DAVOS–If 2011 was the year of the protestor, 2012, at least where the World Economic Forum is concerned, is the year of the reckoning. Through the events of the Arab Spring, major power vacuums have been created in countries all over the Middle East. More governments, such as Syria’s, are likely to topple. But the time to start thinking about what’s next for countries like Egypt is already here.
The thing is, it’s coming at an inconvenient time for Western democracy. Having long held themselves as the global models for governance and economic structure, Western Europe and the U.S. have in recent years shown their warts as never before. That has opened the door for state capitalist models — like China’s — to take the stage. And the simple fact that new models for how countries and economies should work are even being considered is a blow to the Western world’s power and prestige. Obviously, well before the G-7 system broke down, China was already on a path of state capitalism, and that has turned out to be a successful course for that country to chart. But here’s the problem: While it has led to wealth and a rise in living standards for the Chinese, it hasn’t led to more democracy.
Here at Davos, and in capitals around the world, the paths countries should chart for themselves in the future is always topic A, and what we’ve learned over these last years is that transforming those countries and indeed the world is about a lot more than simply swapping out the players who legislate and lead. Look at the precarious situation in Egypt. Consider Putin’s long hold on power in Russia. For that matter, look at the situations in many countries on the euro zone periphery. Going down that list, nations that have simply replaced one power-grabbing leader with another are in trouble. (In Russia’s case, that leader has simply replaced himself.) Countries that have revolved leadership without addressing deeper institutional weaknesses are not setting themselves up for success in the long run.
That’s why changing not just the leaders at the table but the system by which the country is governed is such a real and important goal — it reconfigures the country’s “end result” trajectory. When countries like China and Russia become economically important, they of course support the models that made them powerful: strong authoritarianism and state capitalism. Specifically as China gains more and more economic power, it continues to improve its bargaining position with the West — that is, it can get away with bargaining less and less. And China’s ability to eschew compromise will only grow as its position in the world continues to get stronger — so why would the Chinese negotiate about anything? When their growth starts to level off or their cost structures begin to match the West’s — a change that will be measured in decades, not years — they’ll be willing to cooperate more. But not before.
If you believe in the values of Western democracy — equality, fairness, opportunity and freedom — that’s precisely why the West must rise to the occasion and continue to challenge state capitalism and press Arab Spring countries to fight for democratic institutions in their new national orders. Otherwise the fate of the West will be to represent an important but diminishing subset of the global economy — and to have almost no sway over a group of countries whose economic fortunes are on the rise. And that’s not just about prestige — those are the countries with weaker values. For example, the New York Times has published a devastating series on the Foxconn factories that assemble Apple products, highlighting worker abuses, deaths and practices that would have been outdated in the U.S. even a century ago. Those workers might be making state-of-the-art products, but they live as though they are indentured servants, or worse. It would be naive to think Foxconn is an isolated incident. In China, Foxconn is a success story of state-directed capitalism. Will the West tolerate Foxconn? And if so, how many more Foxconns will it tolerate?