capitalism versus democracy

george soros'un varşova'daki World Forum on Democracy sonrasında yayımladığı yazısı. elemanın fikriyatını merak edenler için faydalı olabilir.

Capitalism versus Democracy:

WARSAW: Around the world, democracy is on the march. Totalitarian and authoritarian regimes have been swept away. Popular resentment against the remaining ones is growing. But it is too early to declare victory. For although capitalism is triumphant, we cannot speak of the triumph of democracy.

The connection between capitalism and democracy is far from automatic. Repressive regimes do not willingly abdicate power and are often abetted by business interests, both foreign and domestic, particularly in countries where resources such as oil and diamonds are at stake. Perhaps today's greatest threat to freedom comes from an unholy alliance between government and business, such as in Fujimori's Peru, Mugabe's Zimbabwe, Mahatir's Malaysia, and the oligarchs' Russia, where the appearances of democratic process are often observed but state powers are diverted to benefit private interests.

Capitalism creates wealth but cannot be relied upon to assure freedom, democracy and the rule of law. Business is motivated by profit; it is not designed to safeguard universal principles. Even the preservation of the market itself requires more than self-interest: market participants compete to win, and if they could, would eliminate competition. So freedom, democracy and the rule of law cannot be left to the care of market forces; we need institutional safeguards.

Traditionally, protecting the common interest was the task of the nation state. But state powers shrank as global capital markets expanded. Since capital can now avoid states that tax and regulate, governments cater to its demands. In many ways, this is beneficial. Free competition produces more wealth than state control; globalization prevents states from abusing their power and offers a degree of freedom that no state could provide.

But globalization has its downside: financial markets are unstable; free competition creates and reinforces inequalities nationally and internationally; collective interests, from preservation of peace to human rights and environmental protection, receive short shrift. To enjoy globalization's benefits we must address these shortcomings on an international scale.

Unfortunately, existing international institutions, like the UN, are ill-suited to safeguard universal interests because they are associations of states, and states jealously guard their interests. Moreover, the faults of state bureaucracies are multiplied within international bureaucracies.

In today's world, most conflicts occur not between states but within states. For people living under repressive regimes, outside protection is the only lifeline. Democratic countries cannot tolerate large scale violation of human rights, and are liable to be drawn into local conflicts. Even if they refuse to be drawn in, they face an influx of refugees and other forms of contagion.

Once conflict erupts, as Yugoslavia shows, most forms of punitive intervention have unintended adverse consequences. Trade sanctions foster smuggling and smugglers are usually in cahoots with authorities, so that sanctions strengthen the governments they are supposed to topple. Military action tends to silence internal opposition to the regime against which it is directed.

Crisis prevention is much to be preferred to intervention; the best way to prevent crises is to foster the development of open societies. That is what my network of foundations seeks to do. Open societies allow people with different views, backgrounds, and interests to live together in peace. Given our human nature, conflicts cannot be avoided, but the chances of crises requiring outside intervention are greatly reduced.

I advocate a concerted effort by developed democracies to foster the development of democracy in less developed parts of the world. This should take the form of technical assistance and economic incentives. Economics and politics cannot be separated. Nobel laureate Amartya Sen makes a convincing case that development should be defined in terms of freedom, not in terms of gross national product.

The global capitalist system has produced a very uneven playing field. The gap between rich and poor is getting wider. We must find ways to counteract this because a system that does not offer hope and opportunity to its losers is liable to be disrupted by acts of desperation. By contrast, economic aid can foster democratic development; it can also be used as leverage against recalcitrant governments.

Unfortunately, there is scant support for this idea. Foreign aid failed in Africa and the post-communist states, and is in danger of failing in the Balkans. But that does not mean we should abandon the idea. Rather, we must examine the reasons for failure and devise better ways. Foreign aid is all too often directed at satisfying the needs of the donor, not the recipient. Based on the experience of my foundations in countries like Russia, I assert that outside assistance can be effective.

Recent changes to the global financial architecture in the wake of the international financial crises aim exclusively at imposing greater market discipline. The goal is to eliminate the moral hazard introduced by the IMF. This will reduce the danger of excessive capital flows to emerging markets, but the next crisis is likely to arise from inadequate capital flows. Today's market fundamentalist creed fails to recognize that financial markets are inherently unstable. By imposing market discipline, it is, in fact, imposing instability. Global financial markets require a global central bank or some other international financial institutions to keep financial markets on an even keel.

The same applies to the World Trade Organization. There is a crying need for both labor standards and environmental protection. But poor countries cannot afford them. Instead of punitive measures to enforce such standards, poor countries ought to be given incentives, such as tariff relief, to comply.

The Meltzer Commission established by the US Congress recently recommended converting the World Bank from a lender to a World Development Agency. Splendid, but the Meltzer Commission would shrink the World Bank, returning unused capital to shareholders – a major resource transfer to the rich. I would put the unused capital to productive use and increase grant-giving activities of the Bank.

The World Bank should also stop insisting that recipient governments guarantee its loans, which gives governments control over which private sector company, local government, or non-governmental organization receives financing. Such control is detrimental to the evolution of open societies. Removing this constraint might endanger the Bank's triple A rating, but will make it more effective.

I propose that the world's open societies form an alliance with a dual purpose: fostering both development of open societies in individual countries and the evolution of a global open society. The first involves development assistance; the second, strengthening international institutions, such as an international central bank and a World Development Agency.

Such an alliance requires the co-operation not only of governments, but also of civil society. Governments represent the interests of the state, but democratic governments are responsive to the wishes of the electorate. Only if people believe in an open society that transcends national borders can such a society be brought into existence. So far, civil society has been mobilized for the destruction of international institutions as in the recent protests against the WTO and World Bank in Seattle and Washington. We must reverse the trend and start a movement for the creation of a global open society. The World Forum on Democracy, held in Warsaw June 25 - 27 made a start, but it must be followed up.