Wednesday, March 19, 2014

What ails democracy?

The Economist has an interesting essay on the subject. Democracy was widening until the turn of the last century. For the last eight years, it has declined, going by the number of people living in democracies. The declines have taken place outside the West. In the West itself, the effectiveness of democracy as a creator of prosperity is coming under a cloud. Why so? The Economist identifies what it believes are the two primary causes:
THE two main reasons are the financial crisis of 2007-08 and the rise of China. The damage the crisis did was psychological as well as financial. It revealed fundamental weaknesses in the West’s political systems, undermining the self-confidence that had been one of their great assets. Governments had steadily extended entitlements over decades, allowing dangerous levels of debt to develop, and politicians came to believe that they had abolished boom-bust cycles and tamed risk. Many people became disillusioned with the workings of their political systems—particularly when governments bailed out bankers with taxpayers’ money and then stood by impotently as financiers continued to pay themselves huge bonuses. The crisis turned the Washington consensus into a term of reproach across the emerging world.
Meanwhile, the Chinese Communist Party has broken the democratic world’s monopoly on economic progress. Larry Summers, of Harvard University, observes that when America was growing fastest, it doubled living standards roughly every 30 years. China has been doubling living standards roughly every decade for the past 30 years. The Chinese elite argue that their model—tight control by the Communist Party, coupled with a relentless effort to recruit talented people into its upper ranks—is more efficient than democracy and less susceptible to gridlock.
Setbacks to the cause of democracy include Russia under Putin, the Iraq war (which led many to believe that democracy was a fig-leaf for the spread of American imperialism) and the turn of events in Egypt where we are back to army rule. Political gridlock in the US and the stagnation in the Eurozone have done little good for the democratic ideal. Independent economic policy is becoming difficult to implement in a globalised world and this makes voters angry. In the West, voters are reluctant to stomach austerity in the medium-term as an answer to their current problems.

The Economist's solutions are not particularly inspiring. It wants to curb the growth of the state, which may be the right answer in the West but not necessarily the right one in developing countries. In the latter, the problem is not that the state is too large but that it has not got the mix of activities right. A more efficient state, not a smaller one, is what a country like India needs. Another solution is to insulate policies from short-term populist pressures by handing over decisions to technocrats and independent commissions. This assumes that technocrats will work for the larger good and can be held accountable if they fail to do so. In a country like India with weak institutions, it is better to have incompetent politicians who are accountable that very competent technocrats who are not.

The Economist glosses over the subversion of democracy by money power or crony capitalism, which has done a great deal to discredit democracy. To succeed in politics, you need big money and the providers of big money have to be taken care of by successful politicians. No democracy has been able to tackle this scourge. Another big problem is the lack of accountability of politicians in the interregnum between elections. We can kick out the party in power once in five years but how do voters express their ire towards politicians or policies during that period? These issues, to my mind, are most important than the ones the Economist raises- and so is the need to find answers to them.

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