The Cash Nexus: Money and Politics in Modern History, 1700-2000

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The Cash Nexus: Money and Politics in Modern History, 1700-2000 Page 42

by Niall Ferguson


  Tocqueville had little interest in the economic implications of his pre-sentiment that in democracies egalitarianism and centralization would pose a threat to liberty. But twentieth-century political theorists – Adam Przeworski, for example – have drawn the obvious inference. According to Przeworski, there is a fundamental conflict between the market, in which individuals cast ‘votes’ using the resources that they own – which are distributed unequally – and the state, ‘a system that allocates resources which it does not own, with rights distributed differently from the market’. In the case of a democracy, the rule of ‘one citizen, one vote’ gives everyone the same right to influence the allocation of resources through the state:

  It is hardly surprising that distributions of consumption produced by the market differ from those collectively preferred by the electorate, since democracy offers those who are poor … or otherwise dissatisfied with the initial distribution of endowments an opportunity to seek redress via the state. Endowed with political power in the form of universal suffrage, those who suffer as a consequence of private property will attempt to use this power to redistribute wealth…. Democracy inevitably threatens ‘property rights’.23

  Might there after all be a conflict between an economic progress which depends primarily on liberty and a democracy which, as Tocqueville warned, tends to give preference to equality?

  THE ASCENT OF DEMOCRACY

  For the past twenty-five years democracy has been spreading across the globe just as Tocqueville predicted. It began in the Iberian peninsula in the mid-1970s, spread to Latin America and parts of Asia in the 1980s, and between 1989 and 1991 swept across Central and Eastern Europe, as well as parts of sub-Saharan Africa. ‘For the first time in history,’ according to the Institute for Democracy and Electoral Assistance, ‘more people are living in democracies than under dictatorships…. And the trend … is towards enlargement of the democratic mandate.’24 Democracy has become ‘a global phenomenon’.25 Its spread has been a benign version of the ‘domino effect’ Americans used to fear during the Cold War.26 It has even been predicted that ‘the democratic community might reach the 90 per cent level toward 2100’.27

  Though it may seem, with the benefit of hindsight, to have been predictable, the success of democracy is one of history’s bigger surprises. When the central question of Western political theory – monarchy, aristocracy or democracy? – was first debated, the proponent of democracy lost. In Book III of his Histories, Herodotus imagines how the Persian conspirators who slew the Magi decided on the future form of their country’s government. Otanes argued for democracy: ‘First, [the rule of the people] has the finest of all names to describe it – equality under the law; and secondly … under a government of the people a magistrate is … held responsible for his conduct in office, and all questions are put up for open debate.’ But Megabyzus argued for oligarchy, on the ground that

  The masses are a feckless lot – nowhere will you find more ignorance or irresponsibility of violence…. A king does at least act consciously and deliberately; but the mob does not. Indeed, how should it, when it has never been taught what is right and proper …? The masses have not a thought in their heads; all they can do is to rush blindly into a politics like a river in flood.

  Finally, Darius made the case for monarchy, and he too had words to say against democracy:

  In a democracy, malpractices are bound to occur … corrupt dealings in government services lead … to close personal associations, the men responsible for them putting their heads together and mutually supporting one another. And so it goes on, until somebody or other comes forward as the people’s champion and breaks up the cliques which are out for their own interests. This wins him the admiration of the mob, and as a result he soon finds himself entrusted with absolute power – all of which is another proof that the best form of government is monarchy.

  Darius won. Significantly, Otanes’s last democratic act was to secede from the new monarchical order.28

  For centuries Western political thought was against Otanes. Only belatedly, in the seventeenth and eighteenth centuries, did the case for a democratic polity begin to find proponents; and even in the nineteenth century relatively few of these were willing to contemplate universal suffrage. Moreover, the first half of the twentieth century seemed to herald not the triumph of democracy but of socialism. In 1942 Joseph Schumpeter argued that democracy was inexorably undermining capitalism, and that socialism was the shape of things to come. But how would democracy fare under socialism? ‘Socialist democracy’, he concluded grimly, ‘may eventually turn out to be more of a sham than capitalist democracy ever was.’29 Another Austrian exile, Friedrich von Hayek, warned that utopian socialism would lead post-war Britain down ‘the road to serfdom’, just as National Socialism had led Germany to totalitarianism.30

  Schumpeter and Hayek can be forgiven their pessimism, writing as they were in the wake of the worst depression of modern economic history and in the depths of the Second World War – a war which was waged not only against an array of dictatorships but also in alliance with one of the most repressive and murderous of them all. Yet the events of the past twenty-five years have belied their forebodings.

  Though there is academic disagreement as to how exactly democracy should be measured,31 the extent of the democratic triumph is unmistakable. Among the most systematic attempts to quantify the advance of democracy is the Freedom House Survey, which has been published annually since 1973 and which awards marks for ‘political rights’ and ‘civil liberties’32 on a scale from 1 (the highest degree of freedom) to 7 (the lowest). Countries whose combined averages for political rights and for civil liberties fall between 1.0 and 2.5 are designated ‘free’; those who score between 3.0 and 5.5 are classified as ‘partly free’; while a mark of between 5.5 and 7.0 signifies ‘not free’. Summarizing the 1998 Survey, the Freedom House president Adrian Karatnycky calculated that

  88 of the world’s 191 countries (46 per cent) [are now] rated as Free, meaning that they maintain a high degree of political and economic freedom and respect basic civil liberties…. Another 53 countries (28 per cent of the world total) were rated as Partly Free, enjoying more limited political rights and civil liberties, often in a context of corruption, weak rule of law, ethnic strife, or civil war…. Finally, 50 countries (26 per cent of the world total) that deny their citizens basic rights and civil liberties were rated as Not Free.33

  Whatever reservations one may have about its methodology, the Freedom House Survey indicates that freedom (by its own definition, at least) has been making a sustained advance. In 1998 India, the Dominican Republic, Ecuador, Nicaragua, Papua New Guinea, Slovakia and Thailand were all promoted from ‘partly free’ to ‘free’; while a further three countries formerly ranked as ‘not free’ were now rated as partly free.34 Altogether twenty-two countries saw their freedom score improve (i.e. go down), compared with just twelve which were judged to have become less free. Only thirteen states qualified for the worst possible score of 7: Afghanistan, Burma, Cuba, Equatorial Guinea, Iraq, Libya, North Korea, Saudi Arabia, Somalia, Sudan, Syria, Turkmenistan and Vietnam. The Survey implies that nearly 2.4 billion people (or 40 per cent of the world’s population) now live in free societies, compared with 1.6 billion (26 per cent) who are partly free and just under 2 billion (34 per cent) who are not free. That is liberty’s best showing since the Survey began twenty-six years ago. Then just 30 per cent of countries were free; 24 per cent were partly free; and 46 per cent were not free (see Table 20).

  Admittedly, the Freedom House definition of freedom is not the same as democracy. As Fareed Zakaria has pointed out, there are a number of democracies that are not especially liberal when one considers closely their respect for civil rights.35 The Survey counted (at the end of 1998) a total of 117 ‘electoral democracies’,36 representing over 61 per cent of the world’s countries and 55 per cent of its population. Yet only 40 per cent of people live in countries that Freedom House regards as free
, implying that 15 per cent of human beings now live in democracies that are not wholly free. (This would not have surprised Tocqueville.) Nevertheless, the trend would now appear to be in the direction of liberalism as well as democracy. In 1995 the Survey rated 76 of the 117 electoral democracies free (just under 65 per cent), 40 partly free (over 34 per cent), and one – Bosnia-Herzegovina – not free. Today, out of the same number of electoral democracies, 88 (over 75 per cent) are free, while all the others are partly free.37 The illiberal democracies may therefore prove to be a transient phenomenon. Still, the point is well taken that the introduction of free elections based on universal suffrage does not automatically guarantee the rule of law and respect for civil rights.

  Table 20. Free, partly free and not free countries: the Freedom House Surveys for 1972–1973 and 1998–1999

  Source: Freedom House, Annual Survey of Freedom.

  It is worth pausing at this point to ask what precisely we mean by ‘democracy’, given the significant differences that exist within this broad and antique category. Take the most basic democratic mechanism, the franchise itself. While most parliamentary systems have, in the course of the last century, ceased to discriminate against women and the poor, the age of entitlement to vote still ranges from 15 (the Philippines) to 21 (India). The number of years between general elections also varies from two to five. Diversity is especially marked with respect to electoral systems. Among fifty-three countries in a survey conducted in 1996, nearly half (twenty-five) had a version of proportional representation (though with different formulas for Lower House composition and different kinds of list); twelve used the British ‘first past the post’ system; eleven had a mixed system, combining elements of PR and FPTP; and two had a majority or ‘run-off’ system (leaving two which defied categorization).38

  Another area of divergence is the number of parties represented in democratic legislatures around the world. According to one estimate (which weights parties by the number of seats they win), the number of ‘effective’ parties in legislatures in the early 1990s ranged from two to twenty-three (Ukraine). This is not just a matter of custom or culture. There does seem to be a link between the electoral system used and the number of parties represented, though the difference is less than might be expected. A recent analysis of 509 elections in twenty countries found that, on average, majority systems had seven parties and PR systems had eight.39 The referendum also plays a role of varying importance: at one extreme, the Swiss have had no fewer than 275 since 1945. At least thirteen democracies make voting compulsory; partly for this reason, turnout in recent general elections has ranged from 21 per cent (Mali) to 96 per cent (Australia). Most but not all systems are bicameral. In 1997 there were 58 two-chamber parliaments in the world, but in China, Denmark, New Zealand, Portugal and Sweden – not to mention Nebraska and Queensland – there is only a single chamber. Some are directly elected; some indirectly; a few (like the ‘reformed’ House of Lords in Britain) are entirely appointed by the executive.40 Only twenty-eight out of fifty-three democratic states in the sample mentioned above have popularly elected heads of state, and not all of these are truly presidential. It has long perplexed American political scientists that so many West European democracies stubbornly choose to retain hereditary heads of state.41

  Such institutional differences can have major implications for the success of democracy. The evidence suggests strongly that parliamentary democracies are more stable than presidential systems: of thirty-one democracies that have lasted for at least twenty-five years, twenty-four are parliamentary and only four presidential.42 There are also reasons to think that proportional representation can ‘exacerbate divisions and conflicts within societies by re-creating them and relocating them in its legislature with a multitude of political parties’.43 Certainly, there is little doubt that it tends to produce shorter-lived governments: in eighteen OECD countries between 1950 and 1990, the average government lasted just 1.9 years under PR, compared with 3 years in majority systems.44

  And there are other important differences. Some democracies (such as Britain and France) are very centralized, while others (Switzerland, the United States, Germany, Canada and Australia) have federal systems. Federal systems naturally strike Americans as preferable; yet it remains very hard to conceive of a federal Britain, even after the creation of national assemblies in Scotland, Wales and Northern Ireland, unless England were to be in some way subdivided. Some states concede more power than others to unelected bodies, such as the judiciary and the central bank. As we have seen, the transfer of control over monetary policy back to more-or-less independent banks run by unelected experts was a widespread response to the problems of inflation in the 1970s and 1980s. Yet there are those who would see this as a diminution of democracy. In Britain considerable power has also been vested in so-called ‘quangos’ (quasi-non-governmental organizations), which are appointed by the incumbent executive and are barely accountable to parliament. Finally, some democracies are more ready than others to delegate powers to supra-national organizations. The European Union illustrates well that the whole of such an organization can sometimes be less democratic than the sum of its parts.

  In short, even if the world is ‘on a roll’ towards democracy, it is not clear which form of democracy is likely to predominate in the future. Democracy is even understood by some to extend beyond the sphere of politics. In his Reith lectures, Anthony Giddens spoke with evident enthusiasm of the democratization of family life, eagerly looking forward to a ‘democracy of the emotions in everyday life’45 – whatever that may mean.

  THE THREE WAVES

  But can we be sure that the trend towards democracy will continue? It is at least arguable that the quarter century covered by the Freedom House Survey is too short a period on which to base projections, much less confident predictions. Moreover, it is important to remember that much of the dramatic change summarized in Table 20 above occurred in a very short period between 1989 and 1991, when the Communist bloc in Eastern Europe and the Soviet Union itself collapsed.

  If there had been a Freedom House Survey for the past century, what would it have shown? Looking back in the summer of 1900 on the three previous decades, an earlier author might also have concluded that liberty and democracy were making inexorable progress in the world. True, much of the world was under imperial rule by the European great powers; while Latin American countries were prone to coups and civil wars. But there were unmistakable moves towards greater liberty and democracy elsewhere. In Russia, Turkey, Portugal and China, absolutist monarchies were driven to liberalize by revolutions or overthrown altogether. Admittedly, there were drastic declines in freedom, if not in democracy, between 1914 and 1916, as the combatant powers in the First World War curtailed political and civil liberties in the name of national emergency. But from 1917 until around 1921 democracy won major victories, with as many new states being constituted as democracies as there have been since 1989.

  Yet this advance was not sustained. The imposition of Bolshevik rule in Russia and most of the old Tsarist empire represented a profound setback for Eastern Europe, the Caucasus and Central Asia, as the new regime was in many ways even less liberal than its Tsarist predecessor. Moreover, there was a collapse of nearly all the new democracies in the years from 1922 to 1938. By that date, democracy survived only in Britain and its white Dominions, the United States, Czechoslovakia, France, Belgium, Holland, Switzerland and Scandinavia. In the following five years Nazi Germany overran all but two of the remaining continental democracies. And although the defeat of Germany restored democracy in north-western Europe, it did not do so in Eastern Europe or Iberia. Nor did decolonization in Asia and Africa advance the cause of democracy, for in few cases did the new rulers long tolerate political opposition. (As the white Rhodesian leader Ian Smith sardonically observed, African democracy meant ‘One man, one vote – once.’) Moreover, both sides in the Cold War installed or propped up undemocratic regimes in Latin America, Asia and Africa. For thes
e and other reasons, fully a third of the democracies that existed world-wide in 1958 had been snuffed out by the mid-1970s.46 The failure of parliamentary regimes in sub-Saharan Africa after decolonization was as big a setback for democracy as events in Eastern Europe since 1989 have been an advance.47

  These points can be presented more formally using the Polity III database, which applies a rather more complex 11-point scale for a much longer period than the Freedom House Survey. Here the score for democracy is based on four criteria: ‘competitiveness of political participation’ (maximum score 3 points), ‘competitiveness of executive recruitment’ (maximum score 2), ‘openness of executive recruitment’ (maximum score 1) and ‘constraints on the chief executive’ (maximum score 4): the maximum score is therefore 10, the minimum – for a wholly undemocratic state – zero. Over 160 states are covered and there are data for many countries from as long ago as 1800.48

  The most striking point is that, though it is undoubtedly true that the world has never been more democratic than it was in 1998, the trajectory of democratization has not been smoothly upwards (see Figure 32). There have in fact been three peaks of global democratization: in 1922, 1946 and 1994 – hence Samuel Huntington’s idea of the current ‘third wave’ of democratization. The crucial point, of course, is that both the two previous waves receded.49

  Figure 32. The rise of democracy, 1800–1996

  Source: Data kindly supplied by Kristian S. Gleditsch and Michael D. Ward.

  Nor has the progress of democracy been uniform around the world. Table 21 presents a simplified overview of the Polity figures, taking twenty-five-year samples of regional averages. The Middle East emerges as consistently the least democratic region, Western Europe the most democratic. There has been no clear trend in Africa, Asia or the Americas. The erratic and uneven character of democratization is borne out by other attempts to quantify the progress of democracy or freedom in the long run.50

 

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