Can capitalism and authoritarianism work together?
HISTORY WAS SUPPOSED to have ended in 1989 with the triumph of Western-style democracy and capitalism. The fall of the Berlin Wall proved, at least to the satisfaction of many American pundits and academics, that economic and political liberty advanced hand in hand. Prosperity must bring freedom and vice versa, a virtuous cycle that would lead the developing world inexorably toward American ideals.
But after 20 years, an alternative scenario has arisen. "By shifting from Communist command economy to capitalism, China and Russia have switched to a far more efficient brand of authoritarianism," Azar Gat of Tel Aviv University argued in Foreign Affairs. These countries "could establish a powerful authoritarian-capitalist order that allies political elites, industrialists and the military; that is nationalist in orientation; and that participates in the global economy on its own terms." Indeed, our erstwhile Cold War foes are doing well with their new economic systems. Russia under Putin and China since the end of Maoism have both registered high rates of economic growth. In Russia, disposable income in the last six years has risen almost four-fold, while unemployment has gone down by more than half. There and in China, the vast majority express a high degree of satisfaction with the way the government has handled the economy.
This stands in sharp contrast to public opinion in America, where 82 percent of the population considers the country to be "headed in the wrong direction." As the events of recent weeks have shown, democratic capitalism-once imagined to be the unstoppable wave of the future for the entire world-now faces an uncertain tomorrow even in the West. Pat Bucnanan noted in a recent column, "Liberal democracy is in a bear market. Is it a systemic crisis, as well?" If it is, might authoritarianism and capitalism soon seem to be natural complements, the way that free markets and democracy were once thought to be?
Advocates of "democracy plus free markets" typically favor some variation of capitalism that is fused with popular elections, religious and cultural pluralism, secularized political institutions, tolerance of homosexuality, and women's rights. These seem to be the necessary preconditions for economic and moral well-being and for a peaceful international community, since, according to this particular picture of human history, democracies never fight each other.
At least to some extent, the identification of democracy with prosperity is true. The Fraser Institute's Economic Freedom of the World, 1975-1995 and other more recent surveys show the correlation between high standards of living and "democratic institutions." Even such heavily taxed and regulated "democratic" countries as Sweden and Norway boast some of the world's highest living standards, as well extensive domestic and foreign investments in their economies. Welfare states such as Australia, Iceland, Canada, and Sweden also register respectable rates of economic growth. That is because these countries, like our own, are politically stable and still have relatively unfettered economies.
But there is no reason to think that only governments that are "democratic" in the current usage can provide political stability and good investment climates. Free markets are operating well in very different political systems. One of the most successful examples of nondemocratic capitalism is Singapore, which after winning independence in 1959 flourished under the firm hand of Lee Kuan Yew, who was prime minister or senior minister from 1959 until 2004. Lee has always stressed economic productivity and very low taxes. But in a 1994 interview with Fareed Zakaria, he pronounced his opposition to "Western democratic imperialism." While acknowledging that the U.S. has some "attractive features," such as "the free and open relations between people regardless of social status, ethnicity or religion" and "a certain openness in argument about what is good or bad for society," Lee expressed doubts about the American way "as a total system. …