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Aug 8, 2008

Essayette: Capitalist autocracy is a corruption, not the future

The rise of China and Russia has prompted a new and widespread version of self-loathing in the west, writes Bernard Keane.

Self-loathing is usually a liberal trait, at least according to the Right. It is liberals that, in contemporary conservative political rhetoric, regard western society with contempt — materialistic, imperialistic and deserving of whatever atrocities are inflicted upon it – even the worst terrorism is ultimately a consequence of greedy western (and, particularly, US) neocolonialism.

The rise of China and Russia, however, have prompted a new and rather more widespread version of such self-loathing, in the conviction that former ideas about the link between capitalism and democracy are false.

The Left, of course, would maintain that any connection between the two is absurd, indeed, worse, a deliberate lie to hide the exploitative, patriarchal, racist truth behind capitalism. But let’s leave the raving lefties out of things for the moment.

More and more commentators are concluding that China and Russia demonstrate that successful capitalist economies are perfectly compatible with autocracy. And Francis Fukuyama and his “end of history” thesis comes in for a particular rubbishing, despite Fukuyama being only the most recent of literally centuries of liberal historicism. For example, Greg Sheridan and Michael Gawenda — two names not usually found in the same sentence — both offered a similar analysis when reviewing, from quite opposite perspectives, a new book by failed US neo-con, Robert Kagan, The Return of History and the End of Dreams: China and Russia show that autocracies can be economically successful.

Today’s pagan idolatry in Beijing, therefore, becomes a confirmation of a new historical trend. In an important article, in the AFR yesterday by Paul Dibb and Geoffrey Barker entitled “Democracy Bows to Business” (which probably sums up the favourite fantasy of most AFR readers), the Olympics was “a triumphant celebration of the new and rising capitalist autocracies.” Dibb and Barker discussed China’s enormous success as a capitalist autocracy, the looming “century of illiberal capitalism”, and, rather less convincingly, dressed up the “Shanghai Cooperation Organisation”, comprised of Russia, China, and such emerging powers as Kazakhstan , Kyrgyzstan and Tajikistan, as a sort of 21st century equivalent of the Warsaw Pact. Watch out, Dibb and Barker are saying — Borat is coming, and he’s not joking anymore.

They even conclude that western democracies are becoming more autocratic in recognition of the success of the Chinese and Russian model. Imitation is, after all, the sincerest form of geo-strategic evolution.

Handily, overleaf in the AFR was a piece from Mark Latham, apparently off his meds again, lauding the Butchers of Beijing and declaring that, while Americans were to be damned as insular and self-obsessed, we shouldn’t judge the Chinese Government’s human rights abuses because Confucianism was different to our own “rights-based values.” Hundreds of gaoled Chinese dissidents must be furious with themselves for getting it so wrong.

This celebration of autocracy appears to spring from the same lack of self-conviction that informs liberal self-loathing — a belief that western values like human rights, rule of law and democratic institutions are weak and flabby compared to the muscular values of nationalism and political repression that underpin autocratic states. It’s similar to the values revealed by neo-conservatives when they argue that torture, pre-emptive attacks and extra-judicial killing are essential in the war against terror, and that getting hung up on traditional values like human rights and due process can no longer be tolerated.

What the “I’ve seen the future and it’s tyrannical” crowd miss, is that China and Russia are not successful capitalist economies. There’s no doubting the high economic growth of both, and particularly China. But according to Transparency International, they are also, along with Saudi Arabia, the two most corrupt major economies in the world. In fact, Russia — about the closest thing to a real-world version of a Bond film — is a virtual kleptocracy, in the bottom 40 countries in the world for corruption, so bad that Rupert Murdoch recently declared he would no longer invest there for fear of having his investments stolen from him.

The extent of Chinese corruption — whether domestic in effect, like the poorly-constructed schools that collapsed and killed thousands of children during the Sichuan earthquake, or exported to the world through dangerous consumer goods — is sufficient to generate ongoing protests throughout that country and constant, and apparently futile, petitioning of the government for action.

This demonstrates, more than any nebulous assertion of the mystical connection between economic and political liberalism, that successful capitalist economies and autocracies don’t go together, because the former is contingent on the rule of law, something that is automatically absent from an autocracy. It is the lack of transparency and accountability that allow corruption to flourish, to the extent that much of the Chinese and Russian economies are based on it. One 2007 estimate put the cost of government corruption alone — not including private corruption — in China at $86b a year, or 3-4% of GDP. A 2005 study suggested citizens and businesses in Russia paid $320b a year in bribes. Corruption also plays a fundamental role in the massive and unsustainable despoiling of the environment in both countries.

Democracy is no guarantee of a corruption-free society (India occupies the same position as China on Transparency International’s list), but its absence appears to strongly correlate with systemic corruption. The accountability and checks and balances that are core components of democracy — including a free press — mean corruption has a far higher chance of discovery, and it is the prospect of discovery, rather than the fear of legal sanction, that is the greatest fear of the corrupt.

Investor withdrawal and corruption protests so widespread they seriously threaten social stability suggests that the triumphalism of the autocrats is somewhat hollow. It is our values of democracy, transparency and the rule of law — however flawed in implementation — that have proven most durable and most capable of facilitating economic development. Thinking otherwise now seems a fantasy of both the left and the right.

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3 thoughts on “Essayette: Capitalist autocracy is a corruption, not the future

  1. Bernard Keane

    Nice to see at least one person made it to the end of this piece…

  2. Lucy

    Yeah, Fukuyama’s thesis was always a bit airy-fairy: market capitalism leads to political liberalism because… well, because FREEDOM, that’s why! But even so, there are, as you point out, concrete reasons why authoritarianism does not make for more successful capitalism than political liberalism. Every good economist, left, right or centre, knows that information is vital to economic efficiency. And where is information freest and most reliable? In a liberal democracy, that’s where.

    I think a lot of the so-called success of the new model of authoritarian capitalism can be attributed to the simple fact that Russia/China/Tajikistan are coming off much lower bases than the US/Germany/Denmark. Of COURSE their growth rates are higher. (If you compare the Russia/China/central Asia axis to formerly poor liberal democracies, like the Spain or Ireland of the 1990s, you will soon see that the source of all that growth isn’t authoritarianism at all, but pent-up economic potential.)

  3. The Kid From Bond

    Bernard, please reiterate and keep repeating the forgotten aspect that the former totalitarian states’ economic miracles are based on corruption of the purest form. From Russia to Africa, the open acceptance of corruption, nepotism of the most venal order are accepted as part and parcel of modern life. As a businessman with forty years of local and international first hand experience, that includes trading with China and the former Iron Curtain countries since the 70’s, I am well aware of how these so called economic miracles in former totalitarian countries have evolved. We in the West are far from blameless as we have been willing and eager supporters of these economic miracles (of corruption). Was it ever any different in times past? Ofcourse not ,but then again, unlike now, universal equality and freedoms were not espoused as a birth right for all who are born and those rights and expectations have now been extended to flora, fauna and the environment. Our collective hypocrisy knows no bounds. My solution? There is none – as humans we carry within us the seeds of our own destruction (I don’t remember who said this) and we will continue to stumble along our destined path regardless of our rediscovery or discarding of morality and common sense. Shakespeare’s call to “kill all the lawyers” left a lot of vested interest groups out.