The Political Economy of Illiberal Democracies

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At the outset of 2020, Brasidas’ newsletter reflects on the state of democracy in some of the world’s leading economies. While it may be assumed that the development of democracy goes hand in hand with the increasing prosperity of a society, many recent examples have proven otherwise. In China, which boasts unparalleled industrial achievements and resultant affluence of entire strata of society, the Communist Party still oversees the operation of companies. Similarly, in Russia, a narrow circle of state-owned enterprises affects how business is conducted not only in the country itself but in the regions where these enterprises have been investing, specifically in Western Balkans and the Commonwealth of Independent States.

The world’s most populous country has attained remarkable commercial success in the past decade, paradoxically leaving its one-party system intact. Moreover, while supervising its domestic enterprises, the Chinese government has also been exercising control over their foreign investments. As such, its funding has been directed at projects in regions which are still undergoing a process of democratization, such as its Belt and Road Initiative (BRI). As benevolence is never a motive in international relations, it is worth noting that the BRI’s ultimate objective is to facilitate the transport of Chinese goods to distant markets. Not only that, but this large-scale infrastructure project is being built with materials shipped from China and realized by the country’s own contractors and even workers. it is safe to assume that China’s influence will remain in the regions connected by the BRI even after the infrastructure project has been completed.

Equally, Russia’s sphere of foreign influence is closely connected to its natural resources. With the country’s most lucrative sectors still under the tight control of state-owned enterprises, Russia’s economic growth has not contributed to a more transparent mode of operation, whether domestically or internationally. The obstacles from a bygone era have lingered, with society staying authoritarian and being kept in place by a ruling elite that is overly invested in preserving the status quo.

Other post-communist countries in the region, such as Kazakhstan and Uzbekistan, seem to have a similar post-Soviet legacy. The energy industry, which is the highest-grossing segment of these countries’ economies, still relies on the protection of government officials. In the case of Central Asia’s economic climate, it is necessary to adopt clear guidelines that would apply to all commercial entities active across the region. The situation is similar just outside the European Union, in the Western Balkans. Whereas several EU candidate countries are engrossed in the comprehensive task of overhauling their economies, they are apparently inclined to accept substantial investment from China and Russia. For instance, in Bosnia and Herzegovina, China is financing coal-based plants even though such projects are incompatible with EU requirements. Correspondingly, Serbia recently signed a free trade deal with the Eurasian Economic Union, headed by Russia, thus perhaps jeopardizing its EU prospects, as some have argued.

In countries like Turkey and Hungary, the political sphere has become a one-man show. But Recep Tayyip Erdogan has abandoned the liberal economic policies that were instrumental in reaching significant commercial results back in the 2000s. Meanwhile, his powers now include controlling even Turkey’s Central Bank during financial crises. He has also embarked upon several stately construction projects that are meant to mark the alleged success of his tenure. Contradictorily, Hungary’s democratic relapse and curtailing of civil liberties has been obscured by the country’s favorable economic performance. Dissatisfaction with failing democracy has lately been expressed by citizens in Bolivia and Lebanon. Even though protests were triggered by different events, their objective is the same in both countries – safeguarding democratic values. While Bolivian citizens expressed concern over the decline of these values under former President Evo Morales, those in Lebanon objected to the country’s political system which is still based on religious belonging and where corruption is still overly present.

While media control has always been regarded as one of the traits of an illiberal society, there has been increasing anxiety over the potential misuse of social media for purposes that infringe on human rights. Today, well into the 21st century, privacy concerns might have dampened the initial optimism of the digital age and its connectivity imperative, with Huawei on the one hand and Palantir on the other having shown that their data collection agendas might not be so innocuous. The precariousness of democracy becomes all the more apparent as these seemingly private companies act in unison with governments to facilitate political aims.