“Markets” and “Democracy”: Good or Bad Bedfellows? (PIB as Panacea)

Market and Democracy

In Capitalism and Freedom, the defining text on the American business model, Professor Milton Friedman (the Nobel-prize winner) acknowledges that “what constitutes property, and what rights
the ownership of property confers are complex social creations rather than self-evident propositions.” He adds, though, more dubiously: “In many cases, the existence of a well-specified and generally accepted distribution of property is far more important than just what the definition is.”

Mr. Anatoly Chubais, leader of Russia’s pro-market reformers, reiterated Prof. Friedman’s claim in blunter language. In 1995 he acknowledged that “they are stealing absolutely everything and it is impossible to stop them. But let them steal and take their property. They will then become owners and decent administrators of this property.” The process Mr. Chubais described reached its zenith in the shares-for-loans program, which transferred Russia’s principal resources and industrial assets to oligarchs such as Mr. Mikhail Khodorkovsky (the multibillionaire behind the Yukos Company – the Russian Oil Producer, now languishes in prison) and ensured Boris Yeltsin’s re-election as President. Russia’s bumpy road to capitalism, therefore, has lessons for the development of a market economy in the developing countries, especially in countries like Nigeria.

Contraries to what the proponents of globalization assume, free markets outside the West (Western developed countries) do not spread wealth evenly and enrich entire developing societies. Instead, they tend to concentrate glaring wealth in the hands of a “few”, and/or clique of ruling class minority, generating class and ethnic envies and hatred among frustrated impoverished majorities.

The global spread of democratization reflects the power assumption in Western policy and intellectual circles that markets and democracy go hand in hand. But in the numerous countries around the world (as seen in Thailand, Russia, Kenya, Malaysia, Indonesia and other developing countries) with a market-dominant minority, just the opposite has proved true. Adding democracy to markets has been a recipe for instability, upheaval, and ethnic conflagration.

In countries with a market-dominant minority and a poor “indigenous” majority, the forces of democratization and marketization directly collide. As markets enrich the market-dominant minority, democratization increases the political voice and power of the frustrated majority. In other words, in the numerous countries around the world with a market-dominant minority, the simultaneous pursuit of free markets and democracy has led not to widespread peace and prosperity, but to confiscation, autocracy, and mass slaughter. Outside the industrialized West, these have been the wages of globalization.

Russia might move more quickly towards a market economy if Prof. Friedman’s maxim could be followed: focus on ensuring the existence of a well-specified and generally accepted distribution of property rights and stop asking questions about the legitimacy of that specification of property rights and their distribution. After all, Prof. John Kay also passionately argues that, even the original sources of the wealth of England’s aristocracy would not bear close scrutiny. Like the fortunes of Russian oligarchs, their wealth was derived from sycophancy towards the monarchy and success in picking the winner in times of political turmoil. But time heals many wounds. Britain’s aristocracy is now only an engaging anachronism with little political power. Unlike the fortunes of Britain’s aristocracy and Russian oligarchs to some extent, the fortunes of market-dominant minority in most developing countries, however preposterously large, are not associated with wealth-creating activities that brought direct benefits to millions of people.

The separation of politics and economic success was the key to the simultaneous evolution of liberal democracy and the market economy. Without such separation, both politics and business are corrupted. Democratic politics is impossible because disinterested government cannot emerge when access to state power is the principal route to private wealth. Economic growth is stunted because entrepreneurial instincts are diverted from the needs of customers to the desires of those who control the government. The Petroleum Industry Bill (PIB) currently at the National Assembly waiting its passage into law has a singular and unparallel capability of separating politics and economic/business success making “Markets” and “Democracy” good bed-fellows relationship realizable. Would the Nigerian National Assembly stand-up and urgently pass PIB into Law!

Dr. M. L. Yakubu (Lawal Karmanje)