosti newspaper