Philip Gordon, the U.S. Department of State’s Assistant Secretary for Bureau of European and Eurasian Affairs, spoke September 21st on the 20th anniversary of the U.S.’s FREEDOM Support Act (FSA), which has provided democracy and market-reform assistance to eastern Europe and former Soviet states.
The FSA has been responsible for training thousands of current and future leaders in Eastern Europe and Central Asia — and investing heavily in programs — in the tenets of representative government, civil society and free enterprise. Yet market ideals and multiparty electorates have since 1992 been elusive in most of the region’s capitals, where state-led capitalism and “managed democracies” have evolved as the norm.
In view of the mixed results, some of Gordon’s comments reflect grand assumptions and near-naiveté:
We all know that there’s more work to be done — notwithstanding all of the progress that I have referred to. As we all know, in other places in Eastern Europe and Eurasia, there has been significant back-sliding on democratic practices. The transition to open market economies really remains incomplete, and so long as it is, social problems will still exist; corruption will continue to impede progress.
No Western aid manager would argue that democratic, liberally economic states are not wonderful end-points. But let’s look at what has actually happened to recipient states over the last 20 years.
The FSA legislated funding of key programs and U.S. engagement starting in the early 1990s while Russia was reeling from the Soviet collapse and struggling with a new identity and mission. FSA allowed the Department of State and USAID to foster civil society efforts through host country NGOs, brought thousands of students and professionals to the U.S. for education and training, and funded small- and medium-enterprise (SME) start-ups to spur private ownership. Even beyond what was originally envisioned, as Gordon recounts, over the last 20 years the US has provided $15 billion in assistance to 12 countries of the former Soviet Union, including governance programs (such as constitutional and other “rule of law” reform) and strengthening of independent media.
Looking back from 2012, the U.S. (and other substantial donor states and bodies, such as the World Bank) can count tepid progress. Former Warsaw Pact states have acceded to the EU, although Romania, due to shoddy reform, has been on the verge of being kicked out. U.S. influence in the Caucasus and Central Asia, which rose in the 1990s while Russia found its way, is ebbing: Over the last decade a resurgent Russia and an uber-engaged China have affirmed roles in everything from resource investment to military partnership. Russian political influence has rebounded in Ukraine as has its military presence in the Caucasus and Central Asia. China now commands pipelines from Turkmenistan and Kazakhstan and has exclusive rights to Afghanistan’s largest copper mine.
Authoritarian governments in Central Asia, quick to welcome investment and civil society (read: democratic reform) programs from Westerners in the 1990s, now leverage their domestic agendas against foreigners’ incentives. Some even play neighborhood heavies off one another. As Alexander Cooley points out in his recent book, “Great Games, Local Rules,” patrimonial leaders have been “managing the demands made by outside powers while simultaneously delivering benefits to their political clients.”
Gordon’s comments about “back-sliding on democratic practices” and that “the transition to open market economies really remains incomplete, and so long as it is, social problems will still exist; corruption will continue to impede progress” reflect a respectable, albeit U.S.-centric, optimism. They also ignore the realities of a burgeoning multipolar world.
Back-sliding from what?
Prophets of democracy, intent on seizing the early 1990s to sow their gospel, have been frustrated at the low rate of conversion. Likewise international financial institutions (IFIs), such as the IMF and the regional development banks, have found themselves less than welcome when proposing their “restructuring” programs (cutting state spending and unleashing privatization) to states, as John le Carré might term it, recently out of the Cold. The efforts of D.C.-based advisors and consultants, to make developing countries swallow the liberal democratic medicine, have either been ignored or twisted into formulaic staged elections, and state-owned investment and banking conglomerates that perpetuate autocracy.
Leaders once enthusiastic for Western partners have had to confront their own political culture –or lack of it. Clan- and tribal-based politics often play the same role as Western party politics, indicating both commitment and policy direction. Georgia, now with its second peaceful parliamentary election since 2003, passing of power between liberally minded parties, and predominantly Western-oriented opposition is an exception. All others have either liberalized and reverted, such as Ukraine, or remained under authoritarian control.
The central issue here is not that emerging nations are developing their own approach to governance and markets. The issue is that the U.S. and Europe continue to play schoolteacher, insisting their liberal economic/democratic system is the best. China has brought millions out of poverty through state-directed programs. Pluralism in Muslim countries after decades of secular autocrats has ushered in “political Islam,” an organic development that is both representative and inclusive.
Admittedly the crux of my argument is after a current fashion in international affairs that proclaims a nascent global multi-polarity. One of the leading lights of this movement is Charles Kupchan, a professor at Georgetown University and author of the recent “No One’s World: The West, the Rising West, and the Coming Global Turn.” In an April op-ed in The New York Times he reminded readers that “the ‘end of history’ didn’t last; many developing nations have recently acquired the economic and political wherewithal to consolidate brands of modernity that present durable alternatives.”
Tying social problems and corruption to open markets
Gordon’s statement above that less-than-open markets prolong social problems is a rather broad brush. What sort of social problems are caused by semi-open markets? Perhaps he is referring to workers unable to unionize, or ethnic discrimination in contracting. Gordon’s reference is unclear at best. Most economists would have difficulty correlating “transition to an open market” to issues of health, education, or race.
The link between markets and corruption is much more salient. Less-than-transparent markets facilitate corruption through opaque regulations and processes controlled by state agencies. Vague or shifting prices and yields for, say, cotton can allow managers to set prices favorable to them and then buy/sell when convenient (i.e., most profitable), uninhibited by a range of buyers that might ask inconvenient questions or appeal to a regulatory body. Asymmetric information, limited market participation, and uncertain regulation all characterize a less-than-open market, and all feed corruption.
Yet – to open a can of worms for development economists everywhere – one country’s corruption is another’s approach to deal-making. Defining “corruption” at the United Nations will probably never be undertaken since interpretations of it differ so internationally.
The definition of corruption in the second paragraph above is rule-based, ie not following established regulations. Nations with mature financial and trade sectors have commissions or ministries that regulate licensing and markets. International trade rules are enforced by the World Trade Organization. In the eyes of the framers of these entities, right and wrong are recorded in black and white.
Socio-cultural relationships tread a much vaguer line. Societies that primarily rely on familial or tribal relations for survival are likely to promote their own members, in the interest of communal stability and profit, and conduct business informally, just as they have done for centuries. In a now globalized arena, friction results when informal meets formal. Americans and Europeans are always humorously astonished in developing nations when an NGO manager hires his cousin to be the office driver, or when they buy supplies only from their uncle’s store. Who can define where the line is crossed?
One of the core projects at Columbia University’s Harriman Institute this academic year, titled Corruption and Patronage, explores the role of patronage networks in developing nations and studies whether such networks impede governance or are simply another way of conducting affairs. The project is investigating “the definitions, significance, costs, benefits, and trajectories of corruption and patronage” and asking such questions as “Are patronage-based clans a viable alternative to the modern state as a governance mechanism?”
In the state-building effort in Afghanistan, there is a virtual consensus among Afghans and foreigners about the number one issue at the national, provincial, and local levels: corruption. But Western managers define corruption differently than Afghans, and after tens of millions of dollars of capacity-building and training (in a Western image, mind you), the issue persists. The disconnect must be in the definition and the implementation. The fact that patronage is being studied and considered, and not solely decried or measured or used in finger-pointing, indicates a new position on what has been an intractable issue for Western aid agencies.
In sum, Westerners have long defined what constitutes open markets and democratic ideals, and to the extent they have been accepted on the world stage, they also had the power to judge right or wrong. Their monopoly on ideal governance, commercial and political, is now being challenged successfully in several regions. To again invoke Charles Kupchan, “effective global governance will require forging common ground amid an equalizing distribution of power and rising ideological diversity. With that in mind, Washington should acknowledge that America’s brand of capitalism and secular democracy must now compete in the marketplace of ideas.”