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International Institutions and Democracy (Part 3 of 5)

(This article is Part Three of a five-part series on "The Clash of Capitalism and Democracy in East Asia." For an introduction to the series, please see Part One.)

In a world where the word "globalization" has become hackneyed due to overuse, there will inevitably be some backlash against the international institutions are gaining importance vis-a-vis national and local institutions. Just as in many nations with a federalist system, a locality will rail against what it perceives to be "federalist interference" in local concerns, the simple wish to be self-governing causes groups, even nations, to fight the globalization that seems to be a foregone conclusion.

This basic desire for self-rule is what has led so many nations to seek democracy in the first place. But even if they have succeeded in establishing a democracy, and even if they have found a satisfactory internal balance of democracy and bureaucracy, they face a new challenge. How can they balance their national democracy with the pressures of gigantic international bureaucracies?

Two such influential bureaucracies are the International Monetary Fund and the United Nations. In the 1990s, both institutions have been quite active in East Asia, and the conflict between them and local democracies has raised some interesting questions about the new attempt to balance local concerns with 21st century tendencies toward globalization.

The International Monetary Fund
Lately, the IMF has been in the news quite a bit for its attempts to rescue Asian nations in an economic crisis. Michel Camdessus, the Managing Director of the International Monetary Fund, said at the Annual Meeting of the Bretton Woods Committee on February 13, 1998, that the IMF has several policy concerns beyond merely loaning money to nations in need. The IMF also wants to further deregulation, develop effective regulation and supervision of financial systems, cut inefficiencies in government (including "costly military buildups"), and increase spending on health care, education, and "social protection for the poor." In order to push these reforms, IMF involvement often includes stringent measures for fiscal reconstruction attached as conditions to its loans.

The application of these conditions in Asia has sparked a backlash against the 182-member international organization. Harvard professor Jeffrey Sachs argued in a November 3, 1997 article in the New York Times that if the IMF loans are "tied to orthodox financial conditions, including budget cuts and sharply higher interest rates, the package could do more harm than good, transforming a currency crisis into a rip-roaring economic downturn." Martin Feldstein, another professor at Harvard (and President of the National Bureau of Economic Research) argued in the March/April 1998 Foreign Affairs that "the IMF should eschew the temptation to use currency crises as an opportunity to force fundamental structural and institutional reforms on countries, however useful they may be in the long term, unless they are absolutely necessary to revive access to international funds."

Suharto is quick to pick up on these criticisms, and voice them in an attempt to renegotiate the IMF package to more favorable terms. But Suharto probably cares as much that the reforms would cause economic hardship for his nation as that they would cause financial pain in his own family, which stands to lose billions if the IMF reforms are pushed through. Suharto, of course, cannot claim the protection of his personal fortune as the reason for his intransigence, without risking a popular uprising by common Indonesians who are sick of his family's favoritist corruption. So, in the ongoing attempt to come up with a reason why the IMF reforms should be eased, he has invented his latest justification -- the reforms would violate the Indonesian Constitution.

Jusuf Syakir, a lawmaker with the minority United Development Party (UDP), said after meeting Suharto, "He described that indeed the IMF package and the IMF requests are aiming for a liberal economy, which did not agree with Article 33, and this was a problem we had to face together." Article 33 of the Indonesian Constitution says that the Indonesian economy has to be "organized as a common endeavor based on the principle of the family system." (Evidently, Suharto believes that the family system that the economy should be supporting is his own.)

What does this have to do with democracy? In Indonesia, not very much, and that may be the point. Contrast Indonesia's economic crisis to that of other East Asian nations receiving IMF loans. Thailand and South Korea have accepted virtually all the IMF conditions with a minimum of fuss, and their economies, although still deeply depressed, have begun steps toward recovery. The IMF's initial demands in all three nations led investors to believe that the situation was worse than they had thought, so the IMF may have roiled confidence at first. But Thailand, with its newly promulgated democratic Constitution, and Korea, with its newly democratically elected President, decided to accept the IMF reforms. Their decision raised confidence as investors realized that the two nations would do what was necessary to put their financial house in order. The fact that the Korean president Kim Dae Jung was elected partially on a platform of cooperating with the IMF signals that the Korean people made the choice (however reluctantly) to accept the temporary hardship for long-term benefit.

It seems that the moral of the story is that democracies cooperating with international institutions (Korea, Thailand) leads to good, and bureaucracies who refuse cooperation (Indonesia) cause only harm. So where's the clash of international institutions and democracy? The clash would occur if Indonesia's Constitution really had been one written and supported by the people, and really did preclude IMF reforms. Or, more concretely, a clash would occur if the people of Korea or Thailand decided not to accept IMF authority, and rejected the loans that were necessary to bail out their nation.

This last sort of clash could happen in any nation that decided (whether through democratic or bureaucratic means) that the reforms would be too hurtful in the short term to make the long-term gains worthwhile. As Feldstein argues, "the message to emerging-market countries sent by painful and comprehensive reform programs was that they should avoid calling in the IMF. Malaysia is now doing just that, even though its conditions are roughly similar to those of Thailand and Indonesia." Malaysia is not particularly democratic, but considering the rather low current popularity of the IMF in that nation, it would be easy to see why, if given the opportunity, the people of Malaysia would reject the IMF.

And the IMF also faces the other side of the democratic coin: it relies on the financial contributions of member nations to keep it operational. Camdessus has said that the IMF is "deeply awarecthat our members' support for the IMF ultimately derives from their legislatures, which vote to approve their countries' subscriptions, or quotas, in the IMF." In other words, without the democratic support of nations like the United States, Japan, Germany, Britain, and France (the IMF's largest financial supporters), the IMF could not even begin to seek the democratic support for its reforms in Korea, Thailand, or other nations. For all the external pressure the IMF puts on democratic nations, it is reliant on democratic nations to provide it with its very existence.

The United Nations
From March 1992 to September 1993, the United Nations Transitional Authority in Cambodia (UNTAC) sent 22,000 military and civilian personnel into Cambodia to assist with maintaining a cease-fire, and helping the nation hold its first free elections ever. The United Nations involvement with the Cambodian elections raises a basic paradox of democracy. Cambodia, after decades of colonial rule and bloody autarky, required an external institution to goad, bully, cajole, and force it to become a democracy. Can a democracy that is created through relatively undemocratic means last?

The case of Cambodia, where last summer's bloody coup by Hun Sen of the Cambodian People's Party (CPP) removed all hope of a peaceful transition to democracy, would indicate that the answer is no. Of course, the experience of the United States, a nation that formed a democracy through its own violent revolt, supplies the opposite answer. So what was the basic difference between the two? Time was certainly one important factor. Only five years after the Cambodian elections, it would be fairer to compare contemporary Cambodia to the United States of 1786, where slavery was common and few men could vote.

But another difference is the origin of the decision to attempt democracy. In the US, the colonists themselves decided to seek democracy. In Cambodia, the parties involved agreed to an election only after a decade of talks, augmented by whatever carrots and sticks the UN could provide. The peace of the aftermath of the election did not last.

The UN once again learned a painful lesson -- that democracy only works when people want it. If enough Cambodians did not want democracy, it could not succeed. FUNCINPEC won the election with 45.5% of the vote, and Hun Sen's CPP came in second with over 38%. The fact that so many supported Hun Sen in the elections did not, in and of itself, demonstrate that Cambodians did not want the FUNCINPEC-led democracy. The fact that this 38% was enough to support a coup did.

After the Cambodian peace collapsed, the UN was fairly limited in what it could do to restore democracy. No nation, especially smaller nations that are acutely aware of their lack of ability to influence world affairs, is willing to cede much of its own authority to the UN. The UN, after all, is a (mostly) democratic body, and can take no measures without the support of its member nations. As a result, the UN has formed rather strict rules limiting its ability to interfere in the affairs of a sovereign nation. Peacekeeping troops cannot be sent without the permission of all the major players in a given conflict. Trade sanctions are about the worst punishment the UN can inflict, and it does so only rarely.

And again, without the democratic (and financial) support of its member nations, the UN could not seek democratic reform in Cambodia or anywhere else. Democratic approval is needed on both sides. On the supporting side, the UN needs the governments of its member nations to approve funding and direction. In democratic nations, the populace must vote to approve such funding from their own tax dollars, even if indirectly, through representatives. Sometimes the bureaucracy has to go to great lengths to convince the democracy to vote in the affirmative. Sometimes, the democratic process in a given nation can stall support for the UN, which undermines UN influence -- for example, the outstanding dues owed by the United States, which limits the UN ability to help nations who actually want UN assistance.

On the receiving side, the UN needs nations to cooperate with it to improve their own situations. Neither the UN nor the IMF can help a nation that does not want to be helped. If Indonesia's decides to revoke its pledged cooperation, the IMF has no obligation to help it, and can delay or halt its scheduled loans. A suspension of the aid package will worsen Indonesia's economic condition. But if the IMF pays Indonesia despite its unwillingness to reform, it will create the morally hazardous precedent that the IMF will pay monies even to those nations who refuse to cooperate. Therefore, if Indonesia decides to ignore the IMF, short of inflicting short-term harm by withholding loans, the IMF is powerless to act. Cambodia (or at least enough of Cambodia's citizens) decided to revoke its cooperation with the peace brokered by the UN, and in the end, the UN is powerless to act, because no nation wants to give the UN the power to interfere in nations without their express permission.

In the first case, the bureaucracy rejects an international institution, to the great detriment of the nation. In the second, the democracy rejects an international institution, to the great detriment of the nation. In the name of national sovereignty, representative democracies have the right to guide their own future. But that does not always mean they are guiding it correctly. And sadly, democratic nations may not be more likely to accept sound advice from international institutions than are autocratic ones.

Part 1: The Clash of Capitalism and Democracy
Part 2: Big Business and Democracy
Part 3: International Institutions and Democracy
Part 4: Corruption and Democracy
Part 5: Blending Capitalism and Democracy

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