Democracy and Prosperity

On a disastrous confusion of cause and effect

The West sees itself as a model for the whole world. What makes it so attractive, for migrants as well, is its high level of material prosperity. This offends many a Western mind, being particularly proud of their supposedly immaterial values. ‘Make the world safe for democracy’ is the motto of American interventionism. Europe hopes it can make more fundamental changes to the world through financial and ultimately therapeutic incentives than through weapons. A lot of money flows into building democracy, which – it is commonly assumed – should lay the foundations for later prosperity. Behind this assumption lies a disastrous confusion of cause and effect.

Democracy, in the sense of a rule of parties which can mobilise the largest proportion of votes, is an expensive affair. Democracy is an expression of stability and prosperity, but not its cause. Only very wealthy countries can afford the expenditure competition of voter mobilisation. In poorer countries the plundering aspect of this redistribution is harsher and more noticeable, which is why tensions arise along differences in the population. Usually, western-style democracy in less developed countries then degenerates into a race between puffed-up tribes, which can lead as far as civil war.

Functional ‘democracy’ in this modern sense, which turns the one from antiquity on its head, therefore has yet another precondition: Homogeneity of the population. If the fictitious ‘we’ of politics is supported by such homogeneity, divisions can be avoided despite political depredation. Because of the diversity of people, democracy is therefore most likely to function in small regions where common interests are stronger than divisions.

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Prosperity and stability are thus prerequisites of democracy, not its consequence. However, the competition for voters is increasingly undermining both preconditions. Prosperity is declining due to the consumer pressure which arises from any redistribution. Investments are anti-egalitarian: they are not randomly divisible and require competence and skill. Almost all uses of funds of ‘democratic,’ i.e. short-term voter-oriented policies are consumptive – the funds are spent on short-term goals, either for the consumer benefit of the recipients or the re-election of politicians. At the same time, stability comes under pressure: lobbying plays interests off against each other. Homogeneity is a long-term obstacle to this political game, because a homogeneous population can act as a counterweight to politics. The incentives for short-term policy therefore always lead to a dissolution of community, family and every other subunit of the population.

The examples of the few wealthy Arab states and Singapore show that democracy is not a cause but a consumer of prosperity. Singapore is pro forma democratic, but one party dominates. In the UAE, as in Singapore, the population is especially heterogeneous. Singapore’s Kuan Yew Lee, in particular, recognized that political competition for voters is dangerous. The Indians in the UAE and the Malays in Singapore have a much higher standard of living there than in their more democratic homelands. However, in contrast to the UAE, Singapore is incurring much higher consumption costs, especially for housing, due to the necessity of the state party having to face elections. This leads to a higher tax burden, which can be offset by the higher productivity of the population and by the British, and thus better, legal system. On Dubai’s streets one generally sees only Indians working; levels of cleanliness and prosperity are nevertheless higher than in India, where it’s not the foreign minority, but the native majority that wants to be provided for by politics, which in turn always leads to poor economic decisions.

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Democracy has such a good reputation because people mistake it for its causes, which are misunderstood as consequences: prosperity and homogeneity, or stability. Higher prosperity almost always leads to demands for more democracy. In fact, these are usually the demands of young people who have grown up in prosperity; demands to consume their share of prosperity sooner. Their parents’ long life expectancy can be frustrating. This can be seen in Hong Kong, where students are pursuing interest politics, in opposition to mainland China’s claim to rule. In fact, high productivity as well as stability and legal security were the reasons for Hong Kong’s high level of prosperity; ‘democratic’ interest politics played no role. A ‘more democratic’ Hong Kong would soon be overtaken in terms of wealth by Shanghai. The crucial difference from China is the legal system, which originates from a more abstract culture of trust – the relatively homogeneous British one – and thus offers reliability across clan and party boundaries.

If the population is too heterogeneous and prosperity too low for electoral gifts and experiments, ‘democracy’ leads to a spiral of envy that can end in ethnic cleansing. The only way to prosperity is by restricting politics so that capital can be accumulated. Sometimes, with a homogenous population, this restriction can have a ‘democratic’ effect, because social unity prevents or removes looting autocrats. However, the probability is greater that an autocrat will limit political consumption in his own interest against the desires of ‘democrats’ and permit capital accumulation, if he is not in competition with other looters who allow only short-term enrichment before they themselves scramble for the troughs.

Translated from eigentümlich frei, where the original article was published on 5th April 2018.

Reprinted from Equity & Freedom.