oktoober 1, 2008

Is authoritarian capitalism sustainable?

Why have Russia and some other post-Soviet countries experienced an authoritarian slide? And is this renewed authoritarian rule likely to be stable?

Why have Russia and some other post-Soviet countries experienced an authoritarian slide? And is this renewed authoritarian rule likely to be stable?


Anders Åslund

Is authoritarian capitalism sustainable?

Why have Russia and some other post-Soviet countries experienced an authoritarian slide? And is this renewed authoritarian rule likely to be stable?

For the first time in history, most countries in the world are democracies and most people in the world live in democratic countries. Between 1974 and 2004, the world saw what Samuel Huntington has named the “third wave of democratisation.” For the first time, we can not only dream of, but can seriously consider the possibility of a world containing only democracies. Francis Fukuyama’s 1989 article on the end of history seems, at last, a plausible prospect: ever more people enter democracy, and ever more countries stay democratic.
This global perspective, however, does not look so obvious in the post-communist part of the world. Of 21 countries arising from the former Soviet Bloc in Europe and Central Asia, only 10 are rated as ‘free’ or as democracies by the authoritative arbiter Freedom House, while no less than 11 are considered ‘unfree’ or ‘partially free’. Among the 12 members of the Commonwealth of Independent States, only Ukraine is considered free and its democracy is fragile. By contrast, 18 of these 21 countries are market economies. Only Belarus, Turkmenistan and Uzbekistan have managed to preserve state-dominated, Soviet-type economies.
With only a little simplification, one can argue that accession to the European Union appears to have built and secured democracy in Central and Eastern Europe, but our intellectual contribution has been scant. We clearly do know how to build market economies, but the political scientists have failed to tell us how to build democracy. Look in a library and you will find many books about how to build a market economy, but none about how to build a democracy. Political scientists are shy of offering prescriptive advice, but economists do so with pleasure.
The starkest case of democratic regression is Russia. In the 1990s, Russia and Ukraine were similarly semi-democratic, but they have since parted company. President Vladimir Putin has systematically and meticulously built personal authoritarian rule. At the same time, Russia has thrived with a steady economic growth of 7 percent a year. Russia appears to be stable and no advances of freedom have been apparent in the region since Ukraine’s Orange Revolution in 2004. The question of whether authoritarian capitalism will last for decades in the former Soviet Union arises. Fareed Zakariah tackled that question in his influential 2004 book on illiberal or electoral democracy, arguing that liberalism was more important than elections.
Russia is not alone in its democratic reversal. In a new book, The Spirit of Democracy, Larry Diamond points to Venezuela, Nigeria and Thailand as other examples of revived authoritarianism. The worst region of the world is the Middle East, which harbours no democracy but Israel.
Latin America is a natural yardstick for comparisons with the post-communist region. Both before and after the collapse of communism, the economic level of the two regions was similar. The post-communist countries have caught up with Latin America by establishing market economies and carrying out privatisation. They are now nearly all capitalist. Latin America has been more successful in democratisation, while the post-communist region has achieved growth rates about twice as high through its structural economic reforms. At present, the economic future of Eurasia looks brighter. The unpleasant question of whether authoritarian rule might be economically advantageous, and thus sustainable, has arisen again.
The world has never been wealthier than it is today as a huge global boom of one of the highest economic growth rates ever seen approaches its end. Statistically, the correlation between wealth and democracy is high. Moreover, a wealthy country that has become a democracy hardly ever reverses to authoritarian rule.
In a 1995 article, Larry Diamond argued, “There are powerful logical, theoretical, historical, and empirical reasons to expect a close association between capitalism and democracy, with a logical relationship flowing almost inescapably from the very definitions of these terms. Capitalism is an economic system based on private ownership of the means of production and the determination of prices and rewards through competition between private producers … Democracy is a political system based on the autonomy and freedom of individual citizens, and the determination of public power and policies through competition between groups of citizens, based in parties and interest groups. Economic freedom and political freedom thus would appear, at a minimum, to be natural companions, even if one does not strictly require the other.”
This leads us to two questions. First, why have Russia and some other post-Soviet countries experienced an authoritarian slide? Second, is this renewed authoritarian rule likely to be stable? Both democracy and authoritarianism tend to be contagious, easily crossing borders into neighbouring countries. Therefore, we shall focus on Russia as the dominant power in the post-Soviet region.
In 2004, Andrei Shleifer and Daniel Treismann published an article in Foreign Affairs entitled Russia – A Normal Country. Their argument was that Russia was an upper middle-income country, like Argentina, Brazil, and Mexico. Such countries are usually a bit rough around the edges with oligarchic ownership, imperfect democracy and poor rule of law. At the time, or perhaps slightly earlier, their judgment seemed plausible, but since then Russia has become a good deal more authoritarian and much richer. Today, Russia is an outlier by being far too rich to be so authoritarian. In fact, only seven oil emirates and Singapore are richer than Russia and just as authoritarian. One obvious cause of Russia’s authoritarianism is its large
oil revenues. As oil prices have risen in the world, not only Russia, but also some other oil-producing countries such as Venezuela and Nigeria have turned more authoritarian. Large oil revenues are an evident threat to democracy because they can easily be concentrated in the hands of the leadership and used to pay off anybody without having to ask the population to pay taxes. As long as oil prices rise, democracy will have an ever harder time in petrostates. But high oil prices are not likely to last for ever.
Another reason for the demise of democracy in the former Soviet Union is that it was poorly built in the first place. All democratic post-communist countries are parliamentary states, but all the post-Soviet states started off with presidential systems. The evidence is stark. Presidential systems have allowed presidents to establish large presidential administrations, which almost always sit in the former central committee buildings of each country. More often than not, the old party apparatchiks have stayed on or come back. They rule as in the old days through informal phone calls and without transparency or accountability; one advantage of parliamentarianism is that it requires more transparency, clearer rules, and more accountability. There were many other flaws, but this was a key failure.
Russia experienced a real revolution in August 1991. Boris Yeltsin skilfully brought the Soviet Union to an end. Thanks to Yeltsin’s clear understanding and determined action, no empire has been ended with as little bloodshed as the Soviet Union. Yeltsin also launched a market economic revolution reasonably well, although it took the financial crash of August 1998 to complete the capitalist construction. Democracy-building, however, was left for later. Elementary institutions were already in place and, in the midst of multiple crises, it did not appear to be a priority. Nor did any clear thinking about how to build democracy exist. Yeltsin was by no means against democracy, but he did not know how to do it and he received contradictory advice. Through his hesitation and uncertainty, he waited too long to dissolve the unrepresentative, pre-democratic parliament. He finally did so in September 1993, but so unsuccessfully that it ended with a bloody uprising that stained Russia’s burgeoning democracy. Yeltsin’s response was to push through a new constitution with excessive presidential powers.
Yeltsin’s ultimate mistake was to anoint Vladimir Putin as his successor; and Putin chose authoritarianism. With great skill, he has built up an authoritarian system. The Bourbons are back. He has been helped by the current mood of post-revolutionary stabilisation. His regime has been legitimised by high economic growth, but the whole post-Soviet region has benefited from the same growth and the regional average has been 9 percent since 2000, while Russia’s average has been a slightly more modest 7 percent. The current post-revolutionary mood is apolitical and passive, but it is not likely to last forever.
Many of the worst threats to democracy reside in history, both distant and recent. Authoritarian ideology remains strong in the former Soviet Union. In an excellent recent book on Russian conservatism, the grand old man of Russian history, Richard Pipes, concludes that, “The dominant strain in Russian political thought throughout history has been a conservatism that insisted on strong, centralized authority, unrestrained either by law or parliament.” The current Russian regime shows parallels with Count Sergei Uvarov’s famous triad ‘Orthodoxy, Autocracy, Nationality’, which became the ideological foundation for the reign of Tsar Nicholas I. Putin is encouraging a certain post-imperial nostalgia calling the demise of the Soviet Union, “the greatest geopolitical tragedy of the 20th century.” He is also happy to beat up on foreign leaders and impose small, nasty trade embargoes as if he wants to show just how mean he can be. A particular threat is the old anti-democratic elites, notably the old security services, which currently rule Russia. Seymour Martin Lipset has stated that, “Legitimacy involves the capacity of a political system to engender and maintain the belief that existing political institutions are the most appropriate or proper ones for the society.” Many Russians think that the Russian state is unique and has to be authoritarian and corrupt. The post-Soviet states have serious problems with the efficacy and therefore the legitimacy of their states.
Continuity is not available as a source of democratic legitimacy for the former Soviet peoples. Yet other countries with similar authoritarian traditions, such as South Korea and Taiwan, eventually democratised when they became sufficiently rich.
In his eminent book Democracy Derailed in Russia Steven Fish concluded that Russia’s failure to democratise was explained by “too much oil, too little economic liberalization, and too weak a national legislature.” There is nothing fateful or permanent in these shortfalls. For many reasons, democratisation is likely to re-emerge in Russia, and then in the broader region. It might not start in Russia, but let us focus on why it is likely to happen in the not too distant future.
The first and fundamental reason for Russia’s democratisation is, as Seymour Martin Lipset has argued, that Russia is just too rich, too well educated and too open to be so authoritarian. According to UNESCO’s broad definition, two thirds of Russian youth acquire some higher education, which is more than the European average. Russia has as many enterprises per capita as the European Union and small and medium-size enterprises produce some 45 percent of GDP. Russia has a broad and well-educated middle class, which will eventually drive democracy.
Second, Putin’s regime is a personal dictatorship, which is the least durable form of authoritarian rule. Normally, such a regime does not survive a succession and, officially at least, we are in the midst of a succession right now. The reason why personal authoritarianism is so fragile is that its only sources of legitimacy are economic performance and stability, neither of which is likely to last for very long. Putin’s regime is hostage to international oil prices. The oil windfall has driven authoritarianism, but it cannot last forever.
A third cause of destabilisation is corruption. Credible independent reports, such as Vladimir Milov and Boris Nemtsov’s Putin: The Results, record kickbacks from major infrastructure projects of no less than 20-50 percent of total project costs. Russia’s top officials steal many billions of dollars from the state and its corporations every year. This can hardly go on for very long. A group of KGB officers sits at the top of each state corporation and taps it for money while purchasing good private companies with state funding and foreign bank loans. Presumably, no country has ever seen such large-scale, top-level corruption as Russia does right now. This situation is untenable, even in the short term. Any Russian ruler must start a serious anti-corruption drive, but that itself can be destabilising. As Ivan Krastev has pointed out, corruption is the dominant theme in each election in Central and Eastern Europe and the incumbent government almost always loses in an election. The situation is far worse in Russia; this corruption is a political powder keg.
A fourth reason to believe in the destabilisation of Russia is the current succession. It is evident that nobody but Putin knows what it is supposed to mean, so neither principles nor details have been elaborated. A strange construct of dual power has arisen and wild fighting has broken out among Putin’s siloviki friends, who are slandering one another and Putin in the media and arresting each other. As a consequence, Putin has undermined that part of his legitimacy that is based on stability – right now, he is completely unpredictable.
Finally, Putin’s Russia is not solving the problems that people want solved. For the last five years, Russia has undertaken no reforms worth mentioning. A large number of increasingly serious problems have accumulated, not least because of the high economic growth. Little had been done to reform the health care and education systems; law enforcement is parasitic rather than useful; President-elect Dmitri Medvedev has even complained about Russia’s “legal nihilism”; road construction has been so neglected that Moscow’s traffic sometimes comes to a complete halt for hours. In short, a state cannot be that mismanaged for long. Something has to give. The problem is that the very effective authoritarian system prevents any serious organised political activity. Instead, the change has to come from the top or from a spontaneous reaction at the bottom.
The final judgment is that Putin has not found any particular solution as to how to combine dictatorship and capitalism. He has simply been plain lucky. He arrived with a silver spoon in his mouth after Russia’s market reforms were completed in 1999 and strong economic growth had been established. The high oil prices from 2004 have allowed him to make Russia as corrupt and authoritarian as he desired. While he arrived at a laid table, he will leave a huge backlog of missed reforms to his successor – if he really goes. If he does not, he will undoubtedly expose the Putin myth himself. It is difficult to see Putinism as a model for export, because the preconditions were so peculiar and the results so poor.

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