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Democracy and the Future of Emerging Market Liberalism

Brazil and the IMF

by Norman Madarasz

When Brazil received the largest IMF bailout in history on August 9, the stock markets of the world rejoiced. It was one of the few days of significant stock market growth in weeks. Yet in the end, it seemed like a supernova. One last rise flashed brightly before the onset of recession could no longer be denied by any conscientious economist. At this point it may also mark the end of IMF measures for effective monetary management. Brazil’s public debt has only risen with the loan, even if the chance of defaulting on payment has subsided. Still, less than a week after the bailout, in tune with media skepticism on the loan as a way of wrangling with the up-coming Brazilian elections, the country’s currency, the real, was on the move again.

The loan and the need for one have led to a more insidious admission in the world’s financial press. It holds that market liberalism has failed in emerging countries. With the disaster of Argentina and the looming cloud of Turkey and Brazil, the Financial Times, New York Times and Wall Street Journal have been reading the message on the bank slip. With any deciphering it’s always of interest to ask what technology is being used. When we do, we come across analytical approaches typical of a band of sore losing whiners, an unworthy posture for the cream of market intellectuals.

Anatol Lieven and Amity Shlaes both write on emerging markets for the Financial Times. He signals the "death-knell of transitology", while she expresses faith in the dictum that the freer the market, the greater the riches. The result is the same in the end. Transitology exposes the constraints of capitalist logic. As the financial crisis ripples out from Market Central, America, the policy guidelines according to which emerging markets might make the transition to market liberalism have primarily benefited financiers, creditors and speculators — in two words, banks and their likes. The outcome, then, is a period vulnerable to populist forces ready to pounce on the market’s heaving torso.

What these commentators fail to mention is that a popular backlash is brewing not only against the free market. It is spreading against those who have been prancing about as free market democrats only to be pushing the interests of oligarchs on stage right. The population’s ire starts from their own capitals. For good reason, it stretches all the way to Washington/New York and Ottawa/Toronto. In its expression lies sure proof that democracy of this kind, even more than market liberalism, has turned into a fable. Then ask the question: are there any other kinds of democracies?

For years now, market economists have waxed triumphant on their earning ethics. The road to riches is redeemed if it spans over one-person/one-vote balloting. What democracy gains from this is the assurance of financial prosperity. Even so, scurrying behind the scenes were quiet voices who noticed that prosperity had absolutely nothing to do with democracy in China, South Korea, Malaysia and Indonesia. Those were the days when the Asian tigers growled louder than anything heard from the East since Hiroshima and Nagasaki. The GDPs erupting from the region until the late nineties were directly influenced by state interventionist populism, with the helping hand of foreign investors.

Let’s not hastily forget either that America’s steady growth is largely due to a Keynesian closed circle of continuous government contracts doled out to the largest industries. Modern American capitalism works at the bottom and middle. Its workers and small businesspeople are taxed heavily for the privilege. At the top, it looks more like state intervention on all fronts, including the tax schemes, and even at times the bailouts.

Still we hear pundits like Ms Shlaes enthusiastically quoting economists like Reuven Brenner to the effect that to reap riches democracy must go "hand in hand with the liberalization of financial markets, giving citizens a stake in the system." (FT, August 1, 2002) Never mind that reasoning of this type is commonly discredited as an explanation for why communist democracies work only in theory only to turn to terror in practice. It is just probabilistic folly to ever believe that markets can be liberalized as fully as promises of fairness require.

The type of development Brenner points to is not supposed to sound like hope. But that’s all it turns out to be when denying the systemic flaw that keeps stabbing international trade in the heart. Inasmuch as large owners of natural resources are less willing to establish liberal economies, not only do they go on to impede democracy, they actually produce poverty. It’s just weak analysis to insist that emerging markets simply ought to get to some more democratic stage. Everyone has heard over and over how trying it is to implement the democratic process. Today’s junctures clearly show that over the past thirty years democracies have been torn from the revolutionary potential through which the people’s will takes shape. Which means that democracies are only smokescreens for oligarchic rule.

Market liberalists are being voted out of power in a succession of these peripheral states. Ever more clever arguments are woven to justify failure of market liberalism in emerging markets. Northern speculators on intellectual movements are led to lament the passing of democracy in the poor nations. Yet not one of them has brought the question back home to ask what this pattern reflects of Northern democracies themselves.

Democracy worldwide is in a pitiful state. Then again the minds of our thoughts, from Plato and Aristotle to Marx and Foucault, including Adam Smith, have considered democracy to enable the poorest form of governance. So chaotic is its organization that it remains forever vulnerable to tyranny. Just have a look: in the self-proclaimed greatest democracy in the world, barely a half of Americans still turn out to vote. For over twenty years now, American presidents have claimed to have won by landslide victories, when a meager fifth is all they have reaped from the tally. Nothing went as far as the recent Florida farce, though.

Whereas in Canada, with an eye keener than former Nortel CEO John Roth for economic previsions, Prime Minister Jean Chrtien called snapshot elections in 1999 only two years after last being re-elected. He has now ruled the Canadian "democracy" for a record of three consecutive terms, close to over ten years. The only opposition the political system is able to muster is some half-baked Christian fundamentalism claiming it can better enforce democracy by imposing its rigid moral code.

Never mind that most "democracies" have long banished the possibility for rule longer than two terms. Mr. Chretien like Blair, Jospin and Gore tried to take credit for an economic boom that resulted largely from accounting trickery, all legal in the finest print. Economics has become an offshoot of thermodynamics, as what was thought to be growth turns out to be expanding percentage mark bubbles. In 1999, Canadians, who have a reputation worldwide for their high level of education, believed Chretien’s gambit and swept him back to power in another "landslide" victory equal to some 33% of eligible voters. After realizing they have a tyrant on their hands, Canadians, like other Western democrats, could only mutter that at any rate there was no real opposition to speak about which could replace him. It starkly befuddles them to sight a real opposition fighting hand-to-hand battles under the general banner of NGOs against lobby groups and multilateral organizations. This opposition, not being an accredited political party, of course has no legitimacy in a democracy.

Not a bad picture of the current first world of democracy. Meanwhile the elite press laments its defaulting to no end in the developing world. Constraints on article length and publication deadlines surely prevent financial journalists from raising the stochastic eyebrow regarding their own backyards. Does it lack legitimacy, then, to hold even the slightest suspicion that the establishment press is subservient to the business interests of the stockholders who own the newspapers they write for? Of course it doesn’t: freedom of expression is also firmly fit in the Northern democracies. As a case in point, such freedom involves detention without charge as common practice for alleged political crimes – not to mention back alley cyber-garbage snooping in library loans and bookstore accounts. Strapped to free markets, democracy has indeed fostered a wealth of methods.

Surely, the state of democracies has progressed. Their foremost achievement has been to cut the problem of social and political instability. Social instability, that scourge, is only what a country gets when masses of workers and students head to the streets to drive a wedge between business lobby groups and the governments of which the people are – or are constitutionally meant to be – the actors and owners. But for the North American mind, political instability in a democracy is when the opposition party is obnoxiously active. If there has been any progress in Western democracies since the 1970s, it has been to rid access to the parliamentary and assembly systems of the deeply-rooted reformist and green parties that are all but "populist" in the sense the financial intellectual elite is painting them to be.

Just consider that no self-proclaimed or designated populist government has ever brought structural change to the class structure on any significant scale in Western democracies since perhaps FDR’s. Who is the populist, after all? Yet the golden-boy and girl intellectuals clamor on: popular movements, demonstrations and calls for tax reform, banning tax shelters, havens and cuts, making banks accountable for the corporate-sponsored legal thievery from which they earn their bullions, taxing international financial transactions and continuing the project of building a free education system for all, with the wherewithal to endow its teachers with the highest level of education — all of these in the eyes of market liberals are nothing but expressions of populism. They reject demonstrations as legitimate expressions of the political will. They acquiesce to mankind’s destiny of destroying its natural habitat. And, as these intellectuals themselves follow leaders and gurus, so also must the population at large.

In the end, it’s just a logical extension of the American and Israeli settler myths. Since our people migrated to these fair lands, so also must have the native Arabs and Indians. Scientifically, this translates as the necessary migration of the first nations – did I hear forced migration? – across the landmass connecting Russia to Alaska some 11 000 years ago. In modern political terms, it asserts that a republic always needs a president.

What about democracy in Europe? The settlers first hoisted their sails from there as they fled persecution (at least sometimes) to find a new virgin land (never in fact). France is the seat of the 1789 Revolution, as it is of the lesser known ones of 1830, 1848, ’48 again and 1871. Arisen from the blood of the Marseillaise and Communards, it rules as a source of political invention for the West. Where is it now? France is caught between the victory of abstention-voting and the muting of social democracy by right-centrist populism. Populism does rule. It need not borrow the red banner to engrave its mark. Though it does succeed well in erasing from public exposure what cries out in the mind of the people: accountable national governance to distribute wealth and end absurd privilege. But as mathematical democrats like to recall, abstaining in politics counts even less than in sex.

Backwards is the course Western democracies have taken since the mid-1970s. The monarchist doctrines of 18th century British parliamentarism have managed to maintain their rule. To the margins of the political system, we had the chance to experience political invention from 1917 to the late 1960s and 1970s. Then, with the opposition sidelined, CEOs and market advocates were able through the glitter of electrotechnological advances to promise a society – a globe – of increased affluence for the many. Emerging markets were set on the course to transitology.

As a religion, democracy may reign strong and loud in the West, i.e. the North. But over the past thirty years, from Chicago 1968 onward, significant opposition parties – with perhaps the exception of the Bloc Quebecois in Canada, but for other reasons – have been all but drawn under. As the Washington Post pathetically displayed on August 19, the Democrats are now "worried" that a war against Iraq "could shift attention away from the economic issues that now dominate their agenda." From rhetoric and action opposition parties have been relegated to mood. And how they worry.

A democratic society is rarely threatened from the outside. Its institutions grow vulnerable to the abuse of power from within. Its monuments are attacked by the sons and daughters it maimed and killed from without. But as the cloak of national security tautens into the shield of civil negation the political process ends up being held hostage from the population at large. What then? Follow free market advocates, who claim that capitalism is crisis, and utter that democracy equates fundamentally with dysfunctionality?

OPEC and the 1973 oil crisis thirty years down the line have fully finalized their explosive prophesy. Democracy as defended by the "quasi-benevolent" corporations of the steel and automotive industries yielded their role long ago. The counter-enlightenment crusaders of the neo-con school have longed to return to the principles of oligarchic rule hidden in the history lesson on Athenian "democracy". If that lesson’s still taught, that is. It’s the only democracy the past really knew: a partial power-lust driven democracy that brought its own glory to dust through continual warfare. As for modern societies, none of them have either managed or wanted to go much further. After all, full voting rights — reserved to citizens, naturally — is only decades old.

As for the U.N. Human Development Report, it’s democracry’s report card. Based on the democratic successes of the West and Central Europe, it proves the theory wrong according to which development has priority over democracy. One of the co-authors of the report, Omar Noman, adds that "the best recipe for stability and development is democracy." (Globe and Mail, July 24) As self-certain as it may appear for the thriving upper middle classes and their ideological media controllers, the measure is consistently satisfied with the level achieved by the West. It never once addresses whether the lack of economic prosperity outside of the West, with some sparkling though rare exceptions, is merely a matter of capital accumulation with or without democratic success.

So it becomes the population more than the pundit to spot failing democracies. Anatol Lieven may liken Latin America in the 20th century to "a sick man on a bed, continually changing his position in an effort to find relief from his pain, and always finding only a temporary respite." (FT, August 11) He still ends up blandishing the measures taken by the North from keeping the populations from establishing the systems they need and want. Argentina may be showing a political vacuum, probably to the relief of the military and oligarchy. Recall only for a second that, like Chile, in Argentina’s recent past the hole in a generation of slaughtered and tortured progressive activists still emits moans of grief as its economy veers headless into total collapse.

Democracy has progressed indeed, progressed as its own alternative as past inventors of new political forms have been silenced into oblivion. Tyranny is no longer needed to appease the upper class. Democracy does just fine.

Norman Madarasz is a Canadian philosopher. He welcomes comments at normanmadarasz@hotmail.com