Exposing the Inherent Contradictions of Authoritarianism

Karl Marx redefined the debate and thinking on capitalism by pointing out its inherent contradictions. Considering the role of labor, production incentives, and the nature of competition, Marx argued that capitalism would generate a tremendous amount of economic wealth. Yet, by putting that wealth in the hands of a few, capitalism would ultimately collapse under its own weight.

Marx’s theory has been refuted by the advance of new institutional economics. Institutions of a market economy, such as property rights, have proven effective in providing the foundation for fostering inclusive and sustainable economic growth. Hernando de Soto, for example, clearly showed how market economy institutions lift people out of poverty[1]. While no longer appropriate for capitalism, Marx’s attention to the contradictions of an economic system remains relevant today if applied to authoritarian regimes.

In fact, the current economic crisis is exposing the internal contradictions of authoritarian regimes. On the one hand, authoritarian countries can (although not always do) turn out impressive economic growth figures, on the other – their growth strategies are not as sustainable over time and their legitimacy is significantly shaken when they exhaust their short-lived economic potential.

The Weakness of the Authoritarian Model

As Marc Plattner has recently noted, authoritarian countries are being battered by the waves of the current economic storm to a much higher degree than established democracies[2]. In the process, they are beginning to face legitimacy tests as populations grow impatient with the inability of their leaders to deliver economic goods.

For instance, proposals to increase tariffs on imported used cars in Russia, in large part to protect domestic manufacturers, sparked public protests across the country. In Russia’s Far East, these protests threatened to spill over into larger public outcry over low pensions and low quality of life, and riot police were flown in from Moscow to disperse the crowds. In light of the worsening economic crisis and the huge unemployment problem, the Chinese government is also deeply worried about social stability. In February 2009, more than 3,000 chiefs of Public Security Bureaus from all across the country were summoned to Beijing to participate in a specialized training program to deal with stability issues.

The roots of the modern authoritarian success story were detailed by Bruce Bueno de Mesquita and George Downs who argued that authoritarian leaders have figured out how to restrict political liberties while offering economic benefits in exchange[3]. The key, however, is that the model holds as long as countries continue to supply economic benefits, but it breaks down when they are unable to do so. Then, one should expect to see demands for political and economic liberties mount.

In light of this, the inherent contradiction is that authoritarian countries eventually come to the point where they are unable to supply those economic benefits; or, alternatively, they come to the point when they can no longer provide substitutes for public demands for freedoms. The reason has to do with the nature of their economic growth– it is not sustainable over time because it is not based on fundamental market economy institutions.

Riding on the wave of economic prosperity resulting from the natural resource boom of the last decade, many of the authoritarian governments have essentially received a free pass to do as they like. In fact, in terms of political reforms they could not go wrong – regardless of decisions and steps taken, their economies continued to grow, generating employment and increasing incomes. As such, it was easy to expel foreign investors, easy to pick favorites in domestic industries, and easy to silence the critics of democratic reversals.

But today, as the downturn hits the real economy, authoritarian leaders face difficult questions with no ready answers. What happens when the numbers of unemployed swell and take to the streets, or when the lack of competitiveness of domestic industries becomes painfully evident? What happens when national currencies have to be rapidly devalued and the prices for the basic goods and services rise sharply?

The absence of institutions of a market economy is eroding the economic victories of the past decade and authoritarian leaders are increasingly worried about both the economic downturn and their political legitimacy. These doubts are not only coming from foreign organizations, often muted domestically, they are also coming from the inside.

For example in Russia, academics from the Higher School of Economics and others have published a number of articles recently evaluating the Russian response to the economic crisis and outlining political reforms that must be put into place if the country is to move forward. Among propositions is reform of the centralized system of government, which would repeal appointment of governors and introduce direct elections instead. At the same time, companies continue to complain about bureaucratic corruption, which has changed, because of the crisis, into something that not only increases the costs of business but also that can put companies out of business entirely.

In Venezuela, the private sector continues to grow skeptical about President Hugo Chavez’s efforts to stabilize the economy. His recent decision to send the National Guard to occupy the rice production facility owned by Polar Enterprises is a clear signal of the measures he intends to quell those who don’t walk the line. In fact, after his win in the referendum that removed term limits on his presidency, there has been a rupture in relations between business-oriented representatives within the government and the private sector.

In a telling sign, authoritarian leaders continue to control what media outlets publish about the crisis, but occasional protests still break out. Even in Kazakhstan, where public protests against the regime are rare, several hundred activists recently took to the streets in the capital, demanding resignation of the government over its handling of the crisis. The difference in media coverage of the crisis is quite evident if one compares media segments from an established democracy to those in authoritarian countries. Authoritarian leaders may be worried, as they should be.

Economic crisis as an opportunity for more economic and political freedoms

The greatest danger of the economic crisis is that it will allow some authoritarian leaders to continue nationalization of key economic sectors under the guise of fixing the economy. Yet, it can also be viewed as an opportunity. The crisis is exposing the economic weaknesses of authoritarian countries, and, therefore, it is a good opportunity for the promotion of true institutional reform. By strengthening economic institutions and leading countries on the path of sustainable economic growth – growth that is not tied only to the exploration of natural resources or a single domestic industry – reforms can also lead to the improvement in the quality of institutions that guarantee and safeguard political freedoms.

Sound economic growth requires institutions of economic freedom that allow the entrepreneurial potential of citizens to generate jobs and overall wealth. It also requires the open flow of information. Governments must have information in order to be able to allocate resources, define reform priorities, determine their effectiveness, etc. As Hayek has pointed out, open and transparent debate is crucial to the economic sustainability of countries, because only then are policymakers presented with a variety of options, opinions, and reform recommendations to be better equipped in making an informed decision[4]. This is precisely why command economies failed – they did not, and could not, obtain the necessary information for making decisions. Focus on market institutions and high quality economic growth could strengthen fragile democracies. And it can be a tremendous help in the struggle against authoritarianism by providing real working examples of successful transitions to democracy and show democracy as a serious alternative to the same old authoritarianisms.

Both friends and opponents of democracy have seen that the enthusiasm for democratization evident in the 1980s and 1990s is in decline. The number of electoral democracies, as a percentage of the total number of countries, has remained relatively stagnant since the mid 1990s, oscillating between 61 and 64% according to Freedom House rankings. Improvements in governance during the same decade have also been limited.

Since Fareed Zakaria explored the problems of illiberal democracies[5], we’ve seen managed, sovereign, social, and many other types of democracies popularized in mainstream development circles. What has become increasingly evident in following the path of various “democracies with adjectives,” is that achieving electoral democracy, while important in its own right, is a task that is much easier in scope than institutionalizing procedural elements of a democratic rule. In other words, elections alone do not guarantee that a government will govern democratically by, for instance, providing all citizens with opportunities to affect policy creation through civil society institutions. Larry Diamond provides a number of good examples where elections did not necessarily lead to more democratic governance in countries as diverse as Venezuela, Russia, Nigeria, Thailand, Kenya, Philippines, and others[6].

There are many ways in which one can disguise the lack of institutions of democratic governance, but none of the adjectives is a true substitute for those institutions. Unfortunately, despite increased attention paid to democratization, true successes in democratic governance are still few and far between. It could be that the lack of success is partly linked to the lack of incentives for democratic consolidation – especially in recent years many fragile democracies have faced incentives to mirror the growth models of China, Russia, and others. The current economic crisis could be such an incentive because it is exposing the limitations of the economic model of authoritarian regimes – they may grow at rapid rates for a short period of time, but long-term sustainable growth demands much needed political reforms.

Perhaps, the best illustration of democracy consolidation challenges comes from the part of the world that gave us a new hope for democratic prosperity only two decades ago – Central and Eastern Europe. There, the quality and sustainability of democratic institutions, despite the countries’ EU membership, still face some serious challenges. These challenges are another proof that democratic reforms are a slow and painful process for which there is no single correct timeframe. Countries’ institutions do not necessarily change immediately after new rules and regulations are put into effect

Corruption remains rampant in Romania and Bulgaria; in fact, the levels have been so high that the European Union is withholding some development funds until corruption levels are brought down. In recent years Hungary has also had its fair political corruption scandals, going right up to the top posts in government. Poland has faced corruption crises of its own, highlighted by the arbitrary installation of ruling party loyalists in key government posts in 2007.

Look further east, and one will find it hard to miss the inability of Ukraine to capitalize on the wave of democratic hope following the Orange revolution – in fact, the country has been stuck in battles for political influence and empty, populist promises. Timoshenko’s economic plan proposed after the Orange revolution split the government. Since then, the government has not been able to implement meaningful policy reforms, and dismissals of government and new elections becoming a new face of the Ukrainian politics.

What is even more troubling is the evident nostalgia for the old days of communism, revealed in some recent surveys in the region. The ongoing economic downturn, which has significantly affected living standards, has plainly lead many people to question the ability of their governments to provide economic goods.

Perhaps the most worrying sign for democratic reformers in Eastern Europe came when Hungary had to turn to the IMF for bailout funds in the fall of 2008. The need for the IMF bailout showed that the country’s economic progress over the past two decades remains very fragile. If Hungary, the unofficial Eastern European poster-child in post-communist privatization and market liberalization had to turn to IMF for help, what does this say about the prospects of democratic transition more generally? And what does this mean for Hungary’s neighbors?

Conclusion

No country seems to be immune from the current economic crisis – whether established democracies, fragile ones, or authoritarian countries. However, the extent of the economic pain differs along with the ability of governments to reform and weather the crisis. The global economic crisis highlights what we knew all along – that sound democratic governance and, more importantly, sound market institutions must remain at the heart of reform efforts.

If there is one thing that unites democracies and authoritarian regimes, it is the need to bring their populations sustainable socio-economic growth and development. In light of the fact that the ability of any government to survive is tied directly to its ability to deliver real, concrete benefits for its citizens, both democrats and authoritarians are worried about the same thing - political survival : Yet, from somewhat different perspectives.

In democratic countries, leaders worry whether they will win the next elections. In authoritarian countries, leaders worry that if they don’t provide enough economic benefits to the people and retain enough political capital, they might not be able to keep power by whatever means they have. The focus of international democratization efforts must therefore turn to improving the underlying ability of countries to generate sound economic growth for their populations, and not merely to a select few. This approach could make fragile democracies more stable and legitimate. For authoritarian regimes, the emphasis on sound economic growth tied to economic freedoms and competitiveness could be, in fact, a path to greater political openness and democratization.

[1] Hernando de Soto. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. 2000.

[2]Marc F. Plattner. “Democracy’s Competitive Edge: Why Authoritarian Economies Could Have More to Fear From the Crisis.”The Washington Post, Tuesday, January 13, 2009.

[3] Bruce Bueno de Mesquita and George W. Downs. “Development and Democracy.”Foreign Affairs, Vol 84, Number 5. September/October 2005.

[4] F.A. Hayek. “The Use of Knowledge in Society.”American Economic Review, XXXV, No. 4; September, 1945, 519-30.

[5] Fareed Zakaria. “The Rise of Illiberal Democracy.”Foreign Affairs, November/ December 1997, Vol 76, Number 6.

[6] Larry Diamond. “The Democratic Rollback: The Resurgence of the Predatory State.”Foreign Affairs, March/April 2008, Vol 87, Number 2.