Issue #14/95, July 20 - August 3, 2000  

Neo-Liberal Revanchism Strikes!

Exile readers may recall our running feud with neo-liberal toady Michael McFaul, who once tried to get us banned from the influential Johnson's Russia List. During the late Yeltsin era, McFaul, a top Carnegie Endowment analyst, Stanford professor and Clinton Administration propagandist, argued that the now-discredited "young reformers" were leading Russia into the Bright Socialist (oops, we meant Free-Market/Democratic) Future, and anyone who disagreed was either a "pessimist" or a communist. At the height of the 1998 financial crisis, McFaul even publicly called for Russian debt to be backed by U.S. Treasury bonds! Thankfully, the American taxpayer didn't have to pick up McFaul's tab on that one. Russia's collapse subsequently turned McFaul into a grumpy yet humbled neo-liberal curmudgeon, but the one-time Moscow Times regular recently made a very public comeback as the guru of optimistic neo-liberal revanchism. In a July 17th op-ed for The Wall Street Journal, titled "Russian Rationalism: At Home And Abroad," McFaul redirects the entire "Who is Putin?" controversy back to his same old golden retriever theme: more democracy leads to economic paradise. In other words, act like us, and you'll become as rich and successful as we are. The premise of self-love and self-congratulation that underlies all chirpy neo-liberal thought is common to happy Americans, and just as sickening as ever.

You would think that the events over the past couple of years, let alone a quick glance at uncensored human history, would have humbled Michael McFaul, or at least caused him to make a few modifications to his heartwarming central thesis: the more democracy, the more markets grow. This thesis holds up well when brown-nosing your ninth-grade civics teacher in suburban America, but expose it to the terrible world out there, and it dies a very quick and insignificant death. The unpleasant truth is that markets respond to profit. For most companies and investors, that means working in a stable environment. Democracy is good not because it's morally right, but because it often provides the highest degree of stability (and profit). As an ideological organism struggling against the others, democracy succeeds by concealing and dispersing its center of power; the mob is pacified by the belief that power is in their hands as much as in the hands of the oligarchs who underwrite and stage the spectacles of democracy. This isn't always the case: in the past few years, democratic regimes were overthrown by the mob that elected them in Bulgaria, Albania, Ecuador, and Venezuela; several others from Southeast Asia to the South Pacific and South America are under threat today. Authoritarianism has proven, at least in the West, to be less stable, and thus less profitable for big business, in recent history. However, in much of the world, oppression and authoritarianism actually work best to pacify the mob and create stability and, therefore, is the most successful means of attracting multinational oligarchs and capital. It's an ugly and even offensive scenario that requires having a little less Christian faith in the simple man and a little more faith in the power of greed and violence, but the evidence supports it.

If, like McFaul, you believe that The West is The World, then you believe that whatever works for us works the same everywhere else. And where evidence doesn't support that thesis, you simply hide your eyes behind an American flag, wait until it passes, then emerge smiling as if nothing ever happened.

Unlike in the West, in the East global money has poured into the most brutal, anti-democratic regimes. Take the recent examples of Indonesia versus Malaysia or China. Following the collapse of the tiger economies a few years ago, Indonesia buckled under, moved to democracy, and opened its markets. The results have been disastrous; foreign investors who haven't fled are still fleeing, and capital markets are still in the pits, while wars and separatism grow and the currency is one of the region's worst-performing. Malaysia, on the other hand, slapped strict controls on its capital markets (which the IMF only recently endorsed after bitter opposition), and arrested popular opposition leader Anwar Ibrahim, accusing him of being a "butt pirate," thereby ensuring that strongman Mahathir Mohamad's rule would last well into the current decade. The results: Malaysia's markets have been among the best performing in Southeast Asia over the past couple of years, rivaled only by China, Singapore, and South Korea. In fact, it seems that for every Chinese student run over by a tank or every activist jailed or Falun Gong cultist bonked on the head, another American factory announces its move to China, another Qualcomm WAP deal is inked in the world's largest market.

Why? Because investors like stability, and there's more money to be made in China and Malaysia than in Indonesia's post-democratic chaos. They sure as hell don't care what system brings the stability or the profit.

But why look so far away when we have our case-in-point right in McFaul's Russia? The democratic Yeltsin regime that McFaul so tirelessly agitated for in the 1990s not only ushered in the greatest economic decline in a 20th century industrial nation, but also propelled them to the very top of the list of the world's most corrupt nations. McFaul, of course, still ignores this: "The fastest democratizers in the region are also the countries with the highest growth rates. The positive correlation between high levels of democracy and low levels of corruption in the post-communist world is also striking." Striking, but not in the way he wants to belive. What's worse, Russia's capital markets have soared since Putin launched the Chechen War last fall and moved to crush Russia's fragile democracy. Why? Because democracy in Russia brought instability, corruption, and economic decline; therefore, the hope among investors is that authoritarianism will reverse all of that. (And don't counter that Russian democracy was just too imperfect under Yeltsin—compared to what we have now under Putin, Yeltsin's brand of democracy would have made Pericles's nipples hard; while in America, democracy has turned into a kind of benign totalitarianism where "people" are allowed the bare minimum of choice, but in return, are allowed to freely feed on the delicious crumbs of our mighty oligarchy's profits.) Investors are utterly amoral and non-ideological. They worship the quarterly report and bonus day, not God or Thomas Jefferson. Even McFaul briefly concedes this depressing point: "Western investors want to return to Russia. They applaud President Putin's rhetoric about restoring law and order and lose little sleep over the arrest of oligarchs or the harassment of corrupt regional leaders both who have done much to impede the development of markets in Russia."

Yeah… but then, he returns to the fairy tale: "In response to the Gusinsky ordeal, Robert Strauss, the Chairman of the U.S.-Russia Business Council, cancelled a trip that would have brought to Russia several CEOs from some of America's largest companies. The causal relationship between the domestic and the international could not be more obvious." Uh… yeah. It would have been embarrassing for Strauss's pack of oligarchs to come to Moscow when the leader of the Russian Jewish Congress was rotting in jail, but something tells me (I think it's called "China") that they'll be back when the storm dies down. McFaul also falsely claims that the raid on LUKOil caused a flight in capital, reflected in the value of the stock: "On the day that criminal investigations were announced against LUKOil, one of Russia's most respected companies among international investors, millions of dollars bolted from LUKOIL stocks and the Russian stock market as a whole. Again, the relationship between political actions at home and foreign policy objectives could not be more direct."

Of course, this only holds true if you have a massively selective memory. As in, you only remember that day, July 11, and not every day since. One day after the LUKOil raid, The Moscow Times market index returned to its pre-raid levels. In the July 13 article "Market Rallies Late in Day, Crackdown not a Problem," the Times quotes Troika Dialog salesman Alexei Dolgikh saying: "The majority of the market has decided recent events and problems faced by companies like LUKoil and Avtovaz are not significant enough to push the market down further. Most investors are fairly optimistic right now despite what's going on." A week after the raid, the market has inched up further still.

What's the point? Just as religious fanatics will sift through events and latch onto those that support their desperate faith in the positive spiritual order of things, neo-liberals like McFaul prefer to squeeze their reality-intake to a trickle in order to uphold their fairytale narrative of the world rather than open the markets of their minds to competitive forces—that is, the forces of bitter truth. To use their own dated Soviet-like language, by cutting off imports of reality, they've consigned themselves to permanent intellectual decline. For the rest of us, the lesson to draw on the relationship between markets and democracy was best summed up by the Croatian taxi driver in the film Brain Candy: "Life is short, life is shit, and soon it will be over."

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