To be democratic and rich -- or just rich first

Janadas Devan, The Straits Times, Asia News Network, Singapore

Is there an inevitable or necessary connection between liberal economics and liberal politics?

Many American intellectuals think there is. Give people a chance to compete in free markets, and they will want political freedoms commensurate with their economic liberties, the theory goes. A capitalist economy cannot thrive in the long run without the transparent structures of governance that democracies promote.

The reality, of course, is a good deal more complex. Consider the recent experience of three countries -- Russia, China and India -- which between them will determine the future of liberalism in the Euro-Asian landmass.

Russia's first romantic brush with democratic capitalism soon after the Soviet Union collapsed in 1991, produced neither democracy nor capitalism, but an oligarchy in politics and piracy in economics.

In the absence of the rule of law, the introduction of political and economic freedoms opened the way for a privileged few to confiscate the country's wealth in a firesale of the state's assets. As a result, the words "liberalism" and "democracy" have become almost swear words in Russia today, the Wall Street Journal reported recently.

Russian President Vladimir Putin has arrested the country's decline by ditching liberal politics but retaining liberal economics.

Arguing that a strong state is part of Russia's "genetic code", he has replaced pluralism with "managed democracy". The country remains formally a democracy, with regular elections, a more or less free print media and an active civil society. But there is no doubt Putin rules as a strongman, and even less that he does so with the overwhelming approval of Russians.

Indeed, it is significant that the retreat of liberal politics in Russia and elsewhere in recent years has been driven in large part by populist pressures.

Vox populi itself seems to have grown tired of its cacophony. A recent United Nations study, for example, showed that 56 percent of Latin Americans now rate economic development more important than democracy, and 55 percent say they would support authoritarian rule if it delivered the goods -- and this barely a decade after the continent got rid of its odious dictators.

There is no equivalent China-wide poll, but it is doubtful if a majority of Chinese would yearn for a return of Maoism. In fact, the surprising thing is that for a people who have had little experience of democracy, the Chinese have embraced democratic practices whenever they have been offered in recent years.

Strangely enough, even as Russia has become less democratic, China has become more so, though no one would accuse it of being a democracy yet.

As Elizabeth Economy, a senior fellow at the Council on Foreign Relations, notes in a recent article in Foreign Affairs, "political reform is resolutely moving forward" in China, not least because "China's leaders have come to understand that enhancing their legitimacy is a matter of survival". When private assets exceed state assets by more than US$1.2 billion, the state has no alternative but to accommodate private interests.

There are now direct elections in China's villages, and some form of representative government at county level, with non- communist party members able to offer themselves as candidates. Middle-class Chinese have organized themselves into independent associations to press their interests. There are more than 2,000 daily newspapers and 900 TV stations in the country, some of which have undertaken aggressive investigative reports of government corruption.

Give people an economic stake (increased wealth) and the means to defend it (the rule of law), and they will be more likely to achieve a stable representative government than if one started with the last.

India is the one great exception. By any measure, its democracy is miraculous. The spectacle of an electorate of 670 million unseating an incumbent government two weeks ago, and that government accepting its defeat and stepping aside as a matter of course, was breathtaking.

So was the sight of a Muslim president, A.P.J. Abdul Kalam, swearing in a Sikh prime minister, Manmohan Singh, whose chief political sponsor, Sonia Gandhi, was born a Roman Catholic, and whose mother-in-law, Indira Gandhi, a Hindu, was assassinated by her Sikh bodyguards.

Whatever the shortcomings of Indian democracy, two things can be said in its favor: One, power does issue out of the ballot box in India, not the barrel of a gun; and two, Indians have indeed fashioned democracy into an effective instrument to manage their diversity.

Whether that democracy will also produce rapid economic growth is, alas, less certain. Between 1991 and 1996, when Singh was finance minister and began to dismantle the "license raj", the country grew by an average of 5.6 percent.

That was almost double the so-called "Hindu rate of growth" in the preceding four decades, but it is significant that India's growth did not accelerate much in the ensuing years, averaging only 5.7 percent between 1996 and now.

Despite the spectacular growth of the country's IT sector, industry in general grew by an average of only 5 percent in those years, and agriculture by less than 2 percent. Given its astonishing pool of talent, India could obviously have done far better, so why didn't it?

The reason lies in the nature of democracy. Winning power in third-world democracies entails divvying up the existing economic pie to win votes. So farmers are promised free electricity, labor unions restrictive practices, the public sector protection. There is no ready constituency to enlarge the pie. India's miraculous democracy thus produces less than miraculous growth.

One can keep hoping for an astounding miracle, of course, but Russia and China will probably become rich and democratic much sooner than India becomes democratic and rich.