Explaining the democratic recession

 

The Roman Goddess Iustitia stands blindfolded. She holds a sword in one hand, a mirror in the other, and stands on top of a serpent. Iustitia was in charge of executing laws and held the sword to deliver swift execution for lawbreakers. The mirror she holds up to criminals so that they can see their sins reflected, and the snake represents the evil which is kept at bay by her actions.

The blindfold was put on her by another Goddess, Fortuna, the goddess of luck, so that Iustitia could not see her mischief. Iustitia is known to us now as Lady Justice. Her likeness stands on top of the Old Bailey in London, as well as courts throughout the world from Brazil to Japan. To us she represents the rule of law, the idea that all people in a society live under the same rules, and are punished equally no matter their status or standing.

Equality before the law is one of the great achievements of Western civilisation, yet for most of its history it was largely absent. Lost after its founders, the Greeks and Romans, departed from British shores, it then floundered under a caste system which ruled over the Saxons in 7th century Britain, where laws were based on clan status. It took until the 15th Century for a concept of equal law to emerge in a protestant Europe. The following Enlightenment thinkers institutionalised the same ideas in the legal profession which would become the standard for almost all developed countries today.

When thinking about the development of democracy, it is important to recognise how democracies originally grew out of legal institutions long before elections were thought of. The right to a fair trial, legal representation, juries, the right to petition, freedom from arbitrary taxation, all were necessary precursors to the systems of electoral democracy that today we see as the benchmark for a developed country.

Since the 1970s, the number of democracies has grown from a few dozen developed countries to encompassing the majority of the world’s nations. This democratic wave that started in the mid-1980s and carried on until the mid-2000s, referred to in the literature as the Third Wave. Since the mid-2000s, however, the world has experienced a severe democratic recession, and organisations like Freedom House have reported more than 15 years of democratic decline.

The Third Wave started with democratic revolutions in southern Europe in the late 70s, and then spread to countries across the world from Latin America to East Asia, ultimately leading to the collapse of the USSR. Financial innovation and the development of computer technology facilitated the Third Wave. Because of the innovations, closed political systems couldn’t keep pace with rapidly developing Western economies, and the liberalisation of trade that they allowed lifted much of the third world out of poverty.

 

The New Authoritarianism

This wave of globalisation and liberalisation has now run out of steam, and democratisation has not spread nearly as far as many had hoped. Despite its shortcomings, the majority of former Soviet countries in Eastern Europe are now flourishing democracies, and the same goes for Latin America. All achieved after the United States succeeded in removing the influence of the Soviet Union and promoted their integration into the global financial system.

After 9/11, the United States then attempted this same approach to the Middle-East, specifically in Iraq, and Afghanistan. The theory was, just as in Eastern Europe: once the dictators were removed, and businesses were allowed to invest, democracies would naturally emerge. This would prevent them from becoming war-torn states which could harbour terrorists. Nearly 20 years on from this policy, however, attempts at state building in the Middle-East have not led to any successful democracies.

What’s more, much of the developing world appears to be democratic in name only. They hold elections, but have high corruption, inconsistent law enforcement, state abuses of power, and ineffective administrations. Analysts like Larry Diamond have noted the development of a hybrid system in many countries that only have very limited democratic features.

The Arab Spring appeared to be the possible beginning of a Fourth Wave of democracy, but by the end of the decade the uprisings had produced only one democratic success story: Tunisia. Aside from this one breakthrough, the uprising brought only failed states, more dictatorships, and the most devastating civil war in a generation.

The late 2010s have also presented an accelerated democratic retreat, events like the Migrant Crisis, national populist movements, and the emergence of a new axis of authoritarian powers represented by China, Russia, and Iran, seem to signal a global authoritarian resurgence.

What then explains this development? The new authoritarianism is all the more puzzling because, while democracy has declined, global standards of living are at their highest level in history. As outlined by writers like Steven Pinker, poverty in the last few decades has declined to an all-time low, and a majority of people on the planet have now reached a middle-income living standard. This contradicts what is commonly derided in the media as ‘rising inequality’ and attempts to paint globalisation as an unadulterated evil. It should be recognised that globalisation has actually been an unprecedented success with regards to the developing world.

The answer to the democracy question is then somewhat paradoxical, because it appears democracy has not declined in spite of higher living standards. Rather, it has declined because of higher living standards.

The reasons for this are rather intriguing and have been written about by various democracy scholars like Francis Fukuyama. The theory is that democracy emerges in countries where a majority of the population is middle-class. The middle-classes support democracy because it guarantees them property rights and some say in their political system.

However, when the middle-class is in a small but significant minority — as is the case in much of the developing world — the non-middle-classes are outvoted by the larger group of peasants who do not have the same living standards and want to take some of their property for themselves.

The minority of middle-classes are then more likely to support authoritarian candidates who are at least able to guarantee them some property rights, and at the same time tackle corruption to meet the demands of the peasants. According to Fukuyama, this is what has occurred in the 2010s in countries like China, Thailand, and Turkey.

Trade illiberalisation

Another aspect of this relationship is the decline of the growth of global trade. In 2007 growth from global trade was more than 7%, a pace kept through most of the 2000s. By 2019, the growth in global trade was just over 2%. Over the last decade economists have found various political events to blame this decline on, such as the 2008 financial crisis, populism, and the Trade War.

Recent reports however, show that decline in global trade has been occurring since 2000. They also found that protectionist policies could not explain this slow down. In fact, what appeared to be happening was that global demand for trade was mostly being met by the supply. The explanation proposed was that a lower income population was mostly focused on buying things like better clothes, food, medicine, and other commodities. But a middle-income population was more concerned with spending money on housing and healthcare and so the rise of a middle-income population was causing this slowdown in demand. In other words, as poorer countries got richer, the less they needed cheap products.

In the developed world, the outsourcing of many industries has led to the stagnation of middle-class wages for over a decade in much of Europe and the United States, which appears to be driving populist movements. Automation and population aging have also created a loss of middle-class jobs at a time when greater demand is being placed on the welfare state.

Many developed countries have sought to placate the trend of an aging workforce by importing masses of younger migrants from the developing world, which has itself created problems as many migrants have failed to integrate into western societies and risk incurring higher welfare costs over time.

A far better solution would be for the countries these migrants come from to better develop themselves so less feel the need to emigrate, which would also strengthen democracy in these poorer countries.

Many democracy scholars have recognised that the reason many of these states cannot move from lower-middle income to higher income is because so many of their state institutions are corrupt and incompetent. While democratic institutions could be transplanted to areas that already had a history of state administrations, like eastern Europe and east Asia, the same thing cannot be accomplished in countries that were previously nomadic or tribal. This has spawned a host of literature like Acemoglu and Robinson’s famous book Why Nations Fail (2012), which focuses on institution building as the basis for democratisation. The problem however is that we still have very few ideas of how to accomplish this.

The Capacity Trap

A 2017 report published by the World Bank outlines the attempts at ‘state capacity building’ which have been attempted over the last thirty years. The results are not especially encouraging.

The writers note that, even though standards of living have risen rapidly, most developing countries today are incapable of providing services as basic as delivering the mail. In some countries like Egypt and Ghana, 100% of the mail was either lost or stolen, even when the exact same policies were implemented that proved successful elsewhere. There is a huge lack of understanding of how institutions function, as evidenced by countries like India which possess a space program and a world renowned IT sector, but is incapable of providing basic plumbing to large segments of its population.

The writers report that, dishearteningly, state capacity in most of the developing world was actually declining instead of improving, and this had occurred alongside better standards of living. Even in countries that showed improvement like Guatemala, it would take more than 500 years to reach the state capacity of a developed country. They conclude that most of the world is now stuck in a ‘capacity trap’ where they cannot develop economically because they do not have effective institutions, but they cannot develop effective institutions because they don’t have a developed economy.

Even looking at historical examples of state building does not give us many ideas of how to proceed. The efficient bureaucracies created by many developed countries today like Sweden, Japan, and Germany were created by autocratic military regimes out of a need for self-preservation. In Britain, an efficient state bureaucracy was created in the 1850s under something known as the Trevelyan Reforms which were an attempt to remove the influence of the landed gentry and replace them with meritocratic governors. These same reforms were then copied by the United States in the 1880s to produce their administration.

Even in recent history where effective state building occurred like in Bosnia and South Korea, these were all in countries that already had historical state bureaucracies, in many cases coming from a history of maritime trade and walled cities.

China in the 1990s experienced its own form of state building which partly explains its rapid economic rise today. They allowed state companies to fail and required public organisations to reinvest profits into the bureaucracy, opening the door to rapid growth. Writers like Minxin Pei however, have shown that since the late 90s, China’s state capacity has been declining after a corrupt political class has become entrenched.

 

The Road to Freedom

A central problem in many developing countries is a lack of trust, because the population is based on localised ethnic communities in many cases, there is a natural tendency for an in-group bias which is not conducive to a democratic state. Others have pointed out that, unlike in 17th Century Europe, there is no mercantile class in most developing countries. Instead there are masses of newly urbanised peasants flocking to cities, meaning that instead of diversifying into different work groups like Europeans did, they simply contribute to the endless supply of cheap labour, all of which creates a set of conditions where true democracy is unlikely to ever emerge.

All is not hopeless when examining attempts at creations of modern states, however. There are a small group of countries like Chile, Uruguay, Estonia, UAE, South Korea, and Brunei which have made the move from low to high state capacity in recent years. And global democracy has proven surprisingly resilient. Countries like Botswana, Costa Rica, Malaysia, Indonesia, and Armenia have emerged as robust democracies against all odds, and while many countries are not fully democratic, they increasingly possess the ability to remove leaders who have overstayed their welcome — as demonstrated by global protests in 2019.

There may be an obvious, albeit uncomfortable solution, which is being overlooked. When the World Bank notes that almost every African state has lower state capacity than it had in 1950, one can’t help but think back to why such state capacity existed in 1950, but not in 2020.

The first healthcare service in the world was created in Algeria by the French government, and at the time the world’s largest railway service and agricultural administration was conducted in India by the British government. Many people are rightfully suspicious of attempts by other countries to run administrations in developing countries, as direct state-to-state governance calls to mind colonial atrocities like slavery and famines. But it is evidently possible to have the services and legal systems without also introducing past atrocities.

The way forward then, may be to circumvent the efforts of global institutions and allow the developed countries of the world to provide Development Schemes which would involve loans and administration training with strict conditions.

The scheme could simply take the existing aid programs that many developed countries already give to the developing world and repackage them as investment. Such a scheme could be entirely voluntary and renewable on a contractual basis.

Such a scheme could be agreed by a collective of democratic nations: The USA, the European Union, Korea and Japan, supported by the experience of the World Bank. The loans and civil service reforms would target specific sectors to prevent nepotism and embezzlement, such as transport, agriculture and the postal service.

Doubtless, such efforts would be dismissed as ‘neo-colonialism’ by some, but this would beg the question why such a policy should be termed neo-colonial when a country does it but not when the World Bank does it. Many European countries already run each other's transport services, for example, and one has to wonder what the alternative is when faced with a policy that has consistently failed for 70 years.

The final thing to point out is that if the developed countries of the world do not do this, then China certainly will. It is already acquiring numerous port cities via the Belt and Road for this purpose, and the institutions that it creates will certainly not be democratic ones.

Of course, there are a whole multitude of ways such a policy could go terribly wrong, as the experiences of the World Bank would demonstrate. Therefore any such programs should be tried first on a very small scale before being expanded and global institutions could act as a mediator to establish the legal framework. But we should at least have faith that the developed countries of the world will not be inclined to repeat the moral failings of the 19th Century.

 

Lady Justice

When all is said and done, government schemes can succeed or fail, and institutions can be endlessly tampered with, but all institutions are the result of ideas. The courts of justice and the first declarations of rights were all a result of Enlightenment thinkers. During the Treyvelian reforms, enormous crowds campaigned for causes like civil service reform as enthusiastically as young people today campaign for environmentalism. There needs to be a broader movement to revive civil society and build up democratic institutions in both the developing and the developed world. All policies will rely on hard working individuals dedicated to their cause, without such a movement, all reforms will be doomed to failure.

Today, Lady Justice stands atop of the High Court of Hong Kong, in the centre of the city’s business district. It is a legacy of the territory’s British legal system which in the late 20th Century allowed it to become one of the wealthiest and most developed cities in the world.

Just down the street from her statue, a few months ago, a group of Beijing-backed legislators with a private security force took over and forcibly removed the elected pro-democracy legislators from the building. Meaning that the rule of law in Hong Kong is now completely dead, and the territory has been fully absorbed into the authoritarian system of mainland China.

In the Chinese pantheon, there is no God of law, or Justice. All control is under the Jade Emperor, the source of all legal functions, and under whom the entire bureaucratic system is subordinate.

Unlike Iustitia, the Chinese judge in hell is a servant of the Jade Emperor. Lord Yama, the red faced king of the underworld, sits behind his desk, and ascribes punishments to the deceased based on lists sent to him by the heavenly officials. Instead of holding back the evil serpents, Yama only holds a list of names of wrong doers whom he punishes. Unable to ever challenge them, he remains a simple bureaucrat, carrying out orders.

Many of the developing countries of the world, like China, have the sword of justice — meaning they have the ability to punish select lawbreakers — but they do not have the mirror that allows their societies to understand and legitimise their rule. And their gods of justice are not blindfolded.

The Chinese authoritarian takeover of Hong Kong is what happens when the Jade Emperor replaces Lady Justice. Instead of equal treatments, and laws based on precedent, the Chinese government simply has goals and directives, issued in the same manner as an Emperor leaving his court officials to interpret his will.

The democracies of the world face serious challenges ahead of them if they are to resist the forces that could corrupt them both externally and internally. We owe it not just to ourselves, but to future generations to do everything we can to ensure the fate of Hong Kong does not become the fate of the world.