LookingGlass – New publications
Download the full LookingGlass No 1/2008
Pluralist economy without pluralist political system? – New Glasshouse Forum publications on authoritarian capitalism
- An Edited Transcript of a Round-Table Conference on Authoritarian Capitalism. Glasshouse Forum, 2008, 128 pp.
- White Whale or Red Herring? – Assessing Sovereign Wealth Funds. By Daniel W. Drezner. Glasshouse Forum, 2008, 24 pp.
- The Limits of the China Model. By Johan Lagerkvist. Glasshouse Forum, 2008, 24 pp.
- Tolerance and Democracy in Liberal and Authoritarian Market Economies. By Sten Widmalm & Sven Oskarsson. Glasshouse Forum, 2008, 40 pp.
What is the relationship between liberal democracy and capitalism? Experience of communism shows that democracy needs some sort of market economy as its basis. Does this also mean that capitalism needs liberal democracy? To study the relationship between capitalism and democracy in this context is completely in line with Glasshouse Forum’s ambition to subject capitalism and its political consequences to critical scrutiny. Linked to the question of whether capitalism is possible without democracy is the question of whether capitalism will give rise to antidemocratic currents in this century too.
In 2007 the Israeli Professor of National Security Azar Gat published a noteworthy essay in Foreign Affairs with the title “The Return of Authoritarian Great Powers”. Glasshouse Forum contacted Gat, who agreed to contribute to a project on this theme. Its inception during the first half of 2008 consisted of a round-table discussion at the Maison Louis Carré outside Paris on 23-24 April 2008.
The basis of the dialogue was the hypothesis that authoritarian capitalist states may be economically successful and may appear to form alternatives to a liberal society. Historical experiences of the relation between capitalist economy and democracy were discussed; whether China represents a viable alternative capitalism, in its own eyes and those of others; what role Russia will play in its relation with the border states and for European developments; and what impact China’s rise will have on global power dynamics, and on the international institutions.
A transcript of this discussion is published in An Edited Transcript of a Round-Table Conference on Authoritarian Capitalism. The intention has been to bring clarity to these issues from different perspectives, and to gain some insight into the best way for Glasshouse Forum to take the analysis and the discussion further.
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To complement Azar Gat’s essay and the round-table discussion, Glasshouse Forum commissioned three special studies:
In White Whale or Red Herring? – Assessing Sovereign Wealth Funds, Daniel W. Drezner establishes that the apprehensions about sovereign wealth funds have so far proved to be unfounded. As regards corporate governance and market uncertainty, it is difficult to prove significant negative effects from these funds. Drezner distinguishes the following possible risks from sovereign wealth funds in the future. They can amplify protectionist tendencies in the OECD countries. A general distrust of foreign investors is intensified by the fact that here it is a question of foreign governments. And they can create problems either by failing disastrously or by being hugely successful. As counterparty surveillance of them is imperfect in authoritarian states, they can commit major errors as regards riskier investments. Successful sovereign wealth funds can on the other hand contribute to the stability and attraction of authoritarian regimes. They can act as buffers vis-à-vis the vicissitudes of the market economy, mitigate crises and challenge the view that the market is the best allocation of resources. In this way, they can strengthen the position of the authoritarian states as an alternative to the liberal capitalist model.
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Azar Gat claims that China might be able to combine authoritarian rule and economic development, and that a model of this kind can exert a considerable power of attraction also outside China. In The Limits of the China Model, Johan Lagerkvist presents a contrasting picture. We will not see a new ideological Cold War between China and the West; nor will there be a return to the authoritarian capitalist great powers. Economic modernisation leads to pluralism and equal opportunities for more people and China will not prove to be an exception to do this. But the process is delayed for various reasons longer than that which seems desirable from the perspective of the West.
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According to the established modernisation theory, economic growth leads in the long term to a liberal democratic system. This view presumably contributes to the belief in China’s coming democratisation being so widespread. But if Azar Gat is correct in that it is possible to have economic development without liberal democracy, then the modernisation theory needs to be modified so that it can explain why economic development in certain cases leads to democracy, but in other cases does not.
Tolerance and Democracy in Liberal and Authoritarian Market Economies, by Sten Widmalm and Sven Oskarsson, provides a complementary empirical elucidation of the question of the return of authoritarian capitalist states and a critical discussion of the modernisation theory from this perspective. What other factors apart from economic development are significant for the growth and maintenance of a democracy?
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Their analysis of the position of tolerance in different societies gives rise to a reformulation of the modernisation theory. Tolerance does not necessarily follow from economic development, and for that reason nor does democracy follow from economic development. The prerequisite for tolerance and economic development to go hand-in hand is that income differences are not too great. Russia and China are markedly unequal societies. This is how the modified modernisation theory runs: economic development favours tolerance which favours democracy presupposing that societies are relatively equal.