Democracy: who buys it?

Is it time to ditch free trade and ‘buy democratically’ instead?

Rod Nixon

Economics and finance, Government and governance, Trade and industry, International relations | Australia, Asia, The World

17 September 2019

Modern citizen-consumers should actively support liberal democracies and question consumption practices that favour authoritarian states, Rod Nixon writes.

The truism that ‘democracy is good for business’, with its implication that the reverse also holds, is ailing. Xi Jinping is now China’s president-for-life, and the military junta of the successful automobile-producing nation of Thailand has recently foregone another opportunity to pass control to a genuinely democratic government.

From this year’s rankings from Freedom House and World Bank Ease of Doing Business, it can be seen that of the top 50 countries, only 31 are ‘Free’ – or truly democratic. A further 10 rate ‘partly free’ with the remaining nine rating ‘not free’.

China, Russia, and Thailand belong to this third category and combined, the three have a gross domestic product of $15.5 trillion. Notably, China is the world’s leading exporter of merchandise valued at $2.26 trillion in total.

It’s a perverse outcome, therefore, that free trade – which should promote liberalisation – is fostering the development of an authoritarian superpower.

The economic success of authoritarian states highlights the need for both a more critical approach to democratic transition and new drivers of change.

More on this: Duterte and the death of democracy

Looking at trade between authoritarian states and ‘Prosperous Liberal Democracies’ (PLDs) is a good place to start. I define PLDs as OECD member-states that have also been endorsed as ‘free’ by Freedom House.

While membership of the OECD requires observance of democratic principles, three countries – namely Turkey, Hungary, and Mexico – no longer seem to be meeting these criteria.

Data sourced from the World Trade Organisation clarifies the extent to which the world’s 33 PLDs source merchandise from authoritarian states. China is the leading source of merchandise imports for six PLDs – Australia, Chile, Japan, New Zealand, South Korea, and the US. China and Russia are among the top two sources of merchandise imports for 27 of them. In total, PLD imports from authoritarian states for 2016-2017 were valued at $1.55 trillion.

Given the total PLD population of 1.07 billion people, this equates to a minimum average annual spending of US $1,456.96 per PLD resident on authoritarian state merchandise – excluding domestic profits, costs, and taxes. On average, a minimum of 13.47 per cent of imports into PLDs are sourced from authoritarian states.

It is also useful to examine merchandise trade from the other side.

PLDs consume around 40 to 50 per cent of total merchandise exports of featured authoritarian states. This suggests that authoritarian states would indeed be vulnerable to boycott action by PLD consumers, although exposure is likely to vary according to the state’s particular export profile.

Between China, Russia, Thailand, and Turkey, the first appears most exposed to an effective consumer boycott. Not only is China the world’s largest merchandise exporter at $2.26 trillion, but PLDs have recently consumed over half (50.15 per cent) its merchandise exports.

More on this: Speak softly and carry economic gifts

Some 93.7 per cent of these are manufactures, products that are commonly labelled, and therefore more easily distinguishable to consumers for the purpose of a boycott than for instance fuel or mining products.

With Freedom House now citing a global 13-year decline in political rights and civil liberties, one might expect new means of incentivising democratisation, rewarding states that uphold minimum human rights standards, and constraining the growth of resolutely authoritarian states.

But it’d be remiss to wait for leaders of liberal democracies to take the initiative, as their addiction to free trade and economic engagements with authoritarian states may already be too far gone. Although export-related, the Australian government’s recent approval of weapons sales to Saudi Arabia is a case in point.

In any case, democratic citizens are the ultimate custodians and beneficiaries of democracy. If there is to be a bright future for liberal democracy, it might be up to the billion PLD citizen-consumers to address the flow of resources to authoritarian states.

More on this: Courting Mother Russia

Whether we are concerned about such developments as, for example, a developing military alliance between China and Russia or the mass-internment of ethnic minorities – there could be merit in reflecting on our own consumption patterns.

Rightly, we may cringe at the transgressions of democracies, and seek means of improving them, but there remains a strong distinction between the world’s imperfect liberal democracies and authoritarian states.

Everywhere, people have benefited from progressive political, human rights, and environmental changes that owe their origins to the freedom of inquiry and expression that has flourished in liberal democracies. It may be time to ditch free trade and, instead, ‘buy democratically’.

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