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The Ultimate Reign of Liberal Democracy?

Dec 19, 2017
Kip Beckman
Principal Economist
World Outlook

In 1992, following the collapse of communism in the former Soviet Union and Eastern Europe, political philosopher Francis Fukuyama wrote a book titled The End of History and the Last Man. He argued that following the failure of communism as an alternative to capitalism, liberal democracy had triumphed and would dominate the world economy going forward. His analysis made sense at the time, but his prediction hasn’t come true. Today, China’s authoritative-capitalist model—where government encourages commerce and trade, while at the same time providing support for certain industries and maintaining tight control over domestic politics and the flow of information—has not only survived its many critics but continues to flourish.

Time’s Ian Bremmer notes that the West has always assumed that the sweeping arc of human development would always favour liberal democracy, but what if we’re wrong?

A few years ago, numerous economists and geopolitical analysts believed that eventually the Chinese communist party would need to implement widespread Western-styled democratic reforms to survive. As the middle class continued to expand and become wealthier, they would demand a greater say in how the country was run. In fact, economists Daron Acemoglu and James Robinson argued in their 2012 book, Why Nations Fail, that the Chinese model—with its extractive institutions designed to keep the communist party in power—was doomed to collapse. This hasn’t happened, and it could be argued that China has become even more authoritarian under President Xi Jinping.

And it isn’t only China that is challenging the West. Today, Russia under Vladimir Putin, while not attaining the economic success of China, has also implemented a command economy that has progressively chipped away at democratic institutions in Russia, and taken several measures to discredit liberal democracy on the world stage. It has been reported that Putin’s intelligence service has meddled in elections in France, Great Britain, Montenegro, and the United States.

The challenge to liberal democracy from China, and elsewhere, is happening while the U.S., under President Trump, is withdrawing from its engagement in the world economy. The decision to walk away from the Trans-Pacific Partnership (TPP) trade deal and the Paris Agreement on climate change, as well as the push to renegotiate NAFTA, are indicative of the nationalist agenda of the Trump administration. China’s ambitious leader, President Xi, has indicated his desire to fill the void left by the United States.

Right after the U.S. announced its intention to abandon the TPP, Vietnam, Malaysia, Chile, and Peru indicated they would attempt to join China’s 16-country trade bloc that includes approximately 3 billion people. President Xi is also pressing forward with his incredibly ambitious “Belt and Road” initiative to construct a network of highways, railways, pipelines, and ports linking Asia, the Middle East, Europe, and Africa. The China-led Asian Infrastructure Investment Bank is committed to spending up to $1.2 trillion in 60 countries—covering about 70 per cent of the world’s population and 75 per cent of its energy resources. China’s leaders contend that there are large, resource-rich countries lacking in infrastructure, notably in Africa. By improving connectivity with these countries, China can stimulate its own economy, gain access to vast supplies of natural resources, and generate new markets for its goods and services.

This would appear to be China’s moment to shine. President Xi’s state-capitalist model has emerged as an alternative to Western-style liberal democracy. Other countries appear to be following China’s path as democracies in Turkey and Hungary have taken steps to suppress dissent and muzzle the free press. At the same time, the U.S. is disinterested in increasing global links. Also, the Trump administration does not act as a vocal supporter of liberal democracy, given its statements about rigged elections, rampant voter fraud, its persistent attacks on the traditional press and economic institutions, and questions it has raised about the integrity of the judicial system.

However, despite its current favourable position, there is no guarantee that the Chinese model will dominate in the future. China faces daunting challenges that could eventually cripple the economy and vindicate its numerous critics. Growth in the economy is partially dependent on subsidies to state-owned enterprises that would likely fail without government help. Debt levels have reached dangerous heights and the government’s ability to bail out failing companies isn’t limitless. The concentration of power in President Xi’s hands, with few checks and balances, is a model fraught with risks. Then there is the reality of a rapidly aging society, poor air quality, persistent corruption, and rising inequality.

It is likely that, at least over the near to medium term, China will find a way to manage its numerous challenges and continue to extend its international presence. This is certainly the view of its leadership. In October, President Xi boldly stated that it was time for China to take centre stage in the world. That said, the Western model of liberal democracy, with its associated economic practices, has much to offer society in the long run. Despite China’s economic success, repression and inequities in the rule of law have led to social stresses associated with a widespread sense of unfairness at many levels of society—all issues liberal democracy helps to address.

There are few voices in the world currently advocating liberal democracy’s many strengths, and there are a few competing models operating around the world. Maybe the conclusions of Francis Fukuyama are flawed given the muted response and ground ceded by supporters of liberal democracy.

Sources:

Daron Acemoglu and James Robinson, Why Nations Fail (New York: Crown Publishers, 2012).
Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 1992).
Ian Bremmer, “China’s State-Dominated Economy Is Built to Win the Future,” Time, November 13, 2017.


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