Authoritarian Fries?

By most accounts the Beijing Olympics were seen as a successful "coming out party" for China, demonstrating strong elements of patriotism/nationalism, superior organizational capacity, and the ability to raise armies of gymnastic prodigies. Not to be outdone, Russia invaded a country. Both events are displays of strength from the West's old Cold War foes and both have led to a renewed debate over threats to the Western system of liberal democratic capitalism. It's not capitalism that's being challenged, but rather the predominance of the liberal democratic system.

For example, Robert Reich - US Secretary of Labor - laments that we've been gravely mistaken if we think capitalism and democracy go hand in glove:

Economic reforms are well underway in China. Individual Chinese can own property and invest, trade and buy almost whatever they want. Private enterprise is in, collectives are out. But when it comes to civil and political rights, China today is where it was almost two decades ago at the time of Tiananmen Square.

Similarly, Arthur Kroeber suggests that we are not going to see an epic struggle between the middle class and elites in China because both groups benefit from the current arrangement and fear the instability democracy will likely bring. In other words, democracy needs to prove itself to the Chinese and it hasn't done that yet. More importantly, economic liberalization is not going to do the job. (See also the Zeitgeist take on things).

I think both of these authors are partly right. It's certainly true that liberal economic reform in no way requires a liberal democratic system to be initiated: Pinochet demonstrated this quite clearly in Chile during the 1970s. But can this be sustained? I don't think so.

You won't often find me agreeing with the likes of Hayek and Friedman, but I make an exception on some topics. Capitalism is rooted in individual liberties and freedoms, which means that the capitalist system cannot last long under a strong authoritarian regime - one will have to give way eventually. (I say "strong" authoritarianism because the "soft" variety, characteristic of East Asia's economic growth until the mid-1990s, is a different situation that requires a separate post entirely).

Perhaps I'm being naive about the sustainability of authoritarianism, but when I look at the regimes in China, Russia and Saudi Arabia I see both strength and vulnerability. Russia's resurgence is contingent upon oil & gas revenues and is hardly creating a sustainable investment environment. China's breakneck growth rates may be keeping the middle class happy for now, but what happens when (not if) this pace drops? Comparing national opinion poles, as Reich does, is not an accurate gage of the state of China's authoritarian capitalism. Saudi Arabia, meanwhile, is struggling to diversify its economy beyond oil revenues and will face a messy power struggle once the last of King Saud's sons dies off.

Remember the 1980s when we thought Japanese investors were going to buy up every North American company and we'd all be doing calisthenics during the office lunch hour? Me neither, I was a toddler; but I'm told it was the case. But it didn't quite turn out that way after the Japanese entered a decade-long recession. Of course, history never repeats itself exactly, but I think we should be cautious about jumping to conclusions over the viability of authoritarian capitalism. Expect more on this topic soon.