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Tuesday, September 09, 2008

Will globalisation come apart?

Many people, most prominently Larry Summers, worry about the weak political support for globalisation in industrial countries. Intellectuals with a sense of history point to the terrible breakdown of the `first globalisation' which started with British control of India (1858), telegraph lines linking Britain to the US (1866) and India (1870) and the Suez Canal (1869). This globalisation effort ended with the first world war. Concerns about the political foundations of globalisation are now at a new high, with the war in Georgia.

I have an article in Financial Express today where I argue that despite the difficulties that we see today, this second globalisation will not come apart as the first did.

The EU and NATO are playing a complementary role to OECD

I emphasise the role of OECD as a core of liberal democracies with market economies that (a) dominate the world economy and (b) will not introduce either trade barriers or capital controls. These countries are now the stable ballast for globalisation. Shlomo Avineri has a fascinating article After Communism: Travails of Democratization in Dissent magazine in which he emphasises the role of the EU in stabilising the turbulent politics of Eastern Europe that is often reminiscent of conditions of the early 20th century. He says:

THE ROLE played by the European Union turned out to be essential. It is true that the postcommunist countries that joined the EU (and NATO!) didn't live up to all the entrance criteria. Still, their membership provided both an implicit guarantee against any Russian neo-imperial encroachment and something of an insurance policy against slippage back into pre-1939 semi-authoritarianism. Even if anti-EU sentiments can be heard in the mainstream right in Poland and Hungary, EU membership locks countries into democracy, liberalism, and market economics.


These questions are freshly relevant in the context of Russia and China.

Writing on the Project Syndicate, Richard C. Holbrooke and Ronald Asmus take stock of Russian relations with the West after the invasion of Georgia. Peter Baker, writing in the New York Times, sketches the geopolitical significance of Russia, and Simon Sebag Montefiore puts these events in a hundred-year perspective.

Daniel Gross argues in Slate that international economic integration will restrain Russia. The early indicators are that Russia has suffered some economic pain as a consequence. In this FT article is a sentence: The million-headed hydra of the bourgeoisie has sent a signal: change your course, comrades! wrote the popular internet columnist Dmitry Oreshkin on in a joking reference to the communist background of Russia's leadership. The Russian stock market has taken quite a beating. Russia is the worst of 88 countries this summer by stock market performance. Will the people who lost wealth have a voice in influencing the Russian State? Writing in FT, Anders Aslund argues that the best path for the West lies in continuing its economic engagement with Russia.


Alongside the Middle East and Russia, the third element of Authoritarianism 2.0, and the political threat to global prosperity, is China. Robert Haddick has a good article on the difficulties that the rise of China presents.

In the article by Shlomo Avineri mentioned above there is a passage that got me thinking:

....the pre-1939 histories of Poland, Hungary, and the Czech Republic provided important keys to their post-1989 development. Czechoslovakia, for instance, was a democratic, secular republic before the Second World War and for a short period after. It had an active multiparty system; parliamentary life; a free press; religious tolerance; and a centuries-old tradition of representative institutions, albeit of feudal character, linked to municipal autonomy and academic freedom; as well as a developed market economy.

Polish and Hungarian histories were more complicated, but both countries enjoyed forms of representative systems for centuries. They were not democracies, but they did create traditions of elections, representation, and limited government. Even though Polish and Hungarian politics were basically authoritarian before the Second World War, a remnant of parliamentary life survived. Even if they were not as industrialized as Czechoslovakia, Poland, and Hungary did undergo significant economic modernization, did possess a fiercely independent, politically organized peasantry, and boasted academic traditions on a West European model. Despite obvious differences among the three countries, they could, after communism, claim to be reviving early institutions and traditions. There were even some political veterans around who managed to survive Nazism and communism. In short, there were historical models on which a postcommunist edifice could be established and legitimized, sometimes with exaggerated pride. In the Polish case, the churchs relative autonomy under communism helped create the infrastructure of a civil society. Another factor was the legacy of upheavals in 1956 and 1968. After the rebellions were repressed harshly, the regimes later relaxed and allowed a modicum of free space, economically as well as intellectually.

These elements were largely missing in Russia. Before the Bolshevik takeover in 1917, there were few elements of civil society. This was one reason for the failure to establish a liberal constitutional regime between February 1917 (when the tsar was overthrown) and October. Pre-1917 Russia was an agrarian society and was not yet emancipated totally from the long legacy of serfdom. Elected institutions did not exist (efforts to create them in 1905 ended in repression. The country was ruled from abovebureaucratically, autocratically, hierarchically; the Orthodox church was subservient to the state; religious and national minorities faced constant oppression; the university system was subservient to the state. Soviet communism, so different from the emancipatory spirit of Marxism (rooted in Enlightenment traditions) was another layer of oppression grafted upon a servile society. So, despite some courageous dissenters, Soviet reform started from above as we noted. While Poles, Hungarians, and Czechs could look back and try to emulate a real (or imagined) precommunist legacy, Russians could not do likewise. Even the historical model of modernization associated with Peter the Great was authoritarian. It was conceived as state-building from above, not democratization nor liberalization.

When the system collapsed, Russia found itself in a vacuum. Mediating institutions of civil society were missing. Yes, individuals in Moscow and St. Petersburg could talk of modeling the New Russia on Locke and the Federalist Papers or retrieve the writings of Herzen and Belinsky, but there were no institutions or popular institutional memories to serve as legitimizing tools. No real political parties emerged for presidential or Duma electionsjust lists centered on personalities. The only exception is the unreformed Communist Party, which managed to retain some of its membership.

This perspective on the different trajectories of the successful East European countries -- Poland, Hungary and Czechoslovakia -- when compared with the failure of Russia, illuminates our thinking about China. The elements of a history, culture and tradition of civil society, dissent, respect for the individual, and democratic discourse that were absent in Russia of 1917 and thereafter are equally absent in China. This suggests that the cost and complexity of political change in China will be high.


In India, we inherited a very good experience of political mobilisation based on non-violence from 1914 (when Gandhiji returned to India) till 1947. We lost our way after independence and lurched into a deep failure in the Emergency, where we became just like any other mediocre third world dictatorship. But from 1979 onwards, we have now built up a 30-year experience of a fairly well functioning democracy.

This is, of course, a work in progress and a lot remains to be done for it to deliver a humane society which cherishes the individual. The state of human rights in India is bad. One pillar of liberal democracy - intellectual life in the universities - has run steadily downhill for the last 50 years. While we have freedom of speech, this has weak legal foundations, banning `offensive' books is routine, criticising minor historical figures on Orkut is dangerous for life and limb, and the government has substantial control over electronic media.

While we have problems in absolute terms, in relative terms the difference is stark. When we compare India against either Russia or China, we have been lucky on inheriting good initial conditions in terms of the 1917-2008 period. Enlightenment values have roots in India in a way that they do not in the countries where the recent 100 years have been dominated by State brutality, and a multi-generation process of destroying the intelligensia.


  1. No. But we will have painful short-term blowback due to impending dollar collapse. China, Russia, India are largely irrelavent players.

    The ball is in american court.


  2. Since you mention Dani rodrik. We might as well ask "Will Democracy come apart ?", "Will nation state come apart?"

    Rodrik has made a very convincing argument about the trilemma of free trade, democracy and soverignity;that you cannot have all three but only two.

    Your argument assumes(implicitly) democracies would be OK with giving up sovereignty and I don't see that happening without a major crisis.


  3. Ajay,
    In you comments regarding the state of Indian democracy, you assert that "intellectual life in the universities [...] has run steadily downhill for the last 50 years". How, in your opinion, was intellectual life better in the universities, say, 10 years ago?

  4. Ajay,

    You have missed the effects of rising income of the government of India on individual free will. One could largely escape the tyrannical 'system' in say 80's or 90's by not being a part of it. However as the government of India has grown richer bureaucratic oversight of individual's lives has not decreased but steadily increased.

  5. I am not from finance background, still .. let me make an attempt to comment here.

    I believe, the concerns raised after Georgia war are mainly because of political reasons. Why there was no such concern when US attacked Afghanistan or Iraq ? US and team largely dominates the world media at this moment. This is just another move to oppose Russia. For US and team, globalization is just opening new markets for their products. They are also under threat when any economy like china tries to become superior and take complete control. They just can not allow it.

    About Indian scenario, after independence we adopted a combination private and free economy. Although we declared ourselves neutral during the cold war, we were clearly under the dominance of Russia. Hence we had more controlled private sector. After Rajiv Gandhi's policies, we are slowly entering into free economy. We are competing with the global market players in India as well as abroad.

    A complete free economy, free market is not good for India as there are several classes which require substantial help from government to establish themselves. It is must for the government to provide them basic facilities so that they come at normal level and compete with others. However, complete government control is also bad as it stops individual progress overall.
    I feel, what we are doing is correct, but it needs to speed up the overall process. May be a CEO will be able to do it better than a politically elected leader.

    And I do not agree with One pillar of liberal democracy - intellectual life in the universities - has run steadily downhill for the last 50 years.. Right now we can see lots of Indian names on global slate. Almost all of them have done their education from India. Its unfortunate that we couldn't provide them platform to shine. But some of them created the platform for themselves.

  6. New US = old S.U ?

    The economy of the new US, with state-sponsored bailouts and all, has quite some resemblences to the old Soviet Union.

    These are amazingly bold bailouts, extremely hard to explain to the stakeholders (the tax payers, it is public money!). Except that in autocracies no explanation is needed, or things are presented as fait-accompli.

    We live in interesting times.

    And why is India largely spared from this crisis ? Because of RBI regulators who withstood the clarion call of market-popular politicians like Chidambaram and other vested interests (market intellectuals included). It proves that there is no substitute for good governance. Learn this lesson well, India!


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