Crunch time for democracy?

Sales of Das Kapital, Karl Marx’s 141-year-old critique of capitalism, are soaring. With governments around the world effectively nationalising their banking industries, injecting unprecedented sums of money into the financial system, and announcing plans to spend their way out of recession, some are sounding the death knell of not only neo-liberal economics but of capitalism itself.

That is an over reaction, of course. Those on the left are misguided when they triumphantly assert that an era of unbridled capitalism has come to an end: as anyone working in the highly regulated financial sector can tell them, their business was anything but unbridled. And governments that have intervened have made it patently clear that they want to get back to “business as usual” as soon as possible. Likewise, those on the political right are being daft – as the surely know – when they try to pin the label of socialism onto rivals who advocate a more active role for the state.

Nevertheless, the mood is changing. Around the world there is increased support for a stronger government role in business affairs. At the same time, enthusiasm in democracy itself seems to be wavering. The implications could be serious. Former US President George Bush talked about the urgent need to protect the free market system and the free flow of trade and investment. “It is essential we preserve the foundations of democratic capitalism,” he said.

As the economic crisis continues to deepen around the world, strong majorities in Italy (81 percent), Germany (70 percent), France (68 percent), the US (63 percent), Spain (61 percent) and the UK (59 percent) believe that there should be increased government regulation of business activities to prevent future financial global market crises, according to the findings of a Financial Times/Harris Poll.

Leaders of the five largest European countries and the US are all looked at differently by their countrymen in how they have handled the financial crisis. Over half Americans lost confidence in President Bush (the survey was conducted in October) down to just one-quarter of Germans (25 percent) who have no confidence in Chancellor Angela Merkel.

Indeed, Merkel came out on top, with 29 percent saying they had “some” confidence in her, a quarter (24 percent) saying they had quite a bit of confidence and 17 percent a great deal.

In the hands of geniuses
Attitudes were more negative in Spain and Italy. Two in five Italians (40 percent) said they had no confidence in Silvio Berlusconi’s ability to handle the global financial market crisis effectively while 16 percent said they had some confidence in his ability. Just over two in five (22 percent) Italians had quite a bit of confidence, while just under that number (18 percent) said they had a great deal of confidence. In Spain, only one in ten said they had a great deal of confidence in Jose Luis Rodriguez Zapatero’s ability to handle the global financial market crisis effectively and 18 percent said they had quite a bit of confidence in him.

UK Prime Minister Gordon Brown was the survey’s worst-rated European. Some 43 percent said they had no confidence in his ability to handle the global financial crisis effectively while one-quarter (24 percent) said they had some confidence.

Looking at the six leaders as a group, the overall decline in confidence is clear. Less than one in ten adults in all six countries had a great deal of confidence in the ability of the collective group. But while the political leaders may be feeling some of the heat from citizens in their respective countries, they are doing better than one other group: bankers. At least three in five adults in the UK (76 percent), the US (74 percent), Germany (73 percent), Spain (67 percent), Italy (64 percent) and France (61 percent) say their opinion of bankers has become more negative as a result of the global financial market crisis.

Does that matter? Who cares if bankers and politicians are unpopular? Well, as the financial and economic crisis continues to move through the world, most people do not perceive any of the current leaders in the survey – either as a group or individually – as having the ability to effectively lead their country out of the financial mess. The last time we saw a financial crisis on a similar scale, the aftermath saw a rise of totalitarianism and dictatorship. This does not bode well for democracy.

There are warning signs already. The Economist Intelligence Unit’s Democracy Index 2008 shows that, after a decades-long global trend in democratisation, the spread of democracy has come to a halt.

Comparing the results for 2008 with those from the first edition of the index, which covered 2006, shows that the dominant pattern in the past two years has been stagnation. Although there is no recent trend of outright regression, there are few instances of significant improvement. The global financial crisis, resulting in a sharp and possibly protracted recession, could threaten democracy in some parts of the world.

The crisis threatens to undermine the credibility of free-market capitalism – it would be wrong to underestimate the anger that the developments on Wall Street have engendered on so-called Main Street. There is talk of a broken financial system discrediting Western values in general. A broader backlash may develop against free markets and neo-liberal ideology in some countries as economic conditions deteriorate.

Changing times
According to Laza Kekic, the Economist Intelligence Unit’s Director for Country Forecasting Services, “While it is highly unlikely that developed countries would experience a significant rollback of democracy, there is little cause for complacency, especially about the impact on emerging markets with fragile democratic institutions.” A lot will depend on the depth and duration of the economic recession, as well as the extent to which attitudes towards the market and role of government actually shift.

There are several ways in which democracy might be adversely affected. First, economic recession could boost extremist political forces in western Europe, and could feed anti-immigrant sentiment. These trends will interact with existing concerns about terrorism and could result in a further erosion of civil liberties.

Second, many non-consolidated democracies are very fragile and if subject to intense socio-economic stress, backsliding on democracy is possible. The recent halt in democratisation could turn into a retreat.

Third, the shallowness of democratic cultures – as revealed by disturbingly low scores for many countries in the EIU indices for political participation and political culture – also underscores the fragility of many democracies and the potential for reversals. Serious recessions typically threaten democracy via increased social unrest. It is therefore worrying that 48 countries are assessed by the EIU as having a high risk of social unrest.

China has not emerged from the financial crisis unscathed, but the relative lack of damage could make its model of authoritarian capitalism look like an attractive option for emerging markets that have not yet embedded democratic traditions. Moreover, those in the West who seek to counter this possibility by promoting the idea of democracy will find their efforts hamstrung and discredited by the experience in the Middle East over recent years. The economic crisis is likely to further undermine the credibility of efforts by developed nations to promote their values abroad.

Already, democracy is not as prevalent as we might think, and is being diminished in some countries. The EIU says there are only 30 full democracies, with 50 rated as “flawed democracies” (see sidebar). Of the remaining 87 states, it says 51 are authoritarian and 36 are “hybrid regimes”. The Nordic states and other West European countries dominate the top ten. By contrast, the US and UK are near the bottom of the full democracy category. In the US, there has been an erosion of civil liberties related to the fight against terrorism. Problems in the functioning of government have also become more prominent. In the UK, there has also been some erosion of civil liberties, but here the main feature is the shockingly low level of political participation.

While a significant backsliding in democratisation is by no means inevitable, these factors suggest that nations with a weak democratic tradition may be vulnerable to setbacks over the next few years.

Damage control
Mitigating the impact of the financial and economic crisis is, therefore, a pressing issue for all nations. Indeed, Jeffrey Sachs, Director of Columbia University’s Earth Institute in New York and a long-time adviser on economic and fiscal issues to governments worldwide, said recently that the first goal for global leaders should be to mitigate the effects of a global recession. The G-20 should encourage looser fiscal policy in Asian countries such as China, South Korea and Japan to stimulate international trade and demand. And the leaders should use their central banks to provide a safety net for banks in emerging- market nations that “might face a threat to liquidity through no fault of their own,” he said.

European leaders have said the fallout justifies major changes in the way financial institutions are regulated. Mr Sarkozy, whose country currently holds the rotating presidency of the 27-nation EU, has compared the effort to the 1944 Bretton Woods conference that fixed exchange rates, hitched the world to the gold standard and created the IMF and World Bank. Global leaders should, he has said, impose stricter regulation on financial institutions, curb bonus packages for bankers, overhaul international accounting rules and reshape policies on foreign exchange rates. “We must reform capitalism so that the most efficient system ever created doesn’t destroy its own foundations,” said Mr Sarkozy. And what book has he been seen flicking through lately? Das Kapital, by Karl Marx.

Just how democractic is the world?
The number of states willing to fly the flag for full democracy is surprisingly low. According to the Economist Intelligence Unit, there are only 30 full democracies, with 50 rated as “flawed democracies”. Of the remaining 87 states, the EIU says 51 are authoritarian and 36 are “hybrid regimes”. Half of the world’s population lives in a democracy of some sort, although only some 14 percent reside in full democracies. More than one third of the world’s population still lives under authoritarian rule.

In most regions the average democracy score for 2008 is similar to the average recorded for 2006. The sole exception was eastern Europe, which had a perceptible decline in its average score. In 19 countries of eastern Europe the democracy score declined between 2006 and 2008; in only one country in this region (the Czech Republic) was there a slight improvement.

In only 12 countries out of the 167 that are covered was there a change in regime type between 2006 and 2008-in eight there was a positive upgrading and in four a regression. Eight of the 12 countries undergoing a change in regime type were in Asia, where many of the most significant changes, in both directions, in democratisation between 2006 and 2008 occurred.

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Posted by asif

Interesting article.

Posted by Anonymous

The article is comprehensive, but on the other hand, it is too general, most of the information is well known already and there are no conclusions, it makes no prediction for the future, it gives no solutions. All in all, it is a well written text in the same old „bla, bla, bla” spirit. Every day humans produce thousands of pages of such texts. It may be good as an introduction for a more consistent study.

Posted by Marian Mierla

4*

Posted by Anonymous

5*

Posted by MIKe Jackson

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