There is fundamentally sound economics behind the authors theory, but there's also really easy to understand logic: IF you have a strong state that controls the economy, then everything that is done must be authorized by the state. This is necessary if the purpose of the state is to extract the nations wealth to profit an elite few. If you have a weak state, then experiments can be tried, and while many experiments will be failures (such as most companies can fail) the ones that are successful really have a lasting and long term positive impact across the whole society. DEC, Apollo and many others failed, but IBM, Apple and Microsoft succeeded.
The other reason this works is that businesses have to accommodate the needs and desires of their customers, their shareholders and their employees. Businesses need all three in order to thrive. Governments don't need to accommodate anyone's desires or needs, short of that which would cause a revolution that overthrows the government... government imposes its edicts using violence while businesses can only attempt to pursuade or entice people.
Naturally this means that government is less interested in accepting economic reality, while businesses have to react very quickly... and if they don't, the entire economy of businesses overall will react quickly (e.g.: your business will get supplanted by one that accommodates the new reality.)
The lesson here for those who wish to enslave a populace and extract wealth from them is rather than have an overarching government with extreme control, allow a great deal of liberty and then impose a %10 tax on it. %10 is better than %50 when its %10 of an economy 1,000 times bigger.
Unfortunately, all states I'm aware of historically, no matter how rooted in liberty, eventually become parasitical and over the years start to extract more and more of the wealth to profit politicians and more and more controlling to make protect that extractive policy.
There are several problem with your theory. Most importantly those in power don't know how long they will stay in power. Dictators don't last that long on average and if you assume there is a 50/50 shot your going to last 10 years investing in the economy may not actually benefit you. Secondly taxes are just one of many ways that the connected extract resources from society, often favors or bribes are an easier target for those with some but not total power.
Finally, the state's real power has little to do with direct force. Functional society's run on softer forms of coercion. Such as propaganda, tribal allegiance, religion, or even entertainment. Consider, over 10 million people live and work in america without permission from the government to do so. And even those with citizenship the largest crop in many states is marijuana and such income rarely makes in on the old tax forms.
> government imposes its edicts using violence while businesses can only attempt to pursuade or entice people.
This is only true where a strong state exists to enforce monopoly of violence. Businesses are perfectly capable of imposing edicts by violence where there is none.
Not really disagreeing with you, but I think it is important to remember that these governments or companies are comprised of individuals following their individual incentives. Those incentives cover a huge range of things beyond simple financial gain.
So while 10% of something 1000 times bigger is definitely better than 50% of the base, that isn't really the issue. It is not as though in an extractive government the loot is divided at the end of the year according to rank or something. It's a bit more catch-as-catch-can.
Basically, and I guess this is what the book is arguing, in the absence of the kinds of institutions that enforce or engender inclusive policies and practices, people do whatever they can get away with.
While the Republicans gripe about "high taxes", it doesn't explain the success of the Nordic countries with their high taxes _and_ high standard of living.
The other reason this works is that businesses have to accommodate the needs and desires of their customers, their shareholders and their employees. Businesses need all three in order to thrive. Governments don't need to accommodate anyone's desires or needs, short of that which would cause a revolution that overthrows the government... government imposes its edicts using violence while businesses can only attempt to pursuade or entice people.
Naturally this means that government is less interested in accepting economic reality, while businesses have to react very quickly... and if they don't, the entire economy of businesses overall will react quickly (e.g.: your business will get supplanted by one that accommodates the new reality.)
The lesson here for those who wish to enslave a populace and extract wealth from them is rather than have an overarching government with extreme control, allow a great deal of liberty and then impose a %10 tax on it. %10 is better than %50 when its %10 of an economy 1,000 times bigger.
Unfortunately, all states I'm aware of historically, no matter how rooted in liberty, eventually become parasitical and over the years start to extract more and more of the wealth to profit politicians and more and more controlling to make protect that extractive policy.