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Editorial
04/2005 |
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When democracy and markets fail
It seems so simple. All we need is democracy plus market economy. Nations that have established both enjoy unprecedented levels of prosperity. While crises may yet instil a sense of gloom, the general standard of life is incomparable to what is experienced in poor countries and what was normal for earlier generations in those countries that have become prosperous. Citizens of the rich world would do well to remember that in periods of stagnation – as the one we are going through in Germany these days.
Democracy and market economy go together. Yes, unfettered capitalism can boom under the conditions of dictatorship. History, however, has again and again shown that this is no arrangement for the long term. Markets thrive on the free flow of information. Accordingly, investors resent censorship. Markets are about choices and people used to choosing for themselves become fed up with authoritarian governments. A third reason is that expanding economies produce wealth – and as masses participate in well-being, they become more demanding, more self-assured and more capable of interfering in political matters.
And yet, we know that it is very difficult to introduce democracy and market efficiency. Whether such attempts were called “modernisation”, “nation building” or “structural adjustment”, results have mostly remained unimpressive. Again and again, the complexity of what was at stake was underestimated. Democracy depends on institutions and public trust. So do markets. Powerful elites, however, can be expected to stand in the way of progress if they feel their positions of unaccountable wealth and power are being undermined. Defective democracies are the result – along with mass poverty (Michael Dauderstädt, p. 144).
While feelings of failure and frustration are well known in Africa, Asia and other parts of the world, they are particularly strong in Latin America. One reason is probably, that the region gained independence from the colonial powers early. In terms of language and religion, Latin America is culturally close to Europe and North America. Nonetheless, its nations are far less successful. Most of the region never shook off the exploitative colonial culture, which has become particularly manifest in large land holdings. The gap dividing rich and poor remains particularly wide.
One term used to describe the resulting challenges is social cohesion. Indeed, Latin American societies tend to be fragmented. The Inter-American Development Bank (IDB) is keenly aware of the destructive consequences. In its view, social cohesion is not merely about inclusion in society. What is at stake is more – a contract of citizens with the state defining rights and obligations for both. Governments, in this view, become responsible for providing a minimal level of fairness in terms of the distribution of income, wealth and and opportunity (Interview with IDB President Enrique V. Iglesias on p. 148).
According to Benedict Anderson, the idea of nationhood took hold in Latin America as early as the 19th century. Sadly, the region has not been good at fostering a culture of nationhood. A large section of the population has an indigenous background. 500 years after the Spanish conquista, these people remain marginalised and disenfranchised. If cohesion is to improve, their fate matters. Focussing on aspects of identity (such as ethnicity, religion, language and others), however, is risky business. If any given group develops a sense of solidarity and cohesion in rigid opposition to other segments of society or even to society at large, there is a serious danger of violence. The South Asian island of Sri Lanka provides an example of ethnic groups usurping all feelings of cohesion and abusing them for destructive purposes (Una Hombrecher, p. 156). The fact that collective identities, however, evolve historically and are not permanently defined, inspires hope for development.
Except for some militia members, after all, most people have reason to prefer the rule of law to that of armed forces. Providing justice is, again, more easily said than done. At stake are, of course, institutions. The judiciary needs to be independent, only bound by the legal provisions of the country. It also needs the trust of the people. Judges enmeshed in particular interests cannot perform their duties. Codes of conduct can help to make legal systems more reliable and trustworthy (Jan Woischnik, p. 152). Such rules must be defined by the judiciary itself – everything else would undermine the judges’ independence. Once such rules exist, however, academic scrutiny and media coverage can help to monitor judicial performance. If that goes well, trust in the courts will grow – and contribute to social cohesion by putting democracy and markets in a position to serve their functions smoothly.
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Dr. Hans Dembowski
Editor in Chief of D+C Development and Cooperation/E+Z Entwicklung und Zusammenarbeit
euz.editor@fsd.de
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