Authoritarianism is Dying

Authoritarianism is still the predominant form of government around the world. It’s the system that naturally occurred when human beings were able to live together in a society. The strongest ruled and made the laws, until overthrown by someone stronger.

While there is no hard definition of authoritarianism, my definition includes fascism, communism, socialism and any other form of totalitarianism. They all have in common that the same people run the government, banks, big business, media, labor unions and even organized crime.

Authoritarianism’s key distinction: in an authoritarian society there is no Rule of Law. The law is whatever the rulers say. Markets and the economy are run for the benefit of the rulers; not for the common good.

That is why stock market valuations – market capitalization compared to aggregate profits – are lower for companies in an authoritarian country then in a capitalist country. Obvious examples are China and Russia. But it’s also no coincidence that the average P/E ratio of Japan’s stock market is lower than in equity markets of Western democracies.

The United States Constitution was the first time historically that a society, in this case the 13 former British colonies, created a government not only based upon the Rule of Law, but where the ruler was not determined by blood lines nor military power.

My definition of capitalism is where consumers, in aggregate, run the economy via a free market and honest elections. A Capitalist system creates wealth. The more wealth created over time in a capitalist system will eventually eliminate the ability of an aristocracy to maintain control over the levers of power – particularly controlling the Rule of Law.

Bottom line: burgeoning global prosperity over time will make the Rule of Law global.

The Roots of Free Markets

Currently, Russia, China, North Korea and Iran are the most obvious authoritarian regimes. But consider that Japan, Korea, Mexico to a certain degree, most of South America, almost all of Africa and the Arab World as well as much of Southeast Asia are all authoritarian regimes where a small group of people manage the Rule of Law in their favor.

I would say that western Europe – Germany, France, Spain, Italy, et. al. – all were mostly authoritarian going back to Feudal times. But since World War II the Rule of Law has become predominant.

The historical basis of Authoritarianism is Feudalism where military might ruled. Regional Lords and Masters of their communities determined the Rule of Law. The Lords and Masters of the Feudal world were determined mostly by military power and used bloodlines to keep control in the family. Wealth was owned by the rulers and everyone else had nothing that was not subject to the Ruler’s whim.

Interestingly many of the current capitalist countries are former British colonies. While the United States was first to declare the Rule of Law, Canada, Australia, New Zealand and even England are capitalist countries. Hopefully India is also headed towards capitalism.

Why were the former English colonies the first to adopt the Rule of Law? In my opinion it was the vast accumulated wealth by English society due to England’s technological leadership in global trade. The authoritarian part of England tried to control trade by setting up quasi trading company monopolies that were eventually bypassed en masse and ultimately destroyed the ability to control wealth through trade.

Democracy and Global Prosperity

England’s attempt to control the wealth created by trade with the 13 American colonies was the main cause of the Revolutionary War. The unleashing of the power of capitalism, free markets governed by the rule of law with an honest electoral process has created the possibility of true global prosperity.

My definition of global prosperity is where there are enough calories to feed all and we all support the Common Good.

Obviously, we are not in a straight line from here to global prosperity. Pandemics can create a major set back. But the ability to fight and conquer a pandemic creates more and better global communication. Improved global communication in an already online world has to create more global wealth than restricting activities to only those supported by an authoritarian regime which controlled the Rule of Law.

Donald Trump tried to resurrect authoritarianism in the US and he failed miserably. Trump subverted to Rule of Law in his favor when he could and urged his supporters to literally attempt a coup to overturn the Rule of Law. In an authoritarian country, the loser of a power struggle who attempted a coup would have met the same fate that Trump supporters threatened for VP Mike Pence, when they erected a gallows in front of the US Capitol.