Russian Foreign Ministry building and skyscrapers of Moscow International Business Center

Politics

Anatomy of Illiberal Capitalism

Sep 11, 2017 Jacek Rostowski

What do Russian President Vladimir Putin, US President Donald Trump, Turkish President Recep Tayyip Erdoğan, Hungarian Prime Minister Viktor Orbán, and Polish Law and Justice Party Chairman Jarosław Kaczyński have in common? They all view the market economy as an instrument of state power.

BUDAPEST – Populists such as US President Donald Trump and de facto Polish leader Jarosław Kaczyński, and authoritarians such as Turkish President Recep Tayyip Erdoğan and Russian President Vladimir Putin, do not just share Hungarian Prime Minister Viktor Orbán’s brand of so-called “illiberal democracy.” Each also espouses a form of “illiberal capitalism.”

But what does illiberal capitalism entail, and how compatible is it with illiberal democracy? For starters, as nationalists, Trump, Kaczyński, Erdoğan, Putin, and Orbán regard the market economy not as a means of boosting dynamism, efficiency, prosperity, and individual freedom, but mainly as an instrument for strengthening state power.

Historically, there have been various schools of authoritarian right-wing thought about the relationship between the market and the state. At one extreme, the Nazis established a command economy while maintaining private property and a high level of income inequality. At the other extreme, early twentieth-century social Darwinists in Europe and the United States called for unfettered domestic free markets in which only the “fittest” would survive, leading to a stronger country.

To continue reading, register now.

Subscribe now for unlimited access to everything PS has to offer.

As a registered user, you can enjoy more PS content every month – for free.

Already have an account? Log in

Subscribe to PS Digital

Access every new PS commentary, our entire On Point suite of subscriber-exclusive content – including Longer Reads, Insider Interviews, Big Picture/Big Question, and Say More – and the full PS archive.

Subscribe Now

Europe’s New Appeasers
Anadolu Agency/Getty Images

Politics 4

Europe’s New Appeasers

Sławomir Sierakowski shows how EU leaders are allowing the Hungarian and Polish governments to betray Europe’s rules and values.
Russia’s Oligarchs-in-Waiting
Alexei Druzhinin/Getty Images

Politics 3

Russia’s Oligarchs-in-Waiting

Anders Åslund shows how Vladimir Putin has consolidated his power through intergenerational cronyism.
Extraordinary Measures for Ordinary Times
Anadolu Agency/Getty Images

Economics 8

Extraordinary Measures for Ordinary Times

Harold James explains how the 2008 financial crisis set the stage for the rise of political "decisionism" today.
Erdoğan’s Pyrrhic Victory?
Elif Sogut/Getty Images

Politics 9

Erdoğan’s Pyrrhic Victory?

Soli Özel thinks the referendum to expand the presidency's powers could galvanize Turkey's opposition forces.
The Anatomy of Populist Economics
Getty Images

Longer Reads 29

The Anatomy of Populist Economics

Brigitte Granville taps insights from Anne Krueger, Jan-Werner Mueller, Michael Sandel, and other <em>Project Syndicate</em> commentators to examine why so many voters have embraced facile policies and populist politics.
The Five Lessons of Populist Rule
JANEK SKARZYNSKI/AFP/Getty Images

Politics 20

The Five Lessons of Populist Rule

Sławomir Sierakowski offers a tip to liberal democrats: winning ugly may be unseemly, but it is far better than losing.
Democratic Resilience for a Populist Age
Nur Photo/Getty Images

Politics 11

Democratic Resilience for a Populist Age

Helmut K. Anheier shows how small civic measures can go a long way toward ensuring stable, representative governance.

new comment has been posted. new comments have been posted.

0 Comments on this paragraph, 7 Comments on this article

Robert Bruce Nov 24, 2017

What the populist offer is not 'illiberal' but irresponsible capitalism. Sod the environment, sod human rights, sod the poor and the sick, sod international relations, and sod the rule of law. The only currency the populists understand is the currency of power and its abuse to advance their own personal vision or advantage.

Their mindset is one of 20th century 'them and us' thinking where the strong take the all they can while the poor have only themselves to blame for being weak losers - a term which Trump specifically uses as an insult.

Besides being morally abhorrent, the economic flaw in their philosophy is that the days of simple resource politics are almost over. Putin does not need a diversified economy based on a free market because he has oil and gas money which he can personally control. But take fossil fuels out and the GDP of Russia falls by 25% to become the same size as Indonesia.

The new 21st century economy by contrast requires highly developed 'social' capital. Advanced centres of learning and technology where expert innovators work together with countless others around the world to create game changing Global hardware and software. The 'irresponsible' capitalists will never build the kind of open society which can foster such diverse and organic cooperation. In the long run, after they have extracted all the personal wealth and advantage they can they will fade away leaving their countries far behind in #TheGlobalRace.
A new reply to this comment has been posted.
Piotr B. Oct 11, 2017

Slightly off topic (I find this piece highly manipulative BTW) but I just couldn't resist myself... Only yesterday Poland` s current finance and development minister Morawiecki delivered his expose in Polish parliament. He literally, and based on facts, destroyed previous government` s economic policy of which Mr. Rostowski was a prominent figure. I remember vividly, 2 years ago, when PiS was coming to power Mr. Rostowski claiming that there was no money for PiS redistributive and pro-social agenda and that it would cause"Armageddon" in economy shortly.
Two years forward, with the most generous social programs in post 89 Poland` history implemented , here are some FACTS:
1. No budget deficit (for the first time ever)
2. One of the highest GDP growth rates in Europe
3. Public debt at ca. half of the estimates
4. Unemployment rate at historic low
5. percentage of poor families with children down 90% !
6. Gini index first time below 30
7. In one year 2/3 of all EU working places in industry sector were created in Poland

It is not any sort of "illiberalism" or "authoritarianism" which is happening in Poland now but a tedious process of dismantling of postcolonial system and mentality of which also Mr Rostowski had become an exponent.
A new reply to this comment has been posted.
Carl Weetabix Sep 22, 2017

With all due respect, when hasn't American capitalism been illiberal? How many countries have we toppled in the name of anti-communism or anti-terrorism when it's really about protecting or expanding markets (even if that market is in military equipment sales)?

Capitalism and our so-called democracy are joined at the hip and have been for well before Trump was even born.

Didn't Citizen's United prove that once and for all?
A new reply to this comment has been posted.
Greg Hall Sep 18, 2017

The only thing not mentioned here is that "Comparative History" is a key aspect of each leader listed here. The techno-state has a way of altering our collective memory and re-writing history. This is an important article.
We need more economic analysis, like this, to address de-globalization and economic nationalisms.
A new reply to this comment has been posted.
Andrew Daring Sep 16, 2017

Let's not forget how the U.S. has spent years privatizing the judiciary via compulsory arbitration hidden deep in the fine print of contracts between individuals and corporations.
A new reply to this comment has been posted.
j. von Hettlingen Sep 12, 2017

Jacek Rostowski dissects the "anatomy of illiberal capitalism" by scrutinising how Vladimir Putin, Turkey's Recep Tayyip Erdoğan, Hungary's Viktor Orbán, and Polish Law and Justice Party Chairman Jarosław Kaczyński abuses market economy to legitimise their authoritarian rule. Although Donald Trump is not in the same league, he embraces protectionism, cheap money policy and nepotism, adopting an economic nationalism, like the one in the 1930s in Nazi Germany.
Market economy in a liberal democracy is "a means of boosting dynamism, efficiency, prosperity, and individual freedom." In illiberal democracies, the market is not free and serves "mainly as an instrument for strengthening state power." Economic growth brings prosperity and appease ordinary people, who turn a blind eye to autocracy. "Illiberal capitalism" had been an Asian phenomenon. China stunned the world with its state capitalism - a free market economy in a communist country. Its double digit growth inspired a number of developing countries - Vietnam, Venezuela etc - to emulate the formula.
Modern history has seen "various schools of authoritarian right-wing thought about the relationship between the market and the state." In Nazi Germany, Hitler's policy was a planned economy, "while maintaining private property and a high level of income inequality. " After years of high unemployment, Germans were glad to have a job. No wonder they were ready to sacrifice their political and religious freedoms for an income. At the turn of the 20th century, social Darwinists urged for laissez-faire economics - a policy of "unfettered domestic free markets" with minimum governmental interference. This created a society, in which only the "fittest" would survive.
Russia's economy reminds of Saudi Arabia's, which is a rentier state, heavily reliant on its energy revenues. In order to maintain political power, Putin had established a regime of authoritarian rule based on the popular vote of the masses. During the boom years, he showered social largesse on ordinary people, who could benefit from subsidies. The middle class could invest and make profits. They could afford holidays abroad and spend on other goods and services. But Putin has no desire to control the masses. Instead he sends his "secret police to manage just a few dozen oligarchs."
All the while, officials, oligarchs, regional strongmen and mafia fought over the spoils of Russia's natural resources. Despite the wealth they had accumulated, Putin "believes that the Russian state has 'ultimate ownership rights' to its citizens’ private assets not just in Russia, but also abroad." The author says, Russian individuals and companies that operate internationally - like those that had "interacted" with Trump's campaign team - "are thus potential instruments of Russian foreign policy." Even the richest oligarch is "essentially a serf of the state."
Since the modern republic was established by Kemal Ataturk in the 1920s, Turkey embraced a market economy. Progress towards democracy halted after his death in 1938, and the army - seeing itself as guarantor of the constitution - repeatedly ousted governments seen as defying secular values. After decades of stagnation, Turkey began to reap what economy minister, Kemal Derviş sowed in 2001. When Recep Tayyip Erdogan came to power, he could lay the ground for years of economic growth. Despite support for free markets, he tends to criticise "imaginary economic conspiracies" and is on his way to "usher in a return to statism."
Viktor Orbán panders to the well-heeled in Hungary. Like Putin, his favouritism towards oligarchs - some control the media - helped him "shore up his power. Orbán's "illiberal" economic policy is a combination of "social Darwinism and nationalism." Poland's steady growth since its EU-membership could soon propel the country to the club of advanced economies. But the ruling party under Jarosław Kaczyński embraces right-wing nationalism, and has been at loggerheads with the EU, which accused Warsaw of interfering with the courts, cracking down on the media and dissent.
Hungary, Russia and Poland had emerged as "illiberal" capitalists - ironically thanks to a globalised free-market economy. Although communism had failed as an economic system, its statist rule is still their political weapon of choice. But a liberalised economy evokes in time the spirit of political freedom, and generates new forces and tension that will make it hard to uphold authoritarian rule. With prosperity comes expectation. And people clamour for the rule of law that protects "contracts and private-property rights." If businesses "lose confidence" and there will be no "strong long-term growth" they will question the "legitimacy" of their illiberal leaders.
A new reply to this comment has been posted.
Steve Hurst Sep 12, 2017

With the exception of Russia, which is overdependent on pumping gas, the countries mentioned are doing not bad economically although it should be noted a couple get handouts from the EU, in one case a massive handout. Thus voters on the whole keep voting for the incumbents. Rostowski's complaint is really a complaint about the nature of democracy and the nature of voters. The reality is that as long as incumbents are able to provide an uptick for the majority they will remain. Rostowski's complaint of manipulation of law and order and voters is valid in all democracies hence unfortunately is meaningless. Most politicians lie, which is now called mis-speaking as though it is some sort of truth stutter, and when they don't lie they disinform, when they don't disinform they speak authoritatively about something they know absolutely nothing about or select a so-called expert whose commentary matches the message they want to get across. This is why politicians as a group do not like the internet which supplies information they cannot control, and why guvnts restrict spending on research that embarasses them. Rostowski's problem is all the leaders mentioned can get on a soapbox and say look what I am doing for you now today, and tomorrow, whereas Rostowski can only get on a soapbox and say there maybe a democratic problem way downstream. At that point the crowd of voters turn away to look at the other soapbox grandstander. Rostowski is on record as complaining about the Brexiteers in the UK but the message of the Remain campaign is eerily similar to the structure of Rostowski's arguments here, both focus on maybes and pessimism (as did Le Pen's campaign in France) whereas the 'winners' focused on optimism and positive messages
A new reply to this comment has been posted.

https://prosyn.org/7OINat4

Anatomy of Illiberal Capitalism

Subscribe to PS Digital

Europe’s New Appeasers

Russia’s Oligarchs-in-Waiting

Extraordinary Measures for Ordinary Times

Erdoğan’s Pyrrhic Victory?

The Anatomy of Populist Economics

The Five Lessons of Populist Rule

Democratic Resilience for a Populist Age

New Comment

Contact us

Handpicked to read next

Illiberal Stagnation

Log in/Register

Anatomy of Illiberal Capitalism

Subscribe to PS Digital

Handpicked to read next

Edit Newsletter Preferences

Set up Notification