Mirage Economics
Mirage Economics
How Satellite Data is helping to Bust Dictatorships' Deception
Well, well well we've got ourselves in a bit of a pickle, haven't we? What once looked like a hopeful landscape of liberal democracies has turned into a buffet of eroding weak democracies and a surge of strong-arm rulers and their homies, popping up just about everywhere you look. (So much for that 'end of history theory, eh, Fukuyama? Haha get wrecked) Now, these would-be despots sing the praises of 'mighty' governments, claiming they're just the ticket for our economic worries. Or that the knotty problems of our age could never be untangled by democratically elected representatives. No, no, it's always gotta be a lone ranger, typically of the male persuasion, to ride in and save the day. Spoiler alert: this narrative isn't all it's cracked up to be.
The Current State of Affairs
Sadly we are NOT having a good time those of us who are fans and know the benefits of living in democratic countries with stable and somewhat good institutions (peak performance so far if you ask me) More and more countries are falling behind on this, and many factors can be attributed to it.
And if we look at this from a historical perspective all the way from the late 1700s of course we are better but c’mon that’s not relevant just look at the peak we had during the 2010s and now we are seeing a decline in Liberal democracies while electoral autocracies seems to increase in size and powers.
This is not an ideal situation, also the rise of far-right movements in Europe, the US, and in some developing countries as well (like Chile which almost had a president whose father was literally a nazi) Or the weak institutions and fragile democracies such as El Salvador where the elected president borough in Armed Soldiers to the Congress to get his budget proposal approved, or Perú where it’s president tried to dissolve congress and stage a self-coup and when his attempt failed he tried to escape to the Mexican embassy but got arrested because Lima’s Traffic is such a shitshow he couldn’t reach there on time.
Also, we have to consider the effects of populists within countries stemming from far-right and far-left groups (depending on the country) that base their entire political ideology and careers on claiming democracy is not enough or that the current institutions are “corrupt” or held hostage by elites while they themselves become more and more powerful and keep power to themselves. Which sadly has been on the rise globally as well with more and more leaders using this despicable ( but effective ) handbook to gain power while established political parties are swayed by charismatic leaders and promises of themselves riding on the coattails of these figureheads not knowing in the long-run a populist is just a masked autocrat using democracy as a platform for their own personal gain. Also, we cannot deny the connections and funds that these movements receive from totalitarian regimes like many European far-right parties and politicians receiving support from the Russian Regime due to their goal of undermining a unified and strong Europe.
The Effects of Surveillance Capitalism or how it’s all Zuck’s Fault
Over the past few years, we’ve seen the behavior-modifying effects of social media that have indeed contributed to the erosion of democracies worldwide. Cases like Cambridge Analytica, (and possibly many others we don’t know about) which have manipulated user data to target and influence people's political views during the U.S. presidential election and the Brexit campaign(get wrecked innit), have shown the extent to which these platforms can shape public opinion and voter behavior.
Sadly, this manipulation is often opaque and unregulated which undermines the very premise of democratic systems: informed citizens making free choices. Social media platforms, largely unchecked, have become echo chambers, amplifying divisive ideologies and fostering political polarization. We know that this can lead to misinformation, deep social division, and even violence(here’s looking at you, January 6 and January 8 crappy insurrections).
Furthermore, the exposure of such manipulative practices and the rise of surveillance capitalism has resulted in widespread mistrust, not only towards these platforms but also towards democratic institutions themselves. The realization that these democratic processes could be influenced indirectly by corporations has fostered cynicism, apathy, and disillusionment in many, calling into question the effectiveness of democracy as a governing system, and the rise of some very wacky conspiracy theories as well. So, while the full extent of these effects is still not entirely understood, the implications for global democratic health are concerning.
And this is not even considering the impact and effects widespread Generative AIs will have on the state of Democracies because now more and more noxious players on the global stage could hire fake news agencies to produce deep fakes and spread them cheaper, faster and with more significant risks than ever before.
Order Under an Iron Fist
We live in a globalized world (fortunately) and thanks to technology and the global supply chain that keeps us all together and also we live in a technologically advanced era that makes the free flow of information almost a rule of nature. Besides, probably the algorithms keeping Google, Facebook, and other tech giants running, there have probably been leaks of every government there is of every institution in one way or another… information craves freedom ( and so do humans)
But there’s nothing that troubles more an authoritarian regime than freedom of information, so you have two pathways to control the flow of information on one hand you can follow the Russsian example of exponentially increasing the disinformation through state media, online presence, and very clever use of language to make everyone doubt everything and just claim everything you say to be the only truth while everything else is just a plan of the enemies against your truth. Which is something of a victory through chaos kind of strategy or what some call Unconventional Warfare.
Then you can follow the Chinese playbook and that’s just suppressing brutally any expression of dissent within your country, brainwashing them through the education system, creating the world’s most complex and complete surveillance system to monitor your population, and finally generating a social credit system that pins people as snitches of each other and guides the behavior of the people through a clever incentive program.
And generally, this is how the world works most autocracies in today’s world function somewhat following and adapting these two techniques to their own regions and idiosyncrasies, so much so that both of these regimes are already exporting their control systems to other countries which is a troubling sight of the spread of the authoritarian cancer into more countries.
The Great Wall of Numbers: China's GDP Conundrum
Sadly the “economic miracle” of China and its soft power influence over Eurasia, Africa, and Latin America through investment projects have been slowly but surely solidifying its image as the second economic world power. And no doubt China has come a long way since the days of hunger and misery thanks to the failures of “The Great Leap Forward”(If 55 million deaths are considered a leap forward … damn)
But still economic prosperity in China is so tied to the Regime of the CCP that it is inevitable that economic numbers for them are also another tool for the propaganda of their harmful ideas. So we kinda have to take things at face value when it comes to self-reporting economic numbers. Especially since the rise of countries like China as the planet’s manufacturing HUBs thanks to their cheap labor and incentives to offshore factories to their lack of human rights and worker rights make production in Chinese sweatshops a competitive advantage for companies migrating their operations there. So of course we would believe the economic might of China since most of our stuff is made there.
Now, In most democracies, GDP, yearly growth, and all of those numbers can be trusted, they come from various decentralized sources and are aggregated by central banks and economists and there are checks and balances in most cases to make the claim that most reported numbers from democratic and free countries are somewhat trustworthy and believable. But when it comes to authoritarian regimes that is not the case and you just have to believe what the regime says about its economy and somewhat guestimate based on what they say and other factors.
I am the eye in the Sky, Looking At You
Luckily thanks to the great research by Colombian Economist Luis Martinez at the University of Chicago has shown that most authoritarian regimes are blatantly lying and covering up their economic numbers to showcase themselves as more powerful and robust economies than they actually are. And the way Martinez has done this I find it incredible. He used satellite data of nighttime lights to gauge economic growth and development in different countries throughout the 90s up until the 2020s.
And the results are very eye-opening on average authoritarian regimes reported GDP growth on average of almost double the reality according to the satellite data. And before you start questioning the research firstly here is the original paper reading it you can see the details of the methodology and the robustness checks for the results of the data and all that delicious statistical backing. But it is just such a crazy concept because yeah, energy is the lifeblood of civilization and a clear indicator of economic growth, you have more income people can afford electricity in more places of their countries, then more retail and stores and economic development start happening, public lights go farther away cities grow and so on and so forth. So, nighttime lights and satellite imagery are a great proxy (though in the paper I think is an instrumental variable, let’s not bore you with that) for economic development.
And analyzing the trends of growth in other countries and then comparing how much the reported growth numbers differ from the nighttime lights in countries gave Martinez incredibly powerful results that I don’t think enough people are talking about it. Because based on these numbers it would position China in a VERY different place alongside other regimes such as Russia in a very disfavorable place to be as influencing powers over other countries to be suede to support their invasions or other atrocities that have been committed by them.
Also not counting the impact on investors, banks, and other financial institutions that have thrived and profited from supporting directly or indirectly the rise and growth of many different authoritarian regimes in the past decades.
Democracy, Freedom, and True Prosperity
Now what about democratic and free countries, based on the same research with only a few exceptions of potential over-reporting in democratic countries (Peru, you’ve been a naughty boy) Martinez’s research shows that democratic and free countries have transparent and more consistent data.
But there is also another point to be taken into consideration is that economists have known for some years now that democracy IS a force of economic prosperity in today’s world even though it seems like most people are not aware of this. Luckily research done by a team of economists from MIT, Columbia, Boston, and Chicago University has a very solid case to back that claim(you can read the paper here)
The “problem” is that the results show that it takes approximately 25 to 30 years for a country to reap the benefits of having good democratic institutions for economic growth. This is a tall order when you compare it to the seductive speech of populists, autocrats, and other strong leaders claiming THEY are the only solution and that their path is the only one for economic, political, and social prosperity. Making very hard for democracy to defend itself especially if not a lot of people are aware of these results from research (unless more people read about them in newsletters such as this :) )
The Comeback of Democracy?
I mean I sure hope so, like we’ve seen here before authoritarian regimes are bad in all ways, from individual freedoms to social prosperity, to economic progress but still liberal democracy is not making a comeback even though it is the best option for societies to build their governments and institutions. Hopefully, more and more research gets published and publicized, and passed around not only in nerdy economic circles but to policymakers, content creators, and even meme Instagram pages so that more and more people are aware of the reality instead of being influenced by the propaganda machinery of these regimes.
The mirage of economic prosperity needs to be dispelled and not for some geopolitical 5-dimension chess play but to be able to remove these authoritarian regimes for the sake of the people living within these countries which is almost 71% of the world population so to be able to reduce their suffering, increase their freedoms and eventually also their economic prosperity should be a goal that we all should strive for. We have seen the first cracks in recent times with the Invasion of Ukraine the world’s second-largest Army has Struggled for almost 2 years to take over a country with a smaller military, less population. So maybe sooner rather than later these regimes will start to fall and democracy shall rise once again.
Also, the challenge is safekeeping and guarding the already established democracies against threats to their institutions and governments especially from bad actors inside the government who have a thirst for power and a disregard for democracy.