The Democratic Deficit

The received wisdom of the post-cold war era has been that democratic government, as exercised in the west, should be exported to other countries as a means of liberating the peoples of states oppressed through ideological subordination or through the actions of dictators or ruling elites.

Hope swelled with the emergence of the Arab Spring in the Middle East and a transition in Egypt to free and democratic elections. Today, Egypt is on the verge of civil war and under a state of emergency. What has gone wrong and what are the implications?

Democracy in the west, developed over many hundreds of years, is not only a matter of one person and one vote represented through an assembly.

Sustainable functioning democracy is underpinned by institutions; the rule of law, an independent judiciary, respect for human and property rights, freedom of speech, peaceful protest, and crucially through a functioning and free opposition. Democracy is fragile and complex, and its durability has been built over many centuries.

It is rare, if not impossible, to reconcile in the infinite variety of human kind a view of the world seen through a single lens. Most governments are not elected by a majority of the people, but by a majority of those who voted, often a relatively small proportion of the total population.

If a government in these circumstances simply ignores the view of its opposition or the wider population it will rapidly lose the consent of the people to govern, as appears to be the case in Egypt.

The transition to a sustainable democracy in Egypt is hampered by a lack of institutions that provide a degree of accountability and a counterbalance to ruling political parties. It will take many years if not decades to build this institutional capacity. Meanwhile the transition will continue to be painful and punctuated by periods of instability.

Add into this mix the desire of some to ensure that religion is the sole or primary source of law, authority and power, and the opposing desire of others for secular rule, and you have a recipe for continuing conflict.

But what is the relevance of these events to Jersey and its finance industry?

Of course any peaceful parliamentary democracy will have a desire to see democracy take root and the human tragedy in Egypt is of great concern to all right thinking people. However, given the nature of this blog, I will restrict comment to how this situation might play out so far as its potential impact on the world economy, and therefore Jersey is concerned.

A lack of stability has held back the world economy since the financial crisis of 2007. We have had five years now of low or slow growth, and this has impacted on all countries including Jersey.

Instability in Egypt has the potential to spread through the region as different factions align behind the opposing sides. Egypt’s commitment to its peace accord with Israel and the functioning of the Suez Canal are both significant issues.

Suez has been the source of major historical conflict and given the Sumed gas and oil pipeline and the Suez Canal together avoid an extra 2,700 mile sea journey for energy supplies coming to Europe and the US, it is easy to see how it could be a lightning rod for trouble again. Markets are spooked with oil climbing to a four month high last week at just over $110 per barrel.

But whilst the situation in Egypt is extreme this is not the only example we have seen of an undermining of the institutions underpinning democracy. Whenever action is targeted at minorities and the rule of law is set aside to pander to populist wishes, we should worry.

The actions of politicians in Europe against those with wealth have on occasion ignored the law and resorted to public vilification in order to bend public opinion. This has been used to justify collecting more cash from firms who have already discharged their legal tax obligations in order to prop up troubled exchequers, resulting in multi nationals volunteering additional tax payments not required by the law. Without the rule of law we have only opinion to guide actions, and opinion as we have seen in Egypt can be uncertain, troubled and volatile, bearing in mind that both Egyptian factions will have seen their actions in this conflict as moral.

It appears a fragile global recovery is underway, it would be both a tragedy and an irony if the recovery were undermined by the transition to democracy in the Middle East and its unpicking in Europe.                                              

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