Authoritarianism 2.0

There is a considerable consensus that USSR-style authoritarianism does not work - it delivers low material wealth, and generally leads to political breakdown. At the end of the 20th century, there was a great deal of `end of history' optimism that the breakdown of this model would lead to a universal movement towards liberal democracy.

However, a series of countries have now embarked on what I term `Authoritarianism 2.0' : a blend of free markets with authoritarian politics. This aims to produce good resource allocation and high growth rates through sound economic policy, while retaining one-party (or one-person) rule, denying the rule of law, and supressing the rights of individuals. Rowan Callick has written an article titled The China Model which reviews this style of design of the State, where individuals are seen as consumers but not citizens; where individuals have some economic flexibility but weak political rights. This model is being attempted in Russia, China, Vietnam, UAE, etc. In some ways, Singapore also exhibits some of these features. These countries do not see their political systems as illegitimate way stations on the road to democracy. The effort is to make Authoritarianism 2.0 work; liberal democracy is not even the long-term goal.

The question we really face is about the soundness of the `Capitalism and Freedom' hypothesis. Does the growth of a free market economy inevitably generate pressures to modernise the political system? Or is it possible to combine 21st century economic policy with pre-enlightenment politics?

One facet of Authoritarianism 2.0 is the rise of large Sovereign Wealth Funds (SWFs) controlled by the State. Many people are benign about the mingling of SWFs into global capitalism. I am not. I am pretty uncomfortable with ownership of shares of Indian firms by the Indian government; by extension I should be even more uncomfortable with shares held by foreign governments, who are not even accountable in the domestic political system. In Business Standard today, Deepak Lal has a suggestion on how liberal democracies should confront the SWF question.