Monday, 23 November 2009

Authoritarian Capitalism

Nat O'Connor: A Wall Street Journal article raises the question of whether authoritarian capitalism is a robust alternative to liberal democratic capitalism.

In the first ten years after the Berlin Wall fell, there was an initial rush of democratization, but since 1999 to 2009 there has not been an increase in the proportion of liberal democracies in the world (which remains at 46 percent). And countries such as China and Russia, as well as highly developed countries like Singapore, are examples of resilient authoritiarian regimes despite the fact that they adopted capitalist economic systems.

I think this is an important 'big picture' question. For example, it challenges the long-held assumption that global free trade with non-democratic regimes is OK. It was always assumed that internal prosperity and a growing middle class would lead to more freedoms and ultimately democracy in those countries. (Note, I wouldn't throw out this argument just yet, but it is open to challenge as the evidence develops).

One particularly interesting comment came from Prof. Francis Fukuyama. Talking about China's unexpected success at developing a capitalist economy while keeping one-party rule, Prof. Fukuyama said: "They've mastered economic development under authoritarian circumstances, and you can argue they've done it faster because they're authoritarian,"

If it is the case (and it's an 'if') that authoritarian regimes can be more effecient at capitalism than liberal democracies, than we perhaps need to make it very clear that we are not willing to sacrifice democratic freedoms for more efficiency. This may sound obvious, but it is not an argument that has been much discussed or fully articulated, because of the assumption that liberal democracies have the most efficient capitalist economies. That is, we've never had a situation where the indicators of capitalist success were in tension with the indicators of democratic strength.

Of course, the relative 'success' of capitalist economies around the world depends on how they are measured. And much of the success enjoyed by China and Russia may rely on GDP growth measures (which include for example polluting industries, resource depletion, arms manufacturing and poor labour conditions) rather than more nuanced socio-economic measurements. This in turn reinforces the arguments for finding and developing other ways of measuring economic performance and social progress, such as the recent work of Stiglitz, Sen and Foutoussi.

We may ultimately need alternatives to GDP, not just to direct our economies in a more progressive direction, but also to explain why we regulate capitalism to protect democracy.


Antoin O Lachtnain said...

It is true to say that whilst some countries have developed without democracy for sure. But is there any country (or 'economy' as we now call it) which has developed without developing a middle class and a consumer-oriented culture?

Nat O`Connor said...

— Antoin,

Probably not.

But we can probably find consumer culture in many of the world’s capital cities, without a strong sense that the urban middle class has the clout or the numbers to usher in liberal democracy; e.g. Tehran, Beijing, Cairo or Moscow.

However, that’s exactly what is at stake: the theory that a self-interested middle class will become an agent for regime change within a country if it is denied freedoms or subjected to too much abuse from its rulers.

Today's Irish Times has an article about protests in China which is evidence against the authoritarian capitalism thesis.

But developments such as Iran’s proposal to move the capital out of Tehran and create a new capital city in the heart of a rural, conservative region, suggests a plan to placate the denizens of the city by granting some liberty, but also ensure that they are not in a position to threaten the regime itself.

Antoin O Lachtnain said...

Maybe consumerism, rather than democracy is the engine of social progress? Practical choices about where we work and what we consume may be as important in practice as voting every five years is important symbolically.

Mack said...

Nat -

"than we perhaps need to make it very clear that we are not willing to sacrifice democratic freedoms for more efficiency"


There is no doubt that authoritarian regimes can be more efficient, but with the exception of Singapore they are pretty much all developing nations, playing catch up and following well trodden paths. Will they be able to innovate, experiment, fail and start over the way Western democracies can?

Singapore is beginning to liberalise slightly, if not in terms of democratic freedoms, at least the personal restrictions are being loosened. For example - males can grow their hair long today, something that was banned in the past. The government are finding with a developed economy they need to encourage the creativity of their citizens and not restrict it. Over time, shouldn't we expect trends towards ever greater freedom to coalesce with greater political freedom too? Particularly as civic instituitions get created, and built as people exercise their personal freedoms?

Which might also be an important point, democracies without strong civic instituitions tend to struggle and fail. They appear to be a prerequisite for effective liberal democracy.