It is now 25 years since the beginning of the great
wave of democratisation that swept away dictatorships from Latin
America to Southeast Asia. Yet there is everywhere a palpable sense of
disappointment that the new electoral democratic regimes have fallen
far short of their promise of not only bringing freedom but also
rolling back poverty and social inequality.

This disappointment was underlined by a poll
conducted by the United Nations Development Program in 2004 that showed
that 54.7 per cent of Latin Americans polled said they would support
authoritarian regimes over democracy if the shift would resolve their
economic woes (1).

In Southeast Asia, not a few commentators have noted
the marked contrast in the performance between authoritarian Vietnam
and democratic Philippines: Vietnam, which started in 1990 with 51 per
cent of its people under the UN-defined standard of $1 a day for
extreme poverty, had reduced this figure to 8.4 per cent in 2000. The
Philippines, on the other hand, barely made any headway, with 11 per
cent of its population classified as extremely poor in 2000. (2)

What happened? Why have democracies been so ineffective in delivering economic betterment?

Elite capture of democratic processes

One reason is that electoral democracies of the kind
favoured by the West have been extraordinarily vulnerable to being
hijacked by elites. The system of democracy re-established in the
Philippines after the ouster of the Marcos dictatorship in 1986
illustrates the problem. It is one that encourages maximum factional
competition among the elite while allowing them to close ranks against
any change in the social and economic structure.

The Philippine system is democratic in the narrow
sense of making elections the arbiter of political succession. In the
principle of "one man/woman, one vote, there is formal equality. Yet
this formal equality cannot but be subverted by its being embedded in a
social and economic system marked by great disparities of wealth and

Like the American political system on which it is
modelled, the genius of the Philippine democratic system, from the
perspective of the elite, is the way it harnesses elections to socially
conservative ends. (3)
Running for office at any level of government is prohibitively
expensive, so that only the wealthy or those backed by wealth can
usually stand for elections. Thus the masses do choose their
representatives but from a limited pool of people of means that may
belong to different factions-those "in" and those "out" of power-but
are not different in terms of their political programs. The beauty of
the system in the eyes of the elite is that by periodically engaging
the people in an exercise to choose among different members of the
elite, elections make voters active participants in legitimising the
social and economic status quo. Thus has emerged the great Philippine
paradox: an extremely lively play of electoral politics unfolding above
a class structure that is one of the most immobile in Asia.

Allowing for institutional and cultural variations,
one can say that the dynamics of democratic politics in countries such
as Brazil, Argentina, Mexico, Ecuador, and Thailand are similar to
those in the Philippines. Elite democracy is one word that some have
used to describe this system. Polyarchy is another.

However, elite capture of democratic processes is,
in my view, only one factor that subverted the performance of the new
democracies that emerged in the 1980s. Another development was equally
critical: their economic promise was undermined by the demands of
external actors.

The subversion of democracy

Let us revisit that historic conjuncture of the
early 1980s. The military dictatorships were collapsing not only
because of internal resistance but also because key external actors
such as the United States, European Union, the World Bank, and
International Monetary Fund (IMF) withdrew their support from them.
Now, one of the major reasons for this about face was that the
dictatorships had lost the credibility, legitimacy, and minimum support
to impose the economic reform programs, better known as "structural
adjustment," that these influential forces demanded. Promoted as
necessary for economic efficiency, these programs were designed to more
widely open these economies to foreign capital and foreign trade and to
enable countries to pay off their enormous foreign debts.

For instance, in Brazil and Argentina, tight
monetary policies and tight fiscal policies drew opposition not only
from labour and other civil society groupings in the early eighties but
also from business groups. Business interests once benefited from
labour-repressive policies imposed by these military dictatorships.
Now, however, business circles began to distance themselves from
repressive governments when neo-liberal policies failed to produce the
promised economic growth. As Stephen Haggard and Robert Kaufmann

"With economic problems mounting, business elites
began to re-evaluate the costs and benefits of the technocratic
decision-making style that characterized authoritarian rule. Business
groups had complained periodically about their lack of access to the
remote technocrats who conducted macroeconomic policy, but such
concerns had been offset by particularistic benefits and the fact that
governments were willing to repress popular sector challenges. The
private sector's gradual disaffection did not reflect a democratic
epiphany, but a pragmatic response to changing circumstances. With
authoritarian governments increasingly unable to deliver their side of
the bargain, "voice" began to appear increasingly important to business
groups, even if it meant reopening the arena to the previously excluded
popular sectors."(4)

The democratic governments which displaced
authoritarian regimes soon confronted their own dilemma. On the one
hand, redistributive policies were blocked by elites that had joined
the anti-dictatorship coalition, a development that we have already
discussed. At the same time, expansionary fiscal policies were
discouraged by the World Bank and the IMF. It soon became clear that
what the multilateral agencies wanted them to do was to use their
democratic legitimacy to impose structural adjustment programs. In
Argentina, for instance, the international financial institutions
pressured the new government of Raul Alfonsin to abandon neo-Keynesian
policies, implement tax reforms, liberalize trade, and privatise public
enterprises. When the regime quailed, the World Bank "concluded that
the government had not made sufficient progress toward its reform goals
and suspended disbursements on a structural adjustment loan."(5)

Electoral democracy became the prime mechanism for
the imposition of stabilization or structural adjustment programs in
Jamaica, the Philippines, Peru, and Pakistan. In Jamaica, the
progressive Manley government suffered a devastating loss of legitimacy
when it caved in to pressure to impose an IMF stabilization program
blessed by Washington. The program eroded living standards. It led to
Manley's crushing defeat in the 1980 elections by a successor who
proceeded to continue the same policies at the behest of the IMF. In
Peru, the government of Alberto Fujimori was elected on a populist,
anti-IMF platform, but proceeded to impose a neo-liberal "shock"
programs that included steep price increases in the rates charged by
state enterprises as well as radical trade liberalization. (6)
These measures provoked a deep recession, leading to popular discontent
that in turn provoked Fujimori to suspend the constitution, close
Congress, and rule as a strongman with little respect for
constitutional restraints.

In the Philippines, the US and the multilateral
agencies abandoned Marcos. Not only was his political position
untenable owing to massive popular resistance, but his government's
lack of legitimacy had made it an ineffective instrument for repaying
the massive $28 billion foreign debt and for implementing IMF
stabilization policies. An economic crisis accompanied the end of the
old regime, but that did not stop the World Bank and the IMF from
demanding that the fledgling democratic government of President Corazon
Aquino make debt repayment its top national economic priority. People
were shocked, and some of Aquino's economic advisers protested, but the
government submitted, issuing a decree that affirmed the "automatic
appropriation" of the full amount needed to service the foreign debt
from the budget of the national government. With some 40 to 50 per cent
of the budget going to service the debt, this practically precluded
national development, since all that was left went to salaries and
operational expenses, with little left over for capital expenditures.
In some years, 10 per cent of the country's GDP was spent servicing its
foreign debt. Thus, it is hardly surprising then that the Philippines
registered average growth of below 1.5 per cent per annum between 1983
and 1993.

In 1991, five years after the end of the
dictatorship, the percentage of the population living below the poverty
line had dipped only slightly from 49.3 to 46.5 per cent, while income
distribution worsened, with the share of income going to the lowest 20
per cent of families falling from 5.2 per cent to 4.7 per cent, while
that captured by the top 10 per cent rose from 36.4 per cent to 38.6
per cent. Lower class alienation from the revived system of democracy
was pervasive. It culminated in an aborted uprising on 1 May 2001-one
that was ostensibly directed at restoring an ousted president from
power but was actually a boiling over of lower-class frustrations. (7)
Today, not only the lower classes but even large sectors of the middle
class have given up on the ability of the system to deliver the
economic goods.

As in Peru, Argentina, and the Philippines, the
return of democracy to Brazil was accompanied by scarcely veiled
warnings from the IMF and the US that the first order of business for
the new regime was to accomplish what the exiting military regime had
failed to do, that is, to impose stabilization programs raising
interest rates, cutting back government expenditures, devaluing the
currency, and liberalizing trade. From the mid-eighties to the 2002, a
series of governments eroded the credibility of democracy by
undertaking unsuccessful efforts to impose on a recalcitrant population
the economic stabilization desired by Washington and the IMF. (8)

The latest victim is the government of "Lula" or
Luis Inacio da Silva of the Brazilian Workers' Party, one of the most
committed anti-neoliberal parties on the continent. Before he even won
the presidential elections in the fall of 2002, Lula did the
unprecedented in Latin America: he promised the IMF that he would
honour the high-interest, expenditure-restrictive conditions of a
stabilization loan negotiated with the outgoing President Fernando
Henrique Cardoso. Lula acted under duress. The Fund made it clear it
would not release the remaining $24 billion of the stabilization loan
unless he behaved.

Lula was true to his word. Consequently, in 2003
Brazilian GDP contracted by 0.2 per cent in Lula's first year;
unemployment surged to a record 13 per cent. This bitter medicine for
the Brazilian people was, however, a tonic for foreign investors. In
the first eight months of the year, even though the economy remained
depressed, Brazilian stocks soared by over 58 per cent, prompting
Business Week to advise speculative investors: "Don't leave this party
yet." (9)
As for Lula, he faced mounting criticism from within his own Workers'
Party and governing coalition as well as from ordinary voters; only 28
per cent of the population voicing support for his government. (10)
In other words, even before the current crisis stemming from financial
scandals among Lula's closest advisers, the government was already in
trouble owing to its adoption of contractionary policies.

Reversal of the third wave of democratization now
looms as a threat in Latin America. In South Asia it is a reality. When
Gen. Pervez Musharraf seized power in Pakistan in October 1999, and
sent the Prime Minister Nawaz Sharaf packing, he ended 11 years of
unstable democracy. So worrisome to many orthodox students of democracy
was Pakistan's democratic breakdown that analyst Larry Diamond wrote:
"Pakistan [may] not be the last high-profile country to suffer a
breakdown of democracy. Indeed, if there is a 'third reverse wave,' its
origin may well be dated to 12 October 1999…."(11)

Post-mortems of Pakistan's parliamentary democracy
tend to focus on corruption, collapse of the rule of law, ethnic and
religious polarization, and economic failure. Other explanations centre
on an unaccountable military that had enjoyed special relations with
the Pentagon owing to its key role in driving the Russians out of

Certainly, all this played a part. But also crucial
was the role played by the IMF and World Bank, which pushed the
democratic regimes of both Benazir Bhutto and Nawaz Sharif to impose
stabilization and structural adjustment programs that contributed
significantly to the rise of poverty and inequality as well as fall in
the growth rate. (12)
Noted one eminent Pakistani economist: "The almost obsessive concern
with short-term macroeconomic stabilization has with it the
danger…that some of our basic social programs might be affected, and
this would have inter-generational consequences on development in
Pakistan." (13)
Since democracy became associated with a rise in poverty and economic
stagnation, it is not surprising that the coup was viewed with relief
by most Pakistanis, from both the middle classes and the working masses.

In conclusion, the last 25 years have been a missed
opportunity. A democratic renaissance in the South was derailed by
elite capture of democratic processes and external pressure to adopt
contractionary economic programs, often connected with debt repayment,
which were precisely the wrong prescription from the point of view of
democratic consolidation. Thus democracy is today seen widely as simply
a mechanism for elite competition and as an obstacle to progressive
economic transformation. When people in the Philippines do not see the
point in changing a president that they have lost confidence in because
her successor, they are convinced, will turn out the same, we are in
trouble. When young people in my country look back to Marcos, a man
they never knew, through rose-tinted glasses, then we are really in

To salvage democracy in the South, we need a second
democratic revolution, one that would free it from the dead hand of
elite competition and control and externally imposed adjustment
programs. This is a tall order, but partisans of democracy have no
choice but to take on this complex challenge.


1. Geri Smith, "Democracy on the Ropes," Business Week, May 19, 2004.
2. Cielito Habito, "Alarming Contrasts," Philippine Daily Inquirer, March 15, 2004.
See Walden Bello, "Parallel Crises: Dysfunctional Democracy in
Washington and Manila," in Back to the Future, ed. Corazon Villareal
(Manila: American Studies Association of the Philippines, 2003), pp.
Stephen Haggard and Robert Kaufman, The Political Economy of Democratic
Transitions (Princeton: Princeton University Press, 1995), pp. 59-60.
5. Ibid., p. 192.
Evelyn Huber and John Stephens, "The Bourgeoisie and Democracy:
Historical and Contemporary Perspectives from Europe and Latin
America," Paper delivered at the meeting of the Latin American Studies
Association, Continental Plaza Hoel, Guadalajara, Mexico, April 17-19,
1997, p. 8.
This account on the Philippines is drawn from Walden Bello et al., The
Anti-Development State: the Political Economy of Permanent Crisis in
the Philippines (Quezon City: University of the Philippines Department
of Sociology and Focus on the Global South, 2004), pp. 9-31.
See, among others, Maria Rocha Geisa. "Neo-Dependency in Brazil," New
Left Review, No. 16 (Second Series), July-August 2002, pp. 5-33; also
Haggard and Kaufman, pp. 193-196, 209-211.
9. "Don't Leave this Party yet," Business Week, Sept. 8, 2003, p. 63.
Is Lula's Honeymoon Winding Down?" Business Week, April 26, 2004, p.
31. See also Roger Burbach, "Brazilian Fiscal Conservatives in Lula's
Government under Attack along with International Monetary Fund," Center
for the Study of the Americas (CENSA), Berkeley, Ca., March 22, 2004.
Larry Diamond, "Is Pakistan the (Reverse) Wave of the Future?," in
Larry Diamond and Marc Plattner, The Global Divergence of Democracies
(Baltimore: Johns Hopkins University Press, 2001), p. 358.
12. A.R. Kemal, "Structural Adjustment, Macroeconomic Policies, and Poverty Trends in Pakistan,"
13. Keane Shore, "The Impact of Structural Adjustment Programs on Pakistan's Social Development," IDRC Reports, June 7, 1999.