Global Insight

June 24, 2013 7:06 pm

Protesters find rising wealth no guarantee of liberalisation

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Veteran administrations in emerging markets resist reforms

The world’s emerging markets are in the grip of an unprecedented wave of public protest. Today it is Brazil. A few days ago it was Turkey. Before that there were Russia, Indonesia, India and South Africa, all of which have seen big demonstrations in the past year. And before that there was Egypt and the Arab spring.

It is dangerous to draw parallels between countries with very different political, economic and social conditions. While Russian president Vladimir Putin was elected last year to a third term in office, his authoritarian regime has little of the democratic pluralism that characterises Brazil, Turkey, India and even Indonesia.

Islamist forces, which have played a key role in Turkey and the Middle East, are negligible elsewhere. South Africa is unique in suffering the poisonous legacy of apartheid. In Brazil and Russia, official corruption has been a big target of the demonstrators. In India and Indonesia, it has been fuel subsidy cuts.

But the current wave of public anger is more than a coincidence. First, protest breeds protest. As with the European demonstrations of the late 1960s and the anti-Communist revolt in eastern Europe in 1989-91, the fervour of protest can spread rapidly across borders. The authorities can move very fast to suppress this information – as they did in the Gulf states when the Arab spring protests hit Egypt in late 2010. But mobile communications and the internet have given demonstrators the advantage.

Next, the demonstrations take place against a background of global economic difficulties. While emerging markets as a whole are growing much faster than the developed world, they too face financial challenges – from youth unemployment in the Arab countries to poor public services in Brazil and a subsidy-boosted budget deficit in India. A handful of oil-rich states led by Saudi Arabia can suppress protests with lavish public spending: but other administrations have to make compromises.

Also, quite a few protest-hit countries are run by veteran administrations that may look outdated to younger people. Mr Putin has run Russia since 2000, and Recep Tayyip Erdogan Turkey since 2002. In Brazil, the Workers’ party has been at the helm since 2003, first under Luiz Inácio Lula da Silva and now under his handpicked successor, Dilma Rousseff. In South Africa, the African National Congress has been in charge since 1994. In India, the ruling Congress party has been in power for all but nine years since independence. In Egypt, the 2011 protests overthrew a military-backed regime that had ruled since the 1950s.

In South Africa, Brazil, Turkey and Russia, annual per capita incomes range from about $12,000-$18,000, the upper end of the range for emerging economies

Finally, look at income levels. India and Indonesia are fairly poor countries with annual per capita incomes of about $4,000 and $5,000 respectively, on a purchasing power parity basis. No surprise that the protesters have focused on a basic economic issue – fuel costs.

In South Africa, Brazil, Turkey and Russia, incomes range from about $12,000-$18,000, the upper end of the range for emerging economies, and the level at which the rising middle classes begin to make more wide-ranging demands. With their basic needs mostly satisfied, they begin to look more widely and press for everything from better public services (Brazil), social freedoms (Turkey), political participation (Russia) and an end to police brutality (South Africa). Taken together, these aims amount to a call for the development of fully-functioning democracies, with the rule of law, financial transparency and respect for minority rights.

History suggests that these demands are a normal corollary of economic development – during and after the industrial revolution, British, French and US elites were gradually forced to share power (very gradually, some might say).

Of the few emerging markets to have achieved rich-world status since the second world war only two are sizeable countries – South Korea and Taiwan (the others are Singapore and Hong Kong). In the 1980s, authoritarian regimes in South Korea and Taiwan were driven by public protests to liberalise their grip on power. Intriguingly, their income levels then were roughly comparable to today’s South Africa, Brazil, Turkey and Russia.

But history does not determine the future. Commodity-rich countries such as Russia may succeed in resisting political liberalisation – as some Gulf states have managed to do. And then there is China: the Communist party has so far retained its grip on power, but average incomes ($9,000 last year) are fast-approaching the level at which the middle classes want more than just money.

The supporters of liberalisation – social, economic and political – cannot take anything for granted. But they may have time on their side.

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