Saturday, 6 July 2013

The quest for inclusivness (and a better democracy)

Over the past few weeks some parts of the World have been subdued into protest mode. In Turkey it all started as a protest against a dubious building site project in one of the largest parks in Istanbul, and has escalated into a country-wide protest against a controversial, authoritarian Prime Minister Erdogan, whose corrupt and unconstitutional activities too often get unnoticed in the West. On the other part of the globe, in Brazil, protests started against bus fare increases in Sao Paolo, but quickly evolved into mass protests against the government's policies vis-a-vis the organization of the FIFA 2014 World Cup, where the protesters demanded to know why the government is building stadiums, and not investing into proper health care, education or public services (* - see note below). In the semi-consolidated Egypt a military coup has ousted the authoritarian, however democratically elected president Morsi, triggering violence and fights on the streets of Cairo between pro- and against-Morsi supporters. Acemoglu and Robinson draw a striking comparison between Egypt today and Turkey 50 years ago. It is another painful proof of the iron law of oligarchy. 

These aren't the only cases however; in Indonesia protests started against high fuel prices, in Bulgaria against a corrupt government, organized crime and powerful oligarchs (triggered by nomination of a media mogul as the head of the national security agency), in Europe against austerity every now and then, in the rest of the Arab world some conflicts still haven't ended (Syria), and in India a few months earlier a similar uprising took place. China, Russia and Saudi Arabia also experienced some minor or major troubles, but in a dictatorship (or semi-dictatorship) ending protests is much easier than in a democracy. The long run costs of pilling up anger are far greater however. 

What do these seemingly different protests in several distant countries across the globe have in common?

The Economist draws an interesting comparison with the revolutionary years 1848, 1968, and 1989, where a number of countries were driven by desire to change a corrupt and unjust system, and more importantly succeeded in doing so. 

What is interesting this time is the quick spread of protests cross-country and world-wide, primarily thanks to technology and social networks. Relying on the so-called "latte" protesters holding up their smartphones to record the whole thing is much better than having things reported by domestic government-controlled media (in most cases). Because of this interlink with social networks, the protests are characterized by an amazing level of spontaneity. Almost insignificant events seem to trigger mass movements, and one simply cannot predict what will be the next big thing. Or even where will it happen. That's why these protests are different that the Occupy movement. They might be driven by similar arguments, but in essence they are much more widespread and more likely to yield results. 

They aren't driven by interest groups loosing their precious political support, they are driven by regular, middle-class people who are fed up being pushed around by their countries' arrogant elites (Egypt, Turkey), their corrupt system (Brazil, Bulgaria, Indonesia), faulty economic policies leading to more and more misery (Europe), or in most cases some combination of these. Indulgence and inefficiency of poorly skilled political leaders and their often even worse alternatives has reached a boiling point. Particularly in those countries which have experienced rapid growth in the past decade, and from which the majority of the people were partially excluded. Notice also how in every one of these countries the index of social capital (measuring interpersonal trust) is substantially low. Turkey, Brazil and Indonesia are among the 10 worst ranked countries. I guess the rule of elites has only made things worse in terms of polarization within the domestic populations. 

Modernization hypothesis tested

The events happening in these relatively new democracies show us that the assumptions of the modernization theory don't seem to hold. As the paper by Acemoglu, Johnson, Robinson and Yared shows, countries that grow fast don't have a tendency to automatically become democratic or consolidate their democratic institutions faster. Even countries like South Korea or Taiwan had inter-political conflicts before their institutions had consolidated. The problem is when countries grow under authoritarian regimes, or political systems in which wealth is unevenly distributed, inequality starts becoming a big issue. The question of transition of power thus becomes the crucial issue in the quest for more inclusivness and the drive for change. 

Ultimately, these protests are much more than the usual protest against government. They present a resistance against an entire system, in which political, corporate and media elites in addition to a series of well-organized interest groups have captured most of the newly gained prosperity. The protests represent a quest towards more political and economic inclusiveness. People want to be included in the economic benefits their societies are achieving. Despite the progress most of these countries have achieved in the past decade, this new accumulation of wealth hasn't resulted in higher living standards for the domestic population. The economic rewards of growth have been captured by political elites and their vigilant cronies, with very little being left for the booming middle classes. By pulling many people out of poverty (or at least out of the low-income trap), the effect of globalization has empowered the middle classes who now demand higher inclusion in the democratic decision-making process. First and foremost through greater accountability and less corruption.

An economic theory of transitions

An economic theory of this story has been brilliantly portrayed by Acemoglu and Robinson in their first book, "Economic Origins of Dictatorships and Democracies". Their theory (which I teach to 4th year undergraduates in my Political Economy class) claims that the path towards consolidating a democracy will depend first and foremost on the allocation of political power and resources within a society. A democracy is always preferred by citizens, and always opposed by the elites who have captured most of the productive resources and hence posses de jure power (decision-making power). It was like this in both England and France, and in countries like South Africa or Argentina. However, citizens tend to posses de facto power (actual, real power), consisting of a credible threat of revolution. In a game theoretical equilibrium, when the costs of repression are sufficiently high and the promises of future redistribution and concessions by the authorities not credible, the elites will be forced to create a democracy (as the British PM Earl Grey in 1831 has made it clear: "...the principal of my reform is to prevent the necessity of revolution..."), and it will be consolidated to ensure further social stability. Thus elites chose democratization (or in today's terms more power to the people and more accountability) to avoid expropriation. Inequality also plays an important role in their theory, where intermediate levels of inequality make the path towards a democracy more likely. It all basically depends on how much each player has to lose. This will determine both the incentive for revolution, and the incentive for a counter coup by the elites. This is why some countries will find it hard to consolidate a democracy once it has been achieved (they mention Argentina in the book, however the most recent perfect examples are Turkey and Egypt).  

Finally, many commentators have stated how these protests are aimed against democracy or even against capitalism itself (particularly in Europe). I disagree. These protests aim for more democracy not less. The people desire a better democracy, characterized by greater accountability of politicians, less corruption, and altogether a strong plea against crony capitalism. They seek changes, reforms that will bring more justice, more human rights and higher living standards. They represent a quest for political and economic inclusiveness. 

* I turn here to an assumption from my Political Agency paper, where I claim that people do in fact notice useless, white elephant projects (particularly on a local level) particularly when such projects supersede the basic needs for welfare and other public services of the government. A decrease of voter utility is the trigger for expressing concern. Within this assumption I define the term "state of the economy". The affected voters send a signal of a poor state of the economy to the indifferent (swing) voters, who then vote against the indulgent government.


  1. The people want justice, that's all. And there can be no justice when inequality is as high as it is, regardless of which country we're talking about

  2. Democracy is not the same as liberty. Nor is is synonymous with justice as the above poster is concerned with.

    In fact democracy is the most easily perverted form of government. What is entirely better suited to human beings is a limited constitusional republic with a garuntee of basic human rights and also property rights.

    The problem arises that such a form of government is not easily nor quickly learned by people who have been governed only by dictatorships. The overwhelming instinct of such people, when they are voted into power is to move to stifle the opposition, and change or put aside the constitutional protections.

    1. I disagree. Perhaps because it's hard for me to imagine a situation where you have a limited constitutional republic with a guarantee of human and property rights which doesn't imply democratic decision-making. You're referring to some form of a benevolent dictatorship, however I have yet to see such an idea work in practice. Essentially, you can have a strong constitution based on inclusive institutions, but the prerequisite for achieving this is, in my opinion, a democratic system. This is, after all, what inclusion implies.

      The best example: United States after gaining independence. I assume this is what you refer to as limited constitutional republic. But don't forget, the US was founded on the principles of democracy, where everyone had a say (well, white man at first, but via gradual democratic consolidation these rights have spread to the rest of the population - it took a long time, but eventually it happened)