Capitalist Peace and Governmental Effectiveness
In a very interesting Chapter 2 "Economic Freedom and Peace" of Economic Freedom of the World (2005 Report) by Fraser Institute, Professor Eric Gartzke challenged the notion of democratic peace, arguing for the case of capitalist peace – quite a food for thought. We have an illusion of democratic peace merely because democracies typically have freer economies than authoritarian states. Expanding trade flows in a free market is a more direct cause for peace.
Free-flowing capital markets and other aspects of globalisation simultaneously draw nations together and raise the economic price of military conflict. Promoting open international markets - that is, spreading capitalism - is the best means to encourage peace as well as prosperity. If market critics don’t realise the obvious economic and philosophical value of markets - prosperity and freedom - they should appreciate the unintended peace dividend. Trade encourages prosperity and stability; technological innovation reduces the financial value of conquest; globalisation creates economic interdependence, increasing the cost of war. – The Straits Times, 9 Nov 2005 commentary
Professor Eric Gartzke is not indicating that democracy is valueless. He is examining the causality of political and economic factors to peace. It follows that apart from spreading the virtues of democracy by the West, they can do more to the world by encouraging more free trade. But what do we see in the recent events leading to next month’s WTO ministerial conference in Hong Kong? The most advanced countries are in a deadlock in making concessions to open up their economies, particularly in agricultural and service sectors, as well as in trade facilitation process. The protectionist sentiment in EU and US is clearly demonstrated by their recent agreements with China to limit the huge influx of lowly-priced textile imports for the next few years, on top of an adjustment period of 10 years since last decade. The left hand is undoing what its right hand does, when the West promotes democracy worldwide while at the same time restricting market access of developing countries.
To me, the effectiveness of a government is more crucial in lifting the standard of living and performance than its liberal/authoritarian inclination. We have seen how reform agendas in democratic India are bogged down by its left wing of coalitional government and its bureaucratic red tape. This is in stark contrast to its highly centralised communist neighbour, China, with its sizzling economic growth. China has long abandoned its communist’s central-planned economy to adopt a market economy but politically retained its communist features. The governmental effectiveness in implementing policies is the propellant of growth though I totally agree that the recent release of whitepaper on democracy development in China by the Chinese government is a disgrace to the concept of democracy when in fact it is talking about the absence of it. Their priority for the years ahead is to catch up with the advanced countries economically. They still have a long way to go to establish a healthy political climate such as civil liberty.
That is the problem of your bureaucracy [Japan]. Your coordination is much more complicated than the Chinese. So, the Chinese make moves very quickly because they are very centralised. The leaders decide and all the ministries agree — trade, industry, environment all quickly agree. So, the Asean-China free trade agreement is going off; whereas you have so many problems. Your farmers, your agriculture, your this, your that. So, it drags on. – Interview with Minister Mentor Lee Kuan Yew by Yomiuri Shimbun, 26 July 2005
Incidentally, in the same interview – "So, in Indonesia, when the Bandung Conference was over, there was an official visit by the President Hu Jintao who proposed a strategic partnership. They know the Indonesians want roads, bridges, container ports. They are ready. They’ve got enormous building capacity, large numbers of engineers and skilled workers and so on. We will do this, this and this. What do they want? Oil, gas, palm oil, whatever they have. So, it’s very good deals. Japan is in a different position. You don’t want all that. Yes, you want oil and the gas, but otherwise, you don’t really need that much raw materials from Indonesia. What you want is good relations and their market. What they want from you is technology, middle technology to upgrade their workers, but to do that they must have stability so that they can invest and get returns. They must put down terrorism and instability." Isn’t this a testament for capitalist peace?
In my view, in the initial process of economic transformation, a more or less authoritative government is often needed to inject bitter pill in the society to push through the economic agenda as most people will resist it because normal folks tend not be able to see the long term gains. After the growth is on track, the government can reduce its presence and directions to let the market chart its own course. In my impression, the West achieved their today’s state of democracy only after their economic revolutions, e.g. the 1 man 1 vote regardless of race and sex in the US was only a recent event in the past decades. Correct me please if I am wrong.
