Democracy or the “Almighty Dollar” – Do We Need to Choose?

Are commercial success and respect for human rights incompatible? Far from it argues Gerd Schönwälder.
By: /
December 31, 2013
Senior Associate, 2013-2014, CIPS

When the Harper government made the interests of Canada's business community its top foreign policy priority last month, effectively sidelining traditional Canadian concerns such as democratic development, good governance, or human security, some observers were quick to denounce the shift as an abdication to the almighty dollar. Others, shrugging their shoulders, sighed that others are doing the same. After all, weren’t some of Canada's fiercest competitors, above all China, pursuing their own economic interests with relentless zeal, unbothered by human rights or other democratic niceties?

But is it really true that democracy and economic prosperity are like oil and water? Is it true that in order to succeed in today's international marketplace, democratic nations have to abandon their principles and accept that their democratic ideals will inevitably be violated in pursuit of economic advancement?

Perhaps so – if the idea is to do business with dictators or to edge out authoritarian rivals in specific economic sectors. In dictatorial regimes such as North Korea or Myanmar before the recent democratic opening, it may well be necessary to throw all human rights concerns overboard and bow to the strictures of the clique in power. But these are small economies that are often subject to economic sanctions, and doing business with them is difficult to impossible in the first place.

Transitional regimes with more open economies where democratic reforms are still fresh or where authoritarian rulers have made a comeback at the ballot box are a different matter. Particularly when they sit on piles of precious natural resources (take Mongolia, for example), getting a foot in the door in what is a strategic sector for the Canadian business community becomes a vital concern. Competition to exploit these resources is fierce, and a Canadian government insisting on strict respect for human rights norms and democratic principles may well become a factor in tilting the balance towards one of Canada’s economic rivals.

Still, this does not mean that Canada or other democratic nations must choose either to uphold their principles and suffer the economic consequences or to abandon them for the sake of raking in the benefits.

For one, there is more to natural resource exploitation than just getting minerals out of the ground. Broader issues of economic sector governance (managing conflicts with resident communities, addressing environmental concerns, or spreading economic spinoffs fairly and equitably) are at least as important, certainly if sustainability is an issue. Democratic nations have more relevant experiences to offer in these areas than their autocratic competitors – a fact that hasn’t been lost on many resource-producing countries, even though the record of democracies, including Canada, is far from spotless.

What is more, research – such as by MIT’s Daron Acemoglu – points to broader linkages between economic performance and democratic development, suggesting that undemocratic nations eventually hit an ‘innovation barrier’ that prevents them from developing the complex, networked, knowledge-intensive economies needed to succeed in today’s globalized, highly interconnected world. As nations develop, sound economic and political governance (comprising issues such as effective regulation, the rule of law, equity, inclusiveness, and support for innovation) become at least as important as investment or trade links, giving democratic nations an edge over the likes of China or Russia.

What does this mean for Canada’s foreign policy? For one, that focusing too narrowly on the interests of the Canadian business community (or specific sectors of it) not only risks damaging the Canadian ‘brand’ but runs against broader national interests. Quite aside from principled arguments in favour of democracy, better governance, and stricter respect for human rights, promoting such concerns can produce real gains in terms of greater political stability, less violent conflict, and stronger economic performance.

In fact, the benefits of fostering such changes abroad will be felt at home, in ways ranging from less uncontrolled migration to combatting organized crime to, yes, creating a better business climate in places where Canada has strong economic interests. From this vantage point, support for democratic norms and principles is far from being just an idealistic pursuit for well-meaning do-gooders unfamiliar with the workings of today’s unforgiving business environment. It becomes an essential component in a well-balanced foreign policy, and something that should be at the top of Canada’s list of priorities.

Right now, of course, it is not. Support for democracy and good governance abroad – long a mainstay of CIDA, Foreign Affairs, public agencies, and non-governmental organizations – has morphed into ‘religious freedom’, coupled with a ‘principled’ approach to foreign relations that neatly distinguishes between friend and foe. It is worth asking how principled this approach really is, given the Harper government’s noted inclination to go soft on its friends and come down harder than (almost) anyone else on its foes.

Most importantly, one has to wonder about its effectiveness. There is nothing wrong with standing up for one’s principles, provided the same standards apply to all. But an approach that lends itself to big words and grand gestures will not yield better results than one that provides the patient, steady, and often invisible support needed by pro-democracy actors working in very difficult environments.

That’s why it’s time for the Canadian government to give democracy support policies another look.