Capitalism and its critics

A modern Marx

Thomas Pikettys blockbuster book is a

great piece of scholarship, but a poor
guide to policy
May 3rd 2014 | From the print edition

WHEN the first volume of Karl Marxs Das Kapital was published in 1867, it took
five years to sell 1,000 copies in its original German. It was not translated into
English for two decades, and this newspaper did not see fit to mention it until 1907.
By comparison, Thomas Pikettys Capital in the Twenty-First Century is an
overnight sensation. Originally published in French (when we first reviewed it), Mr
Pikettys vast tome on income-and-wealth distribution has become a bestseller since
the English translation appeared in March. In America it is the top-selling book on
Amazon, fiction included.
The books success has a lot to do with being about the right subject at the right time.
Inequality has suddenly become a fevered topic, especially in America. Having for
years dismissed the gaps between the haves and have-nots as a European obsession,

Americans, stung by the excesses of Wall Street, are suddenly talking about the rich
and redistribution. Hence the attraction of a book which argues that growing wealth
concentration is inherent to capitalism and recommends a global tax on wealth as the
progressive solution.
In this section

What would America fight for?

Chinas Carnegie

Cheap is cheerful

A modern Marx

Time to ditch Mandelas party

Reprints
Related topics

United States

Thomas Piketty

Capital has duly enraptured the left, infuriated the right and spiced up the dismal
science in the popular mind (see article). But if Mr Piketty does set the tone of debate
on inequality, the world will be the poorer for it. For like its 19th-century namesake,
Capital contains some marvellous scholarship, but as a guide to action, is deeply
flawed.
Capital makes three big contributions in its 577 pages. First, Mr Piketty, a pioneer
in using tax statistics to measure inequality, painstakingly documents the evolution of
income and wealth over the past 300 years, particularly in Europe and America. In
doing so, he shows that the period from about 1914 to the 1970s was an historical
outlier in which both income inequality and the stock of wealth (relative to annual
national income) fell dramatically. Since the 1970s both wealth and income gaps have
been rising back towards their pre-20th-century norms. There are surely a few snafus
in these statistics, but this work has transformed understanding of the history of
wealth, with eye-popping results. Who knew, for instance, that the annual value of
inheritances in France has tripled from less than 5% of GDP in the 1950s to about
15%, not all that far from the 19th-century peak of 25%? As a piece of empirical
sleuthing, the book is indisputably brilliant.
Mr Pikettys second contribution is to come up with a theory of capitalism that
explains these facts and offers a prediction of where wealth distribution is heading.
His central claim is that the free-market system has a natural tendency towards
increasing the concentration of wealth, because the rate of return on property and
investments has consistently been higher than the rate of economic growth. Two
world wars, the Depression and high taxes pushed down the return on wealth in the

20th century, while rapid productivity and population rises pushed up growth. But
without such countervailing factors, Mr Piketty argues, higher returns on capital will
concentrate wealthespecially when, as now, an ageing population means that
growth should slow.
Mr Pikettys expectation of rising wealth concentration is not outlandish. However, it
is a prediction based on extrapolating from the past, not an inherent model of
capitalism. He assumes that the returns to capital will not fall substantially even as the
stock of wealth rises. That may prove to be true, but the Piketty prediction is a
hypothesis, not an iron law.
Nit-Piketty
That is where the problems start, because Mr Pikettys third contribution is to offer
policy proposals that assume this growing concentration of wealth is not only
inevitable, but the thing that matters most. He prescribes a progressive global tax on
capital (an annual levy that could start at 0.1% and hits a maximum of perhaps 10%
on the greatest fortunes). He also suggests a punitive 80% tax rate on incomes above
$500,000 or so.
Here Capital drifts to the left and loses credibility. Mr Piketty asserts rather than
explains why tempering wealth concentration should be the priority (as opposed to,
say, boosting growth). He barely acknowledges any trade-offs or costs to his
redistributionist agenda. Most economists, common sense and a lot of French
businesspeople would argue that higher taxes on income and wealth put off
entrepreneurs and risk taking; he blithely dismisses that. And his to-do list is oddly
blinkered in its focus on taxing the rich. He ignores ways to broaden the ownership of
capital, from baby bonds to government top-ups of private saving accounts. Some
capital taxes could sit nicely in a sensible 21st-century policy toolkit (inheritance
taxes, in particular), but they are not the only, or even the main, way to ensure broadbased prosperity.
Mr Pikettys focus on soaking the rich smacks of socialist ideology, not scholarship.
That may explain why Capital is a bestseller. But it is a poor blueprint for action.

Privatisation

Is it time for governments to launch a new wave of privatisations?

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Opening statements

Yes
Bernardo Bortolotti
Professor of Economics, University of Turin; Director, Sovereign
Investment Lab, Bocconi University

A large-scale privatisation programme alleviates public finances because cash

revenues can be used to redeem public debt, and savings in interest payments
may give leeway to expansionary fiscal policy.

No
Elliott Sclar
Urban Planning Professor and Director, Centre for Sustainable Urban
Development, Columbia University

The motivational misalignment between long-term public needs and shorterterm private needs for investment return is at the core of all the instances of
failure in public-asset sales and leases.
Skip to...

Moderator

Pro

Con

The moderator's opening remarks

Feb 4th 2014 | Matthew Valencia

Our debate tackles a perennial economic question that is also inherently political.
Privatisation has long been championed by proponents of laissez-faire capitalism,
usually on the political right, and opposed, often bitterly, by trade unions and others
on the left. Over the past quarter of a century it has ebbed and flowed, in line partly
with the complexion of governments and partly with the state of financial markets.
(Who wants to sell when prices are in a slump?) Global privatisation receipts have
been strong in recent years, but much of the action has been in large developing
countries, such as China and Brazil. Is it time for advanced economies to rediscover
the boldness of the 1980s and the early part of the last decade?
They could certainly do with some extra revenue. In many OECD countries, public
debt is at its highest peacetime levels. In Italy, for instance, it stands at more than
130% of GDP, far above the level that most economists deem sustainable. Where
economies are on the mend, recovery looks fragile.
Contrary to the widespread perception that most of the juiciest assets have already
been flogged, governments still have plenty of potentially attractive stuff on their
books. Fully or partially state-owned enterprises in OECD countries are thought to be
worth $2 trillion. Add to that another $2 trillion-worth of sub-national assets, such as
regional utilities. Dwarfing these corporate holdings are publicly held buildings, land
and other so-called "non-financial assets". Their precise worth is unknowable because
many are held at questionable book value while others aren't even recorded. Most
governments don't produce balance-sheets.

With such gems in the closet, and those holding them fiscally troubled, the arguments
for sticking more on the block might seem straightforward. But privatisation offers
only brief respite for a government that is addicted to overspending. And though some
sales have been clear successes (who would argue that Europe's telecoms companies
would be better off if still in state hands?), others have produced questionable value
and a few have been unmitigated disasters. If privatisation is poorly designed
particularly if an appropriate regulatory framework isn't first put in place
undeserved spoils are likely to go to a small group of insiders, sparking a backlash.
Witness past turmoil in Latin America.
We are delighted to have two distinguished experts to debate the issue. Arguing the
case for another burst of divestment is Bernardo Bortolotti, associate professor in
economics at the University of Turin, director of the Sovereign Investment Lab at
Bocconi University in Milan and founder of the Privatization Barometer. Mr
Bortolotti sees a virtuous circle in properly structured sales: the paying-down of
excessive debts, rising credit ratings and greater competition. Moreover, market
conditions are right, with global stockmarkets near historical highs and investors'
appetite for equity, relative to other asset classes, likely to remain strong.
Elliott Sclar, professor of urban planning at Columbia University and author of "You
Don't Always Get What You Pay For: The Economics of Privatization", weighs the
short-term financial gains of selling against the possible social costs, and finds them
largely wanting. One reason, he argues, is a misalignment of time-horizons and
incentives between seller and buyer. Using the example of Chicago's parking assets,
he suggests that privatising management while retaining ownershipan increasingly
common approachis not the answer.
Some questions that I'd like to see addressed include: What types of "strategic" or
"heritage" assets should be off-limits in any circumstance? What do examples of
successful state capitalism, notably in Scandinavia, tell us about the merits and
demerits of privatisation, or about how to improve the management of stuff that
remains in public hands? When does it make sense to lease, securitise or form publicprivate partnerships rather than sell outright? And, in the light of their poor accounting
and data collection, what can governments do to develop a better understanding of
what they hold?
Over the next ten days our panellists will present their most persuasive arguments, but
the result of our debate rests in your hands. Do not be afraid to vote immediately
you can always change your mind. Even better, once you have cast your vote, add
your voice to the debate and explain your decision. I look forward to reading the
comments of all those who participate.
Skip to...

Moderator

Pro

Con

The proposer's opening remarks

Feb 4th 2014 | Bernardo Bortolotti

Stars are realigning (again) for the start of a new big privatisation wave. The key
factors explaining state sell-offs are well-known: deteriorating public finances;
financial market conditions; and a large portfolio of state-owned assets. Under present
circumstances, governments of all stripes may decide to put on the market large
chunks of the national economy any time soon.
The financial crisis, with its lethal mix of credit crunch, decreased tax revenues, huge
economic stimulus programmes and bank bail-outs, led to a dramatic increase in
public debt for most advanced economies. Public debt as a percentage of GDP in
OECD countries, hovering around 70% during the 1990s, rose to 113% in 2013, and it
is projected to grow even more in the next year. This trend is visible not only in
countries chronically affected by debt problems, such as Japan, Italy, Belgium and
Greece, but also in countries where public finances were well under control before the
crisis, such as America, Britain and France. A large-scale privatisation programme
alleviates public finances because cash revenues can be used to redeem public debt,
and savings in interest payments may give leeway to expansionary fiscal policy.
Rising interest-rate expectations reinforce the argument, along with the positive effect
on credit ratings of a sustained privatisation programme.
Market conditions are equally important because no government, like any other asset
owner, will sell shares in a depressed market. And again the compass points in the
same direction. Global stockmarkets are today at historical highs. Last year American
stocks posted the best annual return since 2007, and valuations have gone ballistic for
several listed assets in mature economies. Given the current growth prospects, the
outlook is still positive. Under current market conditions, governments could thus
take the opportunity to get good prices for their listed stocks, and significant revenues
in the primary markets in case of initial public offerings (IPOs), given the high

appetite for equity of global investors. The recent highly oversubscribed IPO of
Britain's Royal Mail represents an interesting forerunner of this trend.
The boundaries of state ownership have moved considerably in the past few decades,
with the large privatisation waves of the late 1900s followed by the more recent
government bail-outs in advanced, crisis-hit economies, and sovereign wealth fund
investments in emerging countries. At any rate, residual state ownership in listed and
non-listed firms, real estate and infrastructure is valued at around $9 trillion.
So governments have property left to sell and an interesting window of opportunity to
seize. However, they should remember the hard lessons learnt from past
privatisations.
First, divesting governments should always apply the basic financial rule for
privatisation: privatise only if the sale improves the net worth of the state. A stateowned asset should be sold only if its expected return in private hands exceeds the
interest rates on public debt. The corollary of the rule is that governments should
auction the assets in competitive tenders to get the best price in the market. Giveaway
privatisation, sales to insiders like those implemented in some transition economies
(notably in Russia), or strongly underpriced offerings in public markets violate the
rule and should be avoided.
Getting high prices is an important objective to square public finances, but turning a
giant state company into a private monopoly in order to raise cash is an economic
disaster. Unfortunately, privatisation history is littered with botched sales in network
industries where efficiency considerations have been neglected in favour of
immediate financial relief. The usual method is a partial sale of a badly regulated
monopoly. Under this scheme, the divesting government gets immediate revenues
from the sale, and a future stream of rent in the form of dividends from its residual
stake in the company. Monopolistic rents, extracted from captive consumers of public
services, are thus shared by the treasury and a happy few private shareholders. The
announced partial privatisation of Italy's Poste Italiane, a large state-owned financial
conglomerate and postal operator slated for sale as an integrated monopoly, seems to
fit perfectly in this scheme. Liberalise, regulate and then privatise is the right timing.
The current crisis has raised questions about the role of the state in the economy and
disparaged the economic paradigm based on laissez-faire, unfettered markets and
unrestrained financial capitalism. In the 1980s and 1990s, privatisation was often
shaped by right-wing ideology. This is not a time to resurrect old ideologies, but
rather a time to adopt a policy that can deliver to citizens and taxpayers. The devil will
be in the details of implementation, but it is definitely worth a try.
Skip to...

Moderator

Pro

Con

The opposition's opening remarks

Feb 4th 2014 | Elliott Sclar

Is it time for governments to launch a new wave of privatisations?

While privatisation might make sense in some instances, a massive sell-off of public
assets is not one of them. Privatisation is fundamentally a variation on a simple
technical outsourcing question: should government make or buy products or services
such as computer hardware or painting contracting that are readily available in the
marketplace? However, once the discussion moves from the straightforward to such
uniquely governmental functions as communications monitoring and securityclearance certification, more philosophically complex questions arise pertaining to the
proper role of government in the life of society. Over the past three decades,
privatisation proponents have deployed the outsourcing for efficiency argument in the
service of varying policy ends: reining in the incomes of public employees, putting
state-owned enterprises into the private sector and, most recently, solving state fiscal
crises by selling public assets.
Repurposing privatisation to resolve public-sector budgetary constraints is the issue I
address here. The policy prescription calls for reducing public debt via the sale or
lease (ie, privatisation) of publicly owned assets. The justification is made by analogy.
Private firms facing debt crises are expected to sell assets to avert bankruptcy. The
same should hold true for governments. Firms are not governments. Firms easily arise
and as easily liquidate. Governments can do neither easily, if at all. Governments have
abiding social obligations to deliver important public goods and governance. Asset
dispositions to meet current budget gaps must be weighed against the future costs of
enduring responsibilities.
Privatisation always involves establishing a relationship between government, the
agent of society's collective interests, and a private entity motivated by self-interest.
The critical issue in evaluating this deployment of outsourcing is appreciating the
time-sensitive motivations of the parties involved.

A major proportion of saleable public value is locked into the infrastructure that is
critical to animating vibrant urban societies. The prices private investors willingly pay
for control over such assets reflect their estimates of the revenue streams they expect
from tolls, fees and other charges. The freer the hand the public sector extends to
private investors in operating the asset, the more the latter will offer. Is government
seeking maximum sale value at the cost of something more enduring?
There is no readily obvious alignment between the long-term public needs of a vibrant
urban society and the shorter-term private needs for investment return and protection
of capital. This motivational misalignment is at the core of all the instances of failure
in public-asset sales and leases. Failures are more common than is popularly
understood.
Consider Chicago's experience with its 2008 75-year lease of its street-parking meters
for $1.157 billion. Almost everyone regards that sale as a poor bargain. Chicago now
reportedly has the highest parking rates of any city in America, never a good
economic omen in an auto-dependent country. The consensus is that the city badly
mishandled the leasing process. Chicago's inspector general put the value of the deal
at just over $2 billion. For privatisation advocates, the lesson is that Chicago officials
failed to negotiate well. Incidentally, that is the standard advocate response to all such
failures regardless of specifics. Accumulated evidence of serial failure never proves to
be an intellectually powerful enough reason to reconsider the rationale. It is dismissed
as just so many poorly executed anomalies.
But that framing of the contract debate misses the larger lesson here. Chicago, in
leasing its parking meters effectively, relinquished critical control of its most vital
public good, its streets. Leasing its street space, regardless of price, breaches an
important public fiduciary responsibility. The worst aspect of this privatisation is that
Chicago must guarantee revenue from its street space to a private investment
partnership for the equivalent of three generations. The city cannot take parking space
away for transit, cycle lanes or other purposes. Given new technologies such as selfdriving vehicles and smartphone-accessible demand-responsive taxis, it is unlikely
that we will still need much, if any, on-street parking towards the end of this century.
But Chicago will still be reimbursing a private investment partnership with real
taxpayer dollars for the imaginary lost revenue of what will in effect be phantom
parking spaces.
We will not resolve the larger philosophical questions here about the proper scope of
government. But let's agree that when governments engage in any public-asset
privatisation, for whatever reason, it is vital that public aims remain paramount. These
aims should not be compromised for the sake of private-sector profit-making or rentseeking, as is now the case in Chicago.

The core problem remains one of mission misalignment between the parties. Because
this difference is so fundamental, the contractual terms become critical. All publicasset lease and sale contracts must do three things: explicitly protect public options in
the face of changing conditions; specify exactly how transparency will be maintained;
and make explicit provision for ongoing oversight and accountability. These
provisions will, of course, diminish the attractiveness of such sales and leases to the
private sector and raise public-sector contract enforcement costs. This lesson was
recently driven home when Chicago, stung by its misadventure in parking-meter
sales, sought to impose more contract accountability in the sale of its municipal
airport. Once the new terms of engagement became known, the number of interested
bidders rapidly fell from 16 to one. With no competition there was no sale. And that is
the point. More upfront revenue means higher future social costs. No free lunches
here.

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Working hours
Get a life
Sep 24th 2013, 12:19 by C.W. and A.J.K.D. | LONDON

BERTRAND RUSSELL, the English philosopher, was not a fan of work. In his 1932
essay, In Praise of Idleness, he reckoned that if society were better managed the
average person would only need to work four hours a day. Such a small working day
would entitle a man to the necessities and elementary comforts of life. The rest of
the day could be devoted to the pursuit of science, painting and writing.
Russell thought that technological advancement could free people from toil. John
Maynard Keynes mooted a similar idea in a 1930 essay, "Economic possibilities for
our grandchildren", in which he reckoned people might need work no more than 15
hours per week by 2030. But over 80 years after these speculations people seem to be
working harder than ever. The Financial Times reports today that Workaholics
Anonymous groups are taking off. Over the summer Bank of America faced intense
criticism after a Stakhanovite intern died.
But data from the OECD, a club of rich countries, tell a more positive story. For the
countries for which data are available the vast majority of people work fewer hours
than they did in 1990:

And it seems that more productiveand, consequently, better-paidworkers put in

less time at the office. The graph below shows the relationship between productivity
(GDP per hour worked) and annual working hours:

The Greeks are some of the most hardworking in the OECD, putting in over 2,000
hours a year on average. Germans, on the other hand, are comparative slackers,
working about 1,400 hours each year. But German productivity is about 70% higher.
One important question concerns whether appetite for work actually diminishes as
people earn more. There are countervailing effects. On the one hand, a higher wage
raises the opportunity cost of leisure time and should lead people to work more. On

the other hand, a higher income should lead a worker to consume more of the stuff he
or she enjoys, which presumably includes leisure.
Some research shows that higher pay does not, on net, lead workers to do more.
Rather, they may work less. A famous study by Colin Camerer and colleagues, which
looked at taxi drivers, reached a controversial conclusion. The authors suggested that
taxi drivers had a daily income "target", and that:
When wages are high, drivers will reach their target more quickly and quit early; on
low-wage days they will drive longer hours to reach the target.
Alternatively, the graph above might suggest that people who work fewer hours are
more productive. This idea is not new. Adam Smith reckoned that
[T]he man who works so moderately as to be able to work constantly, not only
preserves his health the longest, but in the course of the year, executes the greatest
quantity of works.
There are aberrations, of course. Americans are relatively productive and work
relatively long hours. And within the American labour force hours worked among the
rich have risen while those of the poor have fallen. But a paper released yesterday by
the New Zealand Productivity Commission showed that even if you work more hours,
you do not necessarily work better. The paper made envious comparisons between
Kiwis and Australiansthe latter group has more efficient workers.
So maybe we should be more self-critical about how much we work. Working less
may make us more productive. And, as Russell argued, working less will guarantee
happiness and joy of life, instead of frayed nerves, weariness, and dyspepsia".

Opening statements

Yes
Larry Diamond
Senior fellow at the Hoover Institution and the Freeman Spogli
Institute for International Studies

Democracy globally has faced a lot of challenges and setbacks in recent years.
Yet none of this has cumulated into an authoritarian "reverse wave". There are
many instances of democratic progress or renewal.

No
Christian Caryl
Senior fellow, Legatum Institute and a contributing editor, Foreign
Policy magazine

People want freedom, to be sure, but they also yearn for economic growth,
social justice and security. When elected leaders fail to produce these public
goods, voters can hardly be blamed for their disillusionment.
Skip to...

Moderator

Pro

Con

The moderator's opening remarks

Jan 21st 2014 | Daniel Franklin

This debate is a timely one. For 2014 is a big year for democracyor, at least, for
voting. Indeed, it may be the biggest ever: roughly 42% of the world's population live
in countries that will hold nationwide votes of some sort this year. These include some
of the largest mature democracies of the rich world (the United States will hold midterm elections, and 28 EU countries will hold elections for the European Parliament)
as well as some of the largest emerging markets (notably Brazil, Indonesia and the
most populous democracy of the lot, India). A glance at the electoral timetable for
2014 shows just how busy it is.
Such a frenzy of voting might suggest that democracy is in rude health. If only it were
that simple. Democracy is about more than just voting: things like pluralism, civil
liberties and a functioning government matter too. Measures of freedom and
democracy around the world by Freedom House and the Economist Intelligence Unit
suggest that, after great gains thanks to the collapse of both colonialism and
communism, progress has stalled, and if anything gone into reverse. Books with titles
like "Democracy in Retreat" (by a guest contributor to this debate, Joshua
Kurlantzick) and "The Last Vote" (by my colleague Philip Coggan) are multiplying.
The worriers see many warning signs for democracy. One is that the voters
themselves seem increasingly disillusioned. Turnout at elections in rich countries has
been on the decline. Elsewhere elections are prone to boycotts and violence (as in
Bangladesh this month and perhaps in Thailand next month). When voters do feel
motivated to show up at the polls, it is more and more often in order to protest against
mainstream parties and to vote for fringe ones, a trend likely to be much in evidence
at the European elections in May. In many countries, not least in the biggest
democracy, India, anger over corruption in politics is widespread.
And the list of concerns does not end there. After high hopes of the "Arab spring",
democracy seems to be going backwards in much of the region. Elsewhere, from
Turkey to Russia, beyond the trappings of democracy authoritarian leaders have been
cracking down on freedoms and opponents. Even in a mature democracy like
America, questions about the accountability of those in power have grown with
revelations about the extent of the state's electronic snooping. And in other respects,
too, the land of the free, which should be setting an example to the rest of the world,
is instead showing the world what gridlock looks like.
One side of this debate, led by Christian Caryl of the Legatum Institute, will
emphasise these and other worries. The task of the optimists, championed by Larry
Diamond of the Hoover Institution, is not so much to reject them as to put them in a
fresh perspective. Are protest votes a sign of trouble or of democratic renewal? Is the
toppling of an elected government in Egypt yet another indication that the Arab spring
is failing, or evidence that what might better be called the Arab "awakening" is deeply
entrenched? To what extent is dismay over the extent of corruption in government

outweighed by encouragement at the scale of the reaction against it in some

countries?
Such questions should make for a fascinating debate, and I hope that readers around
the world will weigh in with comments.
Skip to...

Moderator

Pro

Con

The proposer's opening remarks

Jan 21st 2014 | Larry Diamond

There is plenty of cause for worry about the state of democracy in the world. For most
of the past decade, a global political recession has gradually (if modestly) diminished
levels of democracy and freedom in aggregate terms. The pace of democratic
breakdowns has accelerated and, in net terms, there are now several fewer
democracies than when democracy reached its high-water mark globally, around
2005. With the farce of the recent election in Bangladesh, the escalating assault of the
ruling Awami League on its political opposition and critics, and a new parliament that
lacks opposition representation, democrats globally must acknowledgeand respond
tothe alarming reality that democracy has broken down in the world's eighth most
populous country, one frequently cited as an example of a moderate Muslim
democracy.
The democratic undertow has been particularly apparent in Muslim-majority and lowincome countries. The Arab spring has given way to an Arab freeze in Egypt in
particular, with the army's de facto political domination now constitutionally
entrenched for some time to come. In most other Arab states that experienced ferment,
authoritarian regimes have reasserted control or there is a partial or total vacuum of
authority. Kenya has elected two suspected perpetrators of crimes against humanity as
president and vice-president, and elsewhere in Africa the trend of change (though
incremental) has been towards increasing concentration and abuse of executive power,

shrinking space for civil society and the media, and increasing problems of human
rights and punishment of opposition.
Two big, dynamic middle-income countries where democracy was expected to
consolidate, Thailand and Turkey, are now each in severe political crisis as a result of
political polarisation and intolerance. In Thailand, the much-theorised agent of
democratic defence and reform, the urban middle class is demanding a kind of "time
out" from democracy because its party has lost the last few elections. In Turkey,
Recep Tayyip Erdogan has veered towards an increasingly authoritarian style as he
seeks to maintain his and his party's hold on power.
Then of course there is the sorry performance of democracies in Europe, Japan and
the United States, where elections of late have not produced governments and
parliaments capable of formulating viable policies to address the big economic and
social challenges.
Those who incline towards optimism about the future of democracyand I am one
know that democracy globally has been facing a lot of challenges and setbacks in
recent years. Yet none of this has cumulated into an authoritarian "reverse wave".
There are many instances of democratic progress or renewal, not least in Tunisia,
where constitutional compromise has now positioned the country to emerge as the
first genuine democracy in the Arab world, a potentially transformative development
for the region. And authoritarian regimes face their own huge problems of
performance, legitimacy and stability, which I hope to discuss as this debate proceeds.
In India (whence I write), a political reform party, the Aam Aadmi (or "Common
Man") Party, has swept to local power in the capital, Delhi, and is now bursting onto
the national scene as a significant factor in the parliamentary elections this April.
Although not yet in a position to challenge the two leading parties for power, it has
forced them (and others) to reorient their campaign rhetoric and candidate selection
practices to take account of the growing popular disgust with corruption and misrule.
Similar in some respects to the Progressive Movement of a century ago in America,
Aam Aadmi and the Jan Lokpal anti-corruption mass movement that arose in 2011 are
reaffirming the core promise of democracy: that ordinary citizens can mobilise from
the grassroots to enact institutional reforms, improve governance and advance social
justice. This is not a new story in India, long a democratic work in progress. But it has
brought into being important new institutional levers for transparency and
accountability, such as right-to-information laws and the Lokayuta (anti-corruption
ombudsman).
Populism and corruption have impaired the performance of democracy and
disillusioned citizens in every part of the world. But other emerging democracies are
also making progress, especially where there is leadership at the top committed to
reform, as with President Benigno Aquino in the Philippines. The momentum for

political reform in Indonesia, now stalled, may resume after the presidential election
in June. And as in Indiaand most of the other emerging-market countries of the
G20, such as Mexico, Brazil, South Africa and South Koreathere is substantial
public commitment to democracy and elite consensus on the constitutional rules of the
game. Among the dozens of new democracies that have emerged over the past three
decades, there are other clear success stories of constitutional stability and reasonably
effective performance, including Chile, Uruguay, Taiwan, Ghana and most of the
central and east European countries that entered the EU after the end of the cold war.
The stable, mature democracies of the world are now much more numerousand
much more conscious of their common interest in sustaining democracies globally
and improving the quality of governancethan was the case a generation ago. Indeed
they are organised into groupings, such as the Community of Democracies and the
Open Government Partnership, that are seeking to advance these goals. And for all the
political and fiscal troubles of America, Europe and Japan, few people in the
developing world look to China as a political model. Indeed, the political momentum
in South-East Asiaeven in the successful autocracies of Singapore and Malaysia,
not to mention failed ones like Myanmaris towards democracy. Myanmar is in the
midst of one of the most complex and significant regime transitions of the past two
decades. The military will probably block the scope of constitutional change
necessary for a democracy to emerge out of the 2015 elections, but the next
government will be substantially more democratic than any Myanmar has had in half
a century, and the popular hunger for free and accountable government is palpable
there, as it is in Cambodia.
Concern about the health of democracy is necessary to reform and improve it. Apathy
permits the decay of democracy and could eventually bring its demise. But the fear
that democracy may now be in global retreat is not simply overblown, it is wrong.
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Moderator

Pro

Con

The opposition's opening remarks

Jan 21st 2014 | Christian Caryl

Democracy has enjoyed a good run over the past 60 years. At the end of the second
world war there were only a handful of electoral democracies in the world; today
there are dozens (depending on whose count you accept). Emboldened by this trend,
some say that democracy has "won the argument", noting that even dictators now feel
constrained to give lip service to free elections and human rights.
Yet the supporters of democracy cannot afford to take their own victories for granted.
We are now entering a turbulent period in global politics that is almost certain to see
many an old surety overturned. Perhaps the most striking sign of this dawning new
age is democracy fatigue.
Democracy boosters tend to forget that many citizens do not see democracy as an end
in itself. People want freedom, to be sure, but they also yearn for economic growth,
social justice and security. When elected leaders fail to produce these public goods,
voters can hardly be blamed for their disillusionment. Government gridlock in
America and the economic disarray in the European Union serve as reminders that
even established democracies can lose their lustre in troubled times.
But what about when growth returns? Optimists argue that rising prosperity around
the world entails the rise of democracy; nothing, they say, contributes to the spread of
liberal values like an engaged middle class. The argument, however, is simplistic.
Growth can create contradictions as well as contentment. Widespread corruption, or
the perception of deepening inequality, can poison a democratic polity just as
effectively as any coup d'tat.
Just take India, where the past quarter-century of growth has widened the gap between
rich and poor as well as spawning an epidemic of corruption that is seriously
undermining confidence in the country's democratic traditions. In Thailand, decades
of economic progress have merely exacerbated the deep regional and class divides
that are behind the current political confrontation there. A national election set for
next month could bring a triumph for the camp of Thaksin Shinawatra, a populist exprime ministeror it could inspire an even more ferocious backlash from the
Bangkok elites who view Mr Shinawatra's largely rural, lower-middle-class voters as
barbarians before the gate. The ultimate result could be yet another intervention by the
powerful armed forces.
Thailand serves as a reminder that elections are no guarantee of inherently democratic
outcomes. Genuinely liberal societies require democratic institutions: independent
courts, strong political parties, media pluralism and civil-society organisations. If such
institutions are weak, the collapse or reversal of democracy becomes a possibility.
That there are now far more elections than there used to be does not mean that
institutional evolution has kept pace. In fact, there are many signs that this is not the
case.

Consider Turkey. It was not that long ago that the country was being held up as an
example of a flourishing Muslim democracy. Yet now the prime minister, Recep
Tayyip Erdogan, is responding to last year's protest movement and an unfolding
corruption crisis with a full-scale assault on the press, the judiciary and the
independence of the police. Democratic Turkey now leads the world in the number of
imprisoned journalists. A big part of this institutional crisis is the lack of an effective
opposition to counter the growing weight of Mr Erdogan's well-organised Justice and
Development (AK) party. Its parliamentary opponents are small, fragmented and
mutually antagonistic. The fate of Turkish democracy looks correspondingly bleak.
The fading promise of the Arab spring has quite a lot to do with similar institutional
weaknesses. Egypt, Libya, Yemen and Tunisia have all experienced multiple elections
since the revolutions began there in 2011. Yet Egypt has reverted to army-led
autocracy, while Libya and Yemen are struggling to make headway against civil strife
and weak central governments. Of them all, only Tunisia is close to establishing a
durable constitutional orderand even there the process is still bedevilled by
violence, economic decline and conflict over the role of Islam. Even if Tunisia
succeeds, though, the prognosis for the rest of the Arab-spring countries remains grim.
And what of the claim that liberal democracy no longer has any serious ideological
rivals? This is naive at best. Politicised religion remains a powerful force in much of
the worldnot only in the Islamic countries, but also in South and South-East Asia.
(Witness the sectarian conflict between Buddhists and Muslims in Myanmar that
threatens to undermine that country's democratic transition.) History has shown us
that the rise of the middle class is often a precondition for a surge in nationalism. Yes,
nationalism can sometimes be an ally of democracy. Yet more often it can serve as an
excuse for overriding liberal values of tolerance and open discussion.
Autocrats like Xi Jinping and Vladimir Putin understand this best of all. Having
carefully studied the collapse of one-party states around the world, the Chinese
Communist Party has chosen old-fashioned patriotism as the centrepiece of its
strategy to rally popular support. In Russia, where the 2011 protest movement has
ebbed away, members of the democratic opposition are easily typecast as lackeys of
the nefarious West, slyly attempting to import alien values inimical to Russia's
treasured traditions.
Democrats underestimate the tyrants at their peril: modern dictators have proven far
more sophisticated and adaptable than their opponents want to admit. The defenders
of a free society need to keep this in mind in the years ahead. Complacency is not an
option.