Saturday, March 1, 2014

The End of Democracy?

Two decades ago Francis Fukuyama pronounced the end of history. By his semi-Hegelian thinking, history will end with the triumph of liberal democracy and free market capitalism.

One should laud Fukuyama for proclaiming the victory of free enterprise, but, when it comes to liberal democracy, his prophecy seems less prescient.

Perhaps, he took it for granted that liberal democracy must walk hand in hand with capitalism, but history, strangely enough, has had another idea.

As the Economist argues this week in a lead essay, democracy now seems less and less triumphant. Many countries that flirted with it have veered toward autocracy. The great beacon of democracy, the United States of America has been looking more and more dysfunctional by the day.

Of course, Benjamin Franklin declared that the Constitutional Convention had created a “republic.” And a republic is not quite the same as a democracy. It is fair to emphasize that in the early days of the American Republic, very few people had the right to vote. Since only property-owning males could vote, in the first elections between 3% and 4% of the population participated.

To call the results democratic stretches the meaning of the term.

In principle, a republican or representative form of government is designed to resist the will of the people, the special interests of factions and the vagaries of public mood.

In a republican government representatives are supposed to exercise their own good judgment, regardless of the latest polls. Such a system balances power between the different branches of government, and even within the branches themselves.

It used to allow Senate filibusters to rein in the power of the majority. Now it has a Senate leader who suspends the filibuster to get his way.

It used to have presidents who worked with Congress to pass legislation. Now it has a president who does not know how to compromise or negotiate and who feels that he must, in the name of justice, impose his will on those who disagree.

The will to demonize the opposition is contrary to the spirit of republican governance.

It used to try to balance special interests, but now it is owned by special interests, like public sector labor unions. The Economist does not mention the political power and influence of unions, many of which are more concerned with their own special interest than in the interest of those they serve.

While pursing noble ideals, too many of our politicians have forgotten that a democratic republic only functions when people follow rules, negotiate compromise and respect the outcome.

Nations that want the world to be more democratic must make democracy work at home.

Moreover, the Economist suggests, America has done democracy no favors by trying to force its culture on other nations. The Bush administration effort to export democracy has been a black eye for democracy. Elections in Egypt produced an aspiring autocrat and have led to a military takeover.

It may well be the case, though no one seems to want to say so, that liberal democracy is consonant with Judeo-Christian values. It might not find such a welcoming culture in other nations.

And the Economist adds that Western democracies have damaged their reputations by failing to deal effectively with the financial crisis of 2008.

It explains:

It [the financial crisis] revealed fundamental weaknesses in the West’s political systems, undermining the self-confidence that had been one of their great assets. Governments had steadily extended entitlements over decades, allowing dangerous levels of debt to develop, and politicians came to believe that they had abolished boom-bust cycles and tamed risk. 

Given the explosion of unaffordable entitlement spending and the failure to display fiscal discipline, the financial crisis made Western democracies look as though they were for sale.

Most significantly, a culture of entitlement has overwhelmed what remained of the Protestant ethic. If you can vote yourself a living, why work for it. If you can vote yourself health care and a higher wage, why work harder to earn them.

Perhaps the most important reason why the reputation of democracy has been declining around the world is, as the Economist points out: China.

The Economist reports:

Meanwhile, the Chinese Communist Party has broken the democratic world’s monopoly on economic progress. Larry Summers, of Harvard University, observes that when America was growing fastest, it doubled living standards roughly every 30 years. China has been doubling living standards roughly every decade for the past 30 years. The Chinese elite argue that their model—tight control by the Communist Party, coupled with a relentless effort to recruit talented people into its upper ranks—is more efficient than democracy and less susceptible to gridlock. The political leadership changes every decade or so, and there is a constant supply of fresh talent as party cadres are promoted based on their ability to hit targets.

In some ways the Chinese invented meritocracy, so this should not surprise us. Has the American system done as well in finding fresh talent?

It is worth underscoring that while America is hard at work instilling empty self-esteem in its children China is educating its children to the most rigorous standards.

Worse yet, where Chinese children are taught to take pride in their nation and its history, American children are taught to criticize and complain about theirs.

Of course, China does not have the first amendment, but it also does not have first amendment absolutists who seem to want to turn the Bill of rights into a suicide pact.

As Justice Robert Jackson wrote:

The choice is not between order and liberty. It is between liberty with order and anarchy without either. There is danger that, if the court does not temper its doctrinaire logic with a little practical wisdom, it will convert the constitutional Bill of Rights into a suicide pact.

American democracy is a pragmatic solution to the problem of governance. Forcing it to conform to ideals seems to make it less efficient.

But, the Economist suggests that the Chinese government is less autocratic than it appears. It does respond to some aspects of public opinion. It does not, however, countenance the first amendment freedoms that Americans pride themselves on:

China’s critics rightly condemn the government for controlling public opinion in all sorts of ways, from imprisoning dissidents to censoring internet discussions. Yet the regime’s obsession with control paradoxically means it pays close attention to public opinion. At the same time China’s leaders have been able to tackle some of the big problems of state-building that can take decades to deal with in a democracy. In just two years China has extended pension coverage to an extra 240m rural dwellers, for example—far more than the total number of people covered by America’s public-pension system.

Of course, the whole world is watching the great competition between Chinese-style free enterprise and American-style liberal democracy. Here are the views from India:

 Indian business moguls constantly complain that India’s chaotic democracy produces rotten infrastructure while China’s authoritarian system produces highways, gleaming airports and high-speed trains.

It is fair to mention that China is also producing monstrous amounts of pollution. If China does not clean up the air and water, its grand experiment will start looking far less appealing. Then again, what is the air and water quality in India?

Nations around the world seem to be trying to emulate Chinese autocracy rather than American democracy. But, it is not clear that they are willing to emulate Chinese free market capitalism. Many countries that are shunning democracy prefer economic stagnation to economic vitality. Time will tell whether they embrace free enterprise or continue to fall behind the world.

Perhaps culture counts. In the absence of Judeo-Christian values China can ground itself in Confucian values. These seem fully congenial to free enterprise, but also to social harmony. Certain other cultures, not so much.


Ares Olympus said...

Big picture analyses are fun, but hard to know how much smoke is being blown up the ass in the process, and most of the time its all cherry-picking evidence for conclusions you set to prove.

I like Adam Curtis's attempts, even if they are as flawed and manipulative as any, starting with Freud's discovery of the unconscious.

I don't have any clarity about the future of China's embrace of capitalism, only time will tell. At least the pollution is a visible crisis, while hidden debt/credit bubble crises look great until the last possible moment.

What's clear to me is that "growth" is the god we now worship (and a god inspired by capitalism) because it allows all problems to be kicked down the road. So "growth" is something real, but it also contains cancers, which we might call "speculation" - growth funded under the promise of growth where wealth is made not by the work ethic, but by borrowing lots of money and chasing speculative bubbles, and everyone believing they can exit before the crash.

We're now in a THIRD stock market peak, and everyone is talking about a "20% correction" as likely in first 2013 and now 2014 or whatever, and who wants to ride that DOWN?

I do love the idea that democracy and the "Protestant ethic" go together, but then again, the original Protestants probably would have scoffed at making money on money, like the indulgences that inspired Luther's rage.

I don't know where that takes us. It seems like the ideal Protestant ethic is "moderation" which we've completely abandoned, so we need to accept we're still in the eye of a depressionary hurricane, and we all have a chance to make our bets, where we want to live, what we're willing to risk, and what skills will get is through the next 20 years.

It would be nice if the Protestant work ethic was what allows a culture to pass through a 20 year depression. I tend to expect authoritarianism will ever increase in the coming crises to reduce destructive civil unrest, and then within those constraints, democracy will reassert itself locally as people organize over common interest with their neighbors.

JP said...

"We're now in a THIRD stock market peak, and everyone is talking about a "20% correction" as likely in first 2013 and now 2014 or whatever, and who wants to ride that DOWN?"

I do.

Markets go down faster than they go up. 2008 was a good year for me.

My guess is a reasonable bear market with a 30% to 40% decline.

"The Top" does not appear to be here yet.

The pundits don't know what they are talking about. These are the same people who missed the massive credit bubble in 2006 and 2007. By 2006 I was already in 100% cash.

Big Picture, the market is being drive by QE-ish liquidity.

Poofing money into existence and then having that money pour into financial instruments makes markets go up.

You will note that this requires two steps.

First, the poofing. QE Infinite is slowing heading toward zero.

Second, the money needs to be poured into financial instruments.

However, the second step is pretty much automatic. As long as the market keeps going up, that is.

And in order for the market to go up, you need lots of poofing ex-niliho.

It took me awhile after 2009 to figure out what was going on, but it's *all* driven by the Fed poofing this go-round.

Anonymous said...

Can either Judeo-Christian or Confucian values help to ground free-market capitalism within ethical limits? My guess is no, that power always corrupts.

Perhaps Hinduism or Buddhism, with a more cyclic view of time might be the balancing act against the grandiosity of power?

Iain McGilchrist's "Two brains" presentation, or book "The Master and his Emissary", offers another attempt for a narrative of our divided natures:

He described left-brain thinking as containing a "hall of mirrors" that closes us off from the real world of physical limits, and so falls into its own trap that prevents us from seeing information that doesn't fit our models of reality.

Stuart Schneiderman said...

For the record... I'm with JP on this... as are Jim Rogers and Jim Grant. I also agree that the much anticipated top has not yet arrived.

Dennis said...

As I remember several years ago all the "experts" were stating that disk size had reached the maximum it could grow. Now we have 1 Terabyte plus with smaller disk sizes. I agree with JP, whose analysis is spot on, here. One cannot have true capitalism if the government can control large segments of the economy and "print" money.
A large bit of the corruption is perpetuated by government action which creates winners and losers at the expense of the country and the economy. When politics trump the interest of the country one is bound to have the problems we deal with now.

Anonymous said...

"Indian business moguls constantly complain that India’s chaotic democracy produces rotten infrastructure while China’s authoritarian system produces highways, gleaming airports and high-speed trains."

Japan, Taiwan, and Hong Kong built excellent infrastructure under democracies. So, I think be that East Asians are more orderly regardless of the system.
Hong Kong is very free while Singapore is autocratic, but both are functional societies.
But India might fail even with autocratism since the culture is so crazy.

Stuart Schneiderman said...

Those are good points, a welcome addition to my remarks. I do agree with you about the cultures in those countries. I don't know well enough how free some of the other countries. Japan has apparently been ruled by the same political party forever... and I have been led to believe that the real power resides in the bureaucracy.