Free Market and Democracy

Free Market and Democracy

Domenico Fracchiolla

After the end of the Cold war, Democracy has become a worldwide reference for political regimes (Fukuyama 20).However, the failure of the democratic transition process in many countries paved the way to the installation and the consolidation of hybrid regimes (Diamond 2002; Morlino 2011) as a possible outcome of this failure, as well as the consolidation of some form of authoritarianism.The aim of the paper is to address the question of the controversial relationship between democracy and free market, stressed in the last ten years as one of the main cause of the economic and financial crisis. Indeed, the last decade may have proven that the distortion of the free market have been accompanied by a regression of the quality of democracy in some countries, as well as it may have dumped the consolidation process of democracy and the installation process of democracy in other countries.Whether this hypothesis would be confirmed, it could pave the way to a revival to an old explanation for the democratization process.As deemed by Sartori (1991, 2008: 57 -59) free market and capitalism are different, implying that there are some countries being capitalist without free market institutions and other countries that adopt free market institutions but still are not capitalist. Thus some undemocratic countries with effective capitalistic economy do not falsify the positive action that the free market institutions and culture exert on the democratization process.

After the disenchantment about the forth wave of globalization, due to the success of the Huntington interpretive proposal (1991), some scholars reinforced theresearch modernization studies (Lipset, 1959) underling the central role of socioeconomic development as a factor for enduring democracy (Przeworski 1996) Barro (1996) Glaser (2004) and Dijankov (2003) whereas others stressed the role of different societal arena in the democratization process (Linz and Stepan 1996). The interpretative proposal of this paper is that the free market institutions and culture play a fundamental role in promoting and maintaining democracy. On the contrary, the poor score of the free market could endangered the process of democratic consolidation or it could obstacle the democratization at all.The paper will analyze the role played by the economic dimension in crisis/collapse of non-democratic regimes, the instauration and the consolidation of democracies, with the aim of contributing to an interpretative theory to explain democratization processes, including the democratic transition paradigm. The economic pattern has an important influence in the “third wave” of democratization (Huntington, 1991, tr. it. 1995).
The core will be considering the importance of the economic situation and in particular of (existence or not) free market economy (Linz Stepan 2000).

What endangers the democratization process is not the free market but the absence of it, even in those countries who have embraced the capitalism, the international economy and the global competition. The hypothesis is that non-Western countries have poor scores in these dimensions and thus they reject the Western democratic model.In this prospect, the relationship between democracy and free market foster the possibilities of democratic transition everywhere it functions properly, thanks to the fundamental role of inclusive institutions and free market rules and culture (Acemoglu and Robinson 2012).The implementation of the free market can deepen the level of inclusion in a society through the competition, the circulation of information and the opportunities for a wider part of society. The paper will examine the case of the California, whose cutting edge economy of is experimenting the sharing economy as the last frontier of the free market. Indeed, the sharing economy testifies the shift from the knowledge economy to the opportunity economy, overcoming the private property constrain with the concept of opportunity of fruition. The consequences for the quality of democracy can be relevant when considering the push of political inclusion through economic inclusion that this evolution may involve. Another interesting case for the debate with opposing arguments could be the one of the Jugaad innovation in India. On the one hand,it exemplify the positive effect of the free market on the political inclusion via economic inclusion. contributing to the deepening of the systemic inclusion. On the other hand, it is not working considering the last records of India societal and political fractures deepening in the political system of the country.

Finally, in the last part of the paper, it will be addressed the issue of a separation between the free market institutions and some form of national capitalism in countries like China, the Post-SovietStates in Central Asia and Russia. Many authoritarian regimes have evolved towards hybrid regimes by adopting democratic model and other authoritarian regimes have used democratic scheme in order to consolidate their authoritarian system.This circumstance could explain the difficulties and failure or even the chance to initiate the democratization process in these cases, so far. Being closed to entering in the WTO this year, the PopularRepublic of China demonstrates that a country can become a champion of capitalism without improving its democratization process. In addition to this, the cases of some Eu candidate countries, as well as the Eu member states, underline the consequences that can occur when a democratic system has not completed the implementation of the free market in all its sectors or it poses obstacles to it, giving room to dangerous technocratic tendencies as well as populist reactions.

The hypothesis to control is that the free market variable is a crucial factor for the democratization process in all its main phases. On the contrary, the failure of the free market is co-responsible of the failure of the democratization process. There will be controlled four dimensions that feed the relationship between free market and democracy: the private property; the middle class, the civil society, the trust and the compromise attitude (Mandelbaum, 2007).These variables will be analyzed thourough a theoric framework (L. von Mises, H. H. Hoppe, J. Buchanan, P. Boettke) and operationalized thourough index of market and democracy performance such as Freedom House, Index of economic freeedom.
Relevant empirical indicators will be used, those elaborated by the Freedom House for the democratization process and the those of the World Bank, the IMF or the Index of Economic Freedom for the free market.