Why is AIIB Interesting in Fukuyama’s War of Models?

In 1989, upon the demise of the Soviet Union, Francis Fukuyama memorably pronounced the end of history, and said

We have trouble imagining a world that is radically better than our own, or a future that is not essentially democratic and capitalist. […] We arrive at this conclusion exhausted, as it were, from the pursuit of alternatives we felt had to be better than liberal democracy.

In this view, democracy is revealed to be the only solution to the fundamental problems of human history.

But is it a false choice that has been offered? When democracy is served up as bulwark against authoritarianism and dictatorship, no subtle chain of reasoning is needed to attract to it practically every observer. Add in the strength of sentiment in those individuals who have suffered the ravages of dictatorship. Count up people who have seen personal treatment at the hands of corrupt exploitative elites. Mix in the frustration and despair when those elites are not subject to exposure in the public sphere. Democracy would surely fix all this.

Voters line up to cast their votes outside a polling station during India’s general election in Rangareddy district in the southern Indian state of Andhra Pradesh April 30, 2014. REUTERS/Danish Siddiqui Posed this way, the democracy challenge is hardly fair and balanced. Holding all else constant, it takes no great boldness of spirit to choose democracy.

But the reality is, everything else cannot be held invariant.  Then, basic economics teaches that genuine hard choices need to be made, where people locate liberal democracy in a competitive tradeoff with other things they find also desirable. To say that no such compromises can be considered is wishful thinking and an abdication of responsibility.

Many writers have, of course, recorded that how events unfolded since the 1990s have called for modulation in Fukuyama’s statement. Indeed, Fukuyama himself noted in 2014 that there was a system potentially competitive with liberal democracy, namely:

the so-called “China model,” which mixes authoritarian government with a partially market-based economy and a high level of technocratic and technological competence.

Others might refer to this as a version of Singapore’s authoritarian capitalism, with the difference being that China’s had to be scaled up 300 times.

Now, in the 2016 unveiling of the Asian Infrastructure Investment Bank, Fukuyama sees continuing challenge:

China’s model is based on massive state-led investments in infrastructure—roads, ports, electricity, railways, and airports—that facilitate industrial development. American economists abjure this build-it-and-they-will-come strategy. By contrast, Western development strategy has focused on large investments in public health, women’s empowerment, support for global civil society, and anti-corruption measures.

(To be clear, Fukuyama then goes on to pronounce on these, “Laudable goals, but no one has ever gotten rich by investing in them alone.” While useful to be transparent on this, it doesn’t bear on what I say next.)

Image: Jiaozhou Bay Bridge. 12 January 2015 New York Times/David Barboza

The empirical reality on China’s model and Western development strategy is not so black and white. The US shows today the effects of, among other things, its own massive state-driven Federal Highway infrastructure investment — conducted as late as the mid-20th century and against the objections of many in local government and in the business community. Most observers would likely say the US Federal Highway system is no bad thing. And China, from early on post-1949, worked on the principle that women hold up half the sky. China today pushes a brutal anti-corruption program. The empirical reality melds between Fukuyama’s characterisations.

Nonetheless, well-informed observers likely agree with Fukuyama’s broadbrush characterization on China versus the West.

But Fukuyama’s observations take in not just empirical developmental reality but also academic thinking. He records a specific intellectual emphasis in those he views to be “American economists”, what they avoid, what they research, and what they advocate.

Has Fukuyama similarly over-simplified here? Surely, what the best academics research and write bleed ideas across silos. Multiple pathways to development will not be an unfamiliar phrase to many. However, just as for empirical developmental reality, is Fukuyama broadly accurate on what he says to be consensus on academic development research? Would well-informed observers agree with Fukuyama’s generalization of what (non-American and) “American economists abjure”? What do leading academics research? What will academics discover in what they do that might break them out of what Fukuyama has proposed as a model of them?

  1. development models may have started in Europe but will continue across the continents for decades if not centuries. to claim a formula at this early stage you rightly demonstrate is without scientific basis. The concluded experiment is about 10c of the worlds population so far… europe and the usa. it is like forecasting the usa presidential election on Iowa caucus.
    one must hope that the following 90pc learn from the 10pc and find new and better ways. democracy was not a feature of the industrial revolutions in europe, it was a consequence and are we satisfied with it? we shall see over the next 100 years.

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