With Russia’s invasion of Ukraine bringing us images of murdered civilians, bombed maternity wards and the horror of urban warfare, you really have to wonder about the human race. How is it that 145 million Russians allow someone like Putin to rule over them?
The answer to that question has everything to do with Russian history and politics of course, but an even more sobering point is that Putin is hardly alone. The world today is rife with authoritarians, nationalists and dictators — tinpot and otherwise. And they are on the march. In fact you could make the case that we are moving towards an unprecedented anti-Democratic hegemony.
Forget “dark forces rising” from Lord of the Rings or “winter is coming” in Game of Thrones. This is real-deal, happening-in-our-lifetimes stuff. Without being alarmist, there is something even bigger afoot than Russia invading Ukraine — a war between civilization and humankind’s worst impulses.
The implications for companies and economies are myriad, but I’d identify two key points. First, to a degree this represents a transition, it brings uncertainty and we will know how Mr. Market hates that. Second, authoritarianism and its evil twin corruption produce substandard outcomes for everyone except the unscrupulous few. Autocracies are not in the rising tide business.
What about World War II? It’s true that 80 years ago Hitler, Mussolini, Imperial Japan and their puppets waged a brutal world war. It’s also true — for the time being at least — they were generally more murderous. But the Axis Powers controlled a far smaller share of the global population than today’s authoritarians.
As far as today’s autocrats — Putin, Xi, Bolsonaro, Erdogan, Orbán, Khamenei and dozens of others — this is a mixed bag of leaders. Some are military dictators, some are popularly elected and some control by dint of persona. What they all share at the very least is a disdain for globalism, and in most cases much more than that; suppression of human rights and the media (a chilling source here), jailing of political opponents, murder and, well, acts such as the invasion of Ukraine.
Let’s look at the 10 most populous countries: China, India, the U.S., Indonesia, Pakistan, Brazil, Nigeria, Bangladesh, Russia and Mexico. My colleague Max Zahn and I turned to a 2021 study by V-Dem Institute, (Varieties of Democracy), a Swedish NGO that analyzes and ranks nations based on democratic characteristics, (i.e. home country Sweden has the strongest democracy and Eritrea the worst — below North Korea even.)
As for the 10 most populous nations, only four; the U.S., Mexico, Indonesia and Brazil (which has “undergone substantial autocratization” over the past decade, according to the V-Dem report) and Indonesia are in the top 50% of most democratic nations. (Mexico barely made the cut.) The others are all below the line, highlighted by China coming in at No. 172 out of 179 countries and Russia at No.151.
V-Dem finds that 70% of the world, or 5.4 billion people, are living in autocracies, up from 49% in 2011. The report also found that only 15 countries are democratizing — covering 3% of the world population — the lowest number since 1978. (Another source here is Freedom House, which notes that the number of countries becoming less free has outnumbered those becoming more free for 16 straight years.)
Why is this happening?
“On some levels, it’s a reversion to the norm,” says Erica Frantz, an associate professor of political science at Michigan State. “There was such a burst of democracy after the end of the Cold War, perhaps we’re settling into a new normal. At the same time, it’s important to remember that democracies still outnumber dictatorships.” Frantz also thinks Putin’s invasion might ultimately backfire and slow the advance of authoritarianism.
Another perspective comes from Joseph Wright, a professor of political science at Penn State. Wright makes the case that underlying much of this shift to autocracy is our demand for resources.
“This kind of aggressive behavior of people like Putin — we’ve seen it in the past with Iran as well to some extent Venezuela — is driven by oil and gas prices,” he says. “As those prices go up, dictators whose states own assets in those sectors consolidate power at home, trampling vestiges of democratic institutions that could constrain their behavior. It emboldens their actions internationally, as we’re seeing now with Putin. The why now of why attack in February 2022 — part of that is due to the rise in oil prices in 2021. Decarbonizing Western economies will limit the reach of authoritarianism.”
Regarding Wright’s last point about decarbonizing, I’m not so sure. I just don’t think the world going all solar would end human beings’ megalomaniac impulses.
Speaking of which, both Frantz and Wright speak to another trend known as “personalism,” which as Wright explains is when “oligarchs are able to amass huge fortunes, finance parties they create or take over.” He notes: “In Benin, an oligarch created a party; in El Salvador, the president created a party; Brazil did the same thing. In Hungary, the president was able to consolidate power over the party with the help of oligarchs. Georgia, Serbia are countries that experienced it recently.”
“We know personalist dictatorships are more likely to be aggressive in foreign policy, more likely to initiate conflicts, to provoke disputes with democracies,” says Frantz.
Hmm, does personalism feel a bit familiar? Maybe now would be a good time to point out that the U.S. ranks only No. 29 on the V-Dem’s list — between Japan and Latvia — and worse, like Brazil, has “undergone substantial autocratization” over the past decade. (Freedom House corroborates this, citing illegitimate attempts to overturn elections, a rise in political intimidation and violence and discrimination against racial and ethnic groups in the U.S.)
We have every right to be outraged by Putin and his heinous mob and to condemn them, but we best make sure to keep our own house in order. Investors, voters — and lovers of freedom everywhere — will be watching.
