07 January 2019

Autocracy's Dramatic Rise

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From the article, “China’s ‘Debt Trap Diplomacy’”: “Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, much less environmental- or social impact assessments.” From the article, “China’s ‘Debt Trap Diplomacy’”: “Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, much less environmental- or social impact assessments.” https://www.magzter.com/articles/10894/286648/5b2c97f0203b3

On New Year’s Day 2019 I read an OpEd by “the most important political artist of our time” (as Princeton University Press put it). China’s illustrious artist and dissident, Ai Weiwei, now 61 and living in Germany since 2015, ominously proclaimed, “Human Dignity is in danger. We must stand as one to survive.” Human rights are threatened all over the globe, but part of the problem, he argues, is that their definition has been too constricted. It’s not just about individuals and states. No, the globe is so much more interconnected than that. Much more needs to be included. He explains,


“The right of children to grow up and be educated, the right of women to receive protection, the right to conserve nature, the right to survival of other lives intimately connected with the survival of the human race – all these have now become major elements in the concept of human rights.”


The other reason that presses us to redefine human rights is that science and technology, apart from the good they produce, have also contributed to a much darker side. Authoritarian governments now spy on their citizens with chilling efficacy. He rightly adds the arms trade to the list of threats: “Today, Europe, the US, Russia, China and other governments manufacture, possess and sell arms. Pontificating about human rights is simply self-deluding if we fail to curb the dangerous practices that make armed conflict all the more likely.”

The final threat he mentions is one he pairs with the oppression of autocracies: “Likewise, if no limits are placed on capitalist global expansion and the pervasive penetration of capital power, if there is no effort to curb the sustained assault by authoritarian governments on natural human impulses, a discussion of human rights is just idle chatter.” This is the combination of threats to human dignity I wish to examine in this blog post.


How western management consulting is empowering the world’s autocracies

China, Russia, and Saudi Arabia, just to name the top three autocratic regimes, do not pay for the expertise of western consulting firms to make their governance more broad-based, accountable and responsive to the needs of their citizens. No, they pay dearly for their services to either burnish their international image, or promote a particular policy at home and abroad, or in most cases to breathe new life into state-owned companies that had long been on life support.

The New York Times recently published an excellent piece of investigative journalism on the gold standard of American management consulting, McKinsey & Company, founded in Chicago in 1926. Its clients represent 80 percent of the world’s largest corporations and its alumni, much more than any other firm, populate the highest ranks of these corporations – like Google C.E.O. Sundar Pichai, Morgan Stanley C.E.O. James P. Gorman, Facebook C.O.O. Sheryl Sanders, and many more (see Wiki article). With a revenue of over ten billion dollars in 2018 and close to 30,000 employees, McKinsey’s tentacles literally reach around the world. And though it only relates to China, this is an apt summary by Walt Bogdanich and Michael Forsythe of their 5,100-word article:


“For a quarter-century, the company has joined many American corporations in helping stoke China’s transition from an economic laggard to the world’s second-largest economy. But as China’s growth presents a muscular challenge to American dominance, Washington has become increasingly critical of some of Beijing’s signature policies, including the ones McKinsey has helped advance.”


You will definitely want to read this article, so just allow me to whet your appetite with three short points.


1. Underpining China’s bid for hegemony

One of the Chinese companies McKinsey has advised is the one that built those artificial islands in the South China Sea, which have infuriated the Philippines, as well as Vietnam and Brunei, which all share a stake in this sea (to understand why the international tribunal ruled against China in 2016, read this). Clearly, the US is also nervous about China projecting its military power in such an aggressive manner.

Further, according to The Times’ research, McKinsey consults with “at least 22 of the 100 biggest state-owned companies — the ones carrying out some of the government’s most strategic and divisive initiatives.” China’s most ambitious plan is its “Belt and Road Initiative” (BTI), a recreation of the ancient Silk Road Marco Polo famously publicized in the medieval West. Today this represents a trillions of investment in infrastructure in nations from Central Asia to the Middle East and into much of the African continent. This in turn represents a formidable display of Chinese soft power in the world.

There’s nothing wrong, of course, with boosting the economies of all these nations while landing lucrative trade deals and burnishing your own national image in the process. Western nations have been doing this for decades. But they usually pay at least lip service to improving governance and bringing jobs to the local population. China’s port-building or high-speed railroad projects are all done with its own workers and by definition they do NOT seek to spread democracy.

So it’s not surprising that China’s BTI policy has taken a hit in the last year when the construction of a port for Sri Lanka piled so much debt on Sri Lanka that is was forced to hand over the port to the Chinese for 99 years. Seeing this, Malaysia’s prime minister Mahathir Mohamad panicked and stopped work on the massive railroad project one of China’s largest companies, China Communications, was building in his country. As a result, Malaysia’s landscape is dotted with abandoned buildings and concrete bridge pylons.

But the Malaysia fiasco doubly bears McKinsey’s fingerprints. They had helped to craft China’s enticing proposal for this project and at the same time they had convinced Malaysia that this was a deal they should not turn down. Add to that shame on McKinsey the sanctions the World Bank had imposed earlier on China Communications for its high level of corruption and its involvement in building the South China Sea artificial islands. But as with other Chinese companies, these contracts were too lucrative to turn down.


2. The Ukrainian Yanukovych saga

Ukraine’s wealthiest oligarch, Rinat Akhmetov, had made a deal with politician Viktor Yanukovych whose sordid past would seem like an insurmountable barrier to taking power (“two criminal convictions and a rigged election”). Not to worry, he could enlist the help of two US management consulting groups: Paul Manafort and his Russian cohorts, now well experienced in helping dictators with dismal human rights records, and McKinsey, which agreed to help him devise a winning economic program. We know how things turned out for Manafort, now in federal prison, and partly because of all the money he embezzled in the process of consulting. But why McKinsey agreed to sign this contract is more complicated.

For one thing, here’s how McKinsey defends its global involvement: “it will not accept jobs at odds with the company’s values. It also gives the same reason that other companies cite for working in corrupt or authoritarian nations — that change is best achieved from the inside.” Fair enough, at least to a degree. But as Bogdanich and Forsythe argue in their piece, there is absolutely no evidence that the billions of dollars McKinsey has earned by working with the Chinese have inched China any closer to democratic rule. Here too, no sooner had Yanukovych been elected president that he abandoned the economic blueprint crafted for him by McKinsey and over the next three years drew Ukraine into Russian arms. He was driven out of the country four years later by a popular wave of protests and a budding civil war. Later that year, Russia invaded and annexed Crimea, Ukraine’s most eastern territory.


3. Saudi Arabia’s crackdown on dissidents

McKinsey has been working with a number of Saudi firms over the years (600 projects from 2011 to 2016), but its most troubling project recently involved research on how the KSA’s policies were viewed by its public. In doing so, it pointed in particular to three individuals who elicited a good deal of negative chatter on Twitter. Bogdanich and Forsythe inform us that one was arrested, the other saw two of his brothers imprisoned and his phone bugged, while the third person’s account (anonymous) was shut down. McKinsey made a statement that it is “horrified” that its work might be used to curtail people’s civil rights but it showed no hesitation, unlike many other companies, to show up for the big Saudi investment conference in October, despite the fallout from the Jamal Khashoggi murder in Istanbul.

A 19-month research project by an American academic in the Gulf countries focusing on the work of management consultants concluded that they were “the black box of authoritarian governance.” McKinsey and Company are only the biggest, but the sum total of those efforts, far from coaxing these regimes into more inclusive, participatory governance, actually may be giving them better tools to hold on to power and repress their political opponents.

My takeaway here is simply that US business corporations working abroad, and consulting firms in particular, need more Congressional oversight. In this case, good journalism shed a light on a problem that needs urgent fixing.

On another note, if in light of the preceding you are beginning to wonder whether autocratic governance is not spreading rather than retreating, you are right. That is the subject of the next section.


The 21st-century phenomenon of growing authoritarianism

I am helped here by a groundbreaking essay last April in Foreign Affairs. Yasha Mounk and Roberto Stefan Foa, as I see it, make two basic arguments.


1. The twentieth century was the century of democracy

Post WWII North America, Western Europe, Australia and New Zealand, and Japan formed an alliance against the Soviet Union in the Cold War. Yet despite the USSR’s military might and politico-economic alliances over vast regions of the world, it collapsed in 1989, and at the turn of the new millennium no one would dispute the political and economic clout of the bloc that had embraced liberal democracy. Indeed, this is why an array of McKinsey-like firms suddenly stumbled into a goldmine of projects and contracts in the 1990s. Western capitalist knowhow was in high demand, but not necessarily as tools for democratic reforms.

Mounk and Foa recount the traditional narrative for the rise of democratic hegemony. Democracy flourished because people were becoming enamored with human rights and personal freedoms. Certainly those values played an important role, particularly in the rise of so many human rights NGOs and movements of civil society in most parts of the world. On the other hand, they argue that scholars have underestimated the attraction of the West’s economic prosperity. But that’s precisely where the balance began to tilt dramatically. Hence, their second argument.


2. Almost two decades into this century autocracies command the greatest wealth

Within the next five years these authors estimate that nations run by authoritarian regimes (with China, Russia, and Saudi Arabia in the lead) will command the lion’s share of economic output for the first time ever. And adding to the weakness of the traditional bastion of liberal democracy is its current political turmoil. For example, two-thirds of Americans over 65 say it’s absolutely important to them to live in a democracy, whereas less than one third of those under 35 believe that. Worse, authoritarian solutions are considered possibilities: “from 1995 to 2017, the share of French, Germans, and Italians who favored military rule more than tripled.” Finally, as elections around the world in the last couple of years indicate, we are witnessing “a deep groundswell of antiestablishment sentiment that can be easily mobilized by extremist political parties and candidates.” They explain:


“As a result, authoritarian populists who disrespect some of the most basic rules and norms of the democratic system have made rapid advances across western Europe and North America over the past two decades. Meanwhile, authoritarian strongmen are rolling back democratic advances across much of Asia and eastern Europe. Could the changing balance of economic and military power in the world help explain these unforeseen developments?”


Of course, many different scenarios might be entertained at this juncture. Maybe the West’s current political volatility will settle down again, giving way to a more stable democratic state with improved economic performance. And at the same time, China, Russia and Saudi Arabia could see their economic rise falter, particularly in the transition from fossil fuel-based economies to ones based on cleaner energy alternatives. But then again, Mounk and Foa can easily imagine autocracies expanding and prevailing. And though they don’t bring up war as a possible outcome, I find it hard to put out of my mind. Think of it: it’s the democratic ideals that have guided (imperfectly, yes!) and empowered the work of the United Nations all these past decades. If that fragile structure with its paradigm of human rights begins to crumble, who is to stop another world war?

Today the Eurasia Group just published its Top Risks report for 2019. The number one risk is “bad seeds”: “the geopolitical dangers taking shape around the world will bear fruit in years to come.” This year will likely be fine, but trouble is looming down the pike. Unsurprisingly, the second top risk is the US-China relationship.


Parting Words

At this point, we are brought back to Ai Weiwei’s eloquent and solemn New Year’s warning: “Human dignity is in danger: we must stand as one to survive.” For me, this makes the united work of people of faith even more necessary. Specifically, it calls for Christians banding together with Muslims across national boundaries and contributing in practical ways to a strong solidarity between all human beings. Why? Because, as our texts teach us, they are called and empowered by the Creator to manage this earth in just and peaceful ways.