Making economic policy as if democracy matters

Suggestions for a new foreign-policy approach

I am not a military expert, and I am unable to judge just how well or badly Russia’s invasion of Ukraine is going. From America, it certainly seems that the campaign began shambolically, and met resistance both fierce and effective. It would be nice to think that Vladimir Putin, having launched a senseless war which may well claim tens of thousands of lives, faces a humiliating defeat, which might both threaten his control over Russia and deal a significant setback to authoritarian, revanchist powers.

But as courageously as the people of Ukraine seem to be facing the Russian onslaught, and as impressive as western resolve and cooperation have been, the bigger picture looks a darkly forbidding one. Putin still has an enormous amount of conventional firepower available to him. Given the threat a long and costly war may pose to his political fortunes, he has a strong incentive to use that firepower in brutal fashion—and is willing to, it increasingly seems. Given the nuclear weaponry at his disposal, there is ultimately not very much that America and Europe can do to stop him without pushing the world dangerously close to a third world war. Unless China applies pressure on Putin to seek a negotiated end to the conflict, or his own people remove him, it seems fairly likely that Russia’s forces will eventually establish control over Ukraine. 

Perhaps he will stop there, leaving America and Europe locked in a dangerous standoff with Russia. Or perhaps Putin will try to take more territory, betting—reasonably—that despite its rhetoric the west will not risk a nuclear war to contest a Russian attempt to occupy the Baltic states, or some other piece of land which once fell within the frontiers of the Russian empire. As bad as things are, they could very easily get a lot worse. The west should prepare itself for a very difficult time ahead.

It should also do some hard thinking about how we got here. This war is Putin’s doing, and attempts to justify it by gesturing at the eastern expansion of NATO or the EU are repulsive. But it would be wrong to deny that Putin’s invasion is in some sense evidence of American policy failures. And it is really important that we learn from these mistakes.

America had two extraordinary opportunities to design and implement its vision of a global order, in the aftermath of the second world war, with respect to the free world, and then again after the fall of communism. Looking back over these experiences, we can certainly find things to celebrate. That western Europe and Japan would become reliably peaceful, prosperous, and democratic places was certainly not something that could be taken for granted 75 years ago, and while the people living in those places deserve most of the credit for that accomplishment, America very clearly played an essential enabling role. Seeing off the Soviet threat without plunging the world into nuclear war was also a significant achievement, as was reestablishing an open global economy—even if the benefits of global growth have not been as broadly shared as we might have hoped. 

But if you had told the architects of the postwar order that while veterans of the second world war still lived, and despite the collapse of the Soviet Union and the seeming failure of communism, Europe would see another war of territorial aggrandizement by a would-be emperor, while a tide of authoritarianism rose as democracies wobbled, I think they would agree that something had gone badly wrong. The postwar order, its institutions and alliances, were intended to secure democracy and prevent the world from tearing itself apart. Now the rosy scenario is one in which Putin is toppled—but not in a nuclear-war-starting way!—followed by another contest of endurance between nuclear-armed superpowers. 

Now, it is important to be realistic. The leaders of rich democracies don’t have magic wands. They operate under many constraints and cannot snap their fingers and create conditions supportive of democracy in other countries. We should also leave open the possibility that in another five years things will look and feel very different. Maybe Putin will lose this war, his power will crumble, and the Russian people will finally get the government they deserve. Maybe China will be chastened by Russia’s experience, and the difficulties it faces reviving a weakening economy will open the door to political reform. One can hope. But there is no getting around the fact that this is a dangerous moment, and that there might have been ways to avoid it given different policy choices.

What lessons can we learn from our failures? A first, and crucial one is that the triumph of democracy cannot be taken for granted. It might have been tempting in 1945 or 1991 to see the spread and persistence of democracy as an inevitability. It should be clear today that to maintain democracy takes constant work. That work, it seems important and, somehow, necessary to say, is worth it. Democratically elected governments make plenty of errors, but as we watch China fail at its attempt at a third consecutive orderly transfer of power, while the unaccountable Vladimir Putin massacres the people of a neighboring state, we should reflect on just how valuable a democracy can be. 

That democracy takes constant tending has implications for how societies conduct matters internally. But I think the history of the past 75 years also illustrates that democracies can provide crucial support to each other. It is difficult to separate the political from the economic here. Consider the experience within the EU, which I would say again is both flawed in many ways and an extraordinary human achievement. The promise of close economic ties with rich western Europe has been a powerful spur to liberalization and reform in central and eastern Europe. Being in the EU means access to the common market, access to investment funds, access (in most cases) to the Schengen area. For the member states of central and eastern Europe it has also meant a route to high incomes. There has of course been democratic backsliding within the EU. But EU institutions provide member states with mechanisms through which to apply pressure on backsliding governments.

Again, it is not a perfect system. But through the EU, the club of rich, democratic European countries has grown to include most of the continent. Contrast that experience with the west’s pursuit of close economic ties with China, without regard for the nature of the latter’s political system, and without any attempt to link economic integration with political reform. Deep integration with the world economy has lifted hundreds of millions of Chinese out of poverty; that can’t and shouldn’t be overlooked. But it also failed to spur political liberalization within China. It gave China a means through which to promote illiberal values abroad. And it helped to bring the world to this moment: in which China is traveling down a road of increasing repression and insularity, and in which China is supporting a despotic neighbor as it wages a war of conquest, while the open global economy that helped enrich China is at risk of fracturing.

Should America have pursued something like regime change in China? Absolutely not. On the contrary, if we are counting up the failures which helped push the world toward its present state, the Iraq war must rank high on the list. It not only exacted a terrible toll in lives and treasure, but also undercut American credibility, handed skeptical countries a good reason to doubt our commitment to our values, and weakened the norm against wars of aggression. No, another critical lesson of the past 75 years is that the free world, and America especially, relied far too heavily on the stick and made far too little use of the carrot, in a way which generally undermined efforts to advertise our values. 

What does our recent history recommend? It seems to me that rich democracies should consider pursuing a much more principled foreign policy. We should refrain from offensive military action except in extreme cases, like a dire terror threat or a genocide. And while we should be willing to work with governments of all sorts in the pursuit of global public goods—to maintain a stable climate, or deal with public-health threats, or limit nuclear proliferation—we should be more careful to ensure that our economic relationships reflect our political values. We can’t force other countries to become liberal democracies, and we shouldn’t try to. But we can recognize that there is something unique and important about being a liberal democracy—that there is an essential kinship of values—which we can honor and support with extraordinary generosity, for the sake of other countries and our own.

The EU should be a guide, though not a model; the idea is not that we should build a superstate. It is, rather, to recognize that we can strengthen fellow democracies by reducing barriers to trade; by providing generous investment funds for education, infrastructure, clean energy and public health; and by relaxing restrictions on migration. That doesn’t mean we shouldn’t trade with non-democracies. Cutting off trade relations with a Vietnam, for instance, would be a mistake, which would hurt the Vietnamese people and push the government toward our geopolitical rivals. 

But we should structure our economic relations with the rest of the world such that it is clear to the Vietnamese people—and perhaps even to their leaders—that they stand to benefit economically from a process of political liberalization. We need to learn from experience with China that we don’t do people living in authoritarian states, or ourselves, any favors by giving such places preferential economic access, in ways that empower authoritarian governments and cast doubt on the seriousness of our commitment to our values. 

I recognize that in the short-run, this sort of principles-based approach may seem to conflict with a broader strategic aim of Chinese containment. It seems clear, for instance, that America made a mistake in not joining the TPP, and it may also seem clear that a TPP which includes Vietnam is a stronger one. But this is a bit blinkered. Our relationship with China has grown increasingly strained because of the fundamental incompatibility of our political values. There is a pretty big difference between a trade spat which results from governments attempting to satisfy various domestic interest groups and one which results because the governments worry that exposure to each others’ ideas and values threatens the legitimacy of one or the other’s system of government. If China were democratic, there would still be trade rows between it and the rich world. There would not be the basis of a new Cold War. 

And so it is very important to understand that unless the exigencies of war demand a different approach, demonstrating our commitment to democracy and strengthening our fellow democracies is an essential part of an effort to manage Chinese influence. Disregarding the nature of an autocracy’s political system and showering it with benefits we deny to less strategically useful but democratic places, all in the name of hard-headed realism, does not pay in the long run. 

Would this sort of approach have yielded better outcomes over the past 75 years. To the extent that we were able to apply it consistently, I think so. I think a world in which more developing countries saw us as a place which richly rewards fellow democracies and fewer saw us as a place which rejects the results of elections we don’t like would on the whole be a better one.

I think this approach might have led to different policies with respect to Russia after the fall of the Soviet Union. From 1992 to 2005, America provided about $28bn in aid to the former Soviet Union, much of it focused on basic humanitarian assistance and non-proliferation. By comparison, Germany spent more than a trillion dollars in the former East Germany over the 20 years after reunification, and the EU has spent hundreds of billions in its central and eastern European members under its cohesion policy—and in both cases, aid to the former communist states came with the promise of deep economic ties. A more principled approach to trade with China—particularly after 1989—would either have constrained Chinese growth and power or have led to more political reform there, but in any case would have left the American economy less dependent on imports from an unfriendly authoritarian state. Had China chosen not to democratize, and had trade links between America and China thus grown more slowly, that would very likely have been to the benefit of other important and democratic trade partners like Mexico.

As I’ve noted before, Latin America is the most natural place for the United States to demonstrate what strong, mutually beneficial economic relationships between itself and kindred democracies might look like. It is an absurdity that we have not before had the vision and the courage and the wisdom to engage with Latin American democracies in a more principled and constructive way. It shouldn’t matter if we don’t like the person who gets elected, or if we do like the general who seized power and introduced market reforms, or if the autocracy has valuable resources while the democracy only has lots of poor people. It should matter if a country rejects democracy and the rule of law. It should matter a lot. 

This is what we’re doing here; this is what we think matters most, or used to anyway: that people should enjoy the freedom and the responsibility of self-government, because the other systems are much worse. And because we respect principles of freedom and self-government, we aren’t going to shove democracy down anyone’s throat. But we are going to recognize that establishing and maintaining a democracy is hard work, and for those who put in that work there will be a community of like-minded societies which are prepared to support that effort.

To conduct our economic policy in this way flies in the face of efficiency-based arguments for free trade made by economists, or philosophical arguments for free trade rooted in a belief in the fundamental liberty of individuals to transact with each other. But we need to reckon with some hard realities: that trade ties alone are insufficient to keep the peace or to spark political liberalization in autocratic countries, that the freedom to buy an iPhone is not obviously more sacred than the freedom to criticize one’s government and choose who leads it, and above all that we did not achieve what we hoped to achieve when we sought to rebuild the global economy after the second world war. Those of us that value global openness thus need to think much harder about what sort of world we really want to build and which strategies offer us the best hope of getting there.