Democracy Notes
Published: 19/05/2022
Building Global Support for Ukraine: Debt and Democracy
The Russian invasion has done historic damage to the Ukrainian economy, and it  has become conventional wisdom that the scale of devastation necessitates a concerted, international rebuilding effort on par with the Marshall Plan.  But as Adam Tooze argues, what made the Plan so effective was not the amount of financing involved, but a long-term political commitment which prevented it from descending into “a free-for-all for ‘disaster capitalism’, something to be exploited by Western contractors and local oligarchs.” Unspooling precisely what this commitment entails can be tricky, but a useful way to begin is through debt. Ukraine’s external public debt stands at $57 billion, $22.7 billion of which is held by private borrowers in the form of Eurobonds. In efforts to stay in good standing with its creditors, Ukraine has continued to make bond payments throughout Russia’s full-scale invasion; as these payments are financial resources that could be going to Ukraine’s military defense or social spending, activists have responded with calls for the World Bank and IMF to cancel Ukraine’s debt outright, while more moderate academics have laid out plans for a carving out an exception for Ukraine to enable a wholesale debt restructuring. Any such effort would require significant coordination between governments (primarily the US and UK) who regulate financial centres, including pressuring private creditors to ensure their cooperation. The Covid-19 pandemic and accompanying global recession recently provided a test case of the latter approach. The sudden stop to economic activity in early 2020 meant that dozens of countries in the Global South suddenly, and through no fault of their own, were faced with a choice between funding a proper public health response to the pandemic and making bond payments to international creditors. Unfortunately,  the Debt Service Suspension Initiative (DSSI), an agreement to suspend payments on publicly-held debt and call on private bondholders to do the same, lacked the required legal or political leverage to compel private creditors to participate, and a lobby group representing private creditors responded by threatening to lock debtor countries who chose to participate out of capital markets. Ratings agencies doubled down, warning that participation in the DSSI would result in a credit downgrade. Lacking the requisite political support from western governments to make participation feasible, nearly all eligible countries declined to join the DSSI and the program ended a . Indeed, “by continuing to service the debt held by private finance ‘partners’, poor countries chose to prioritize social pain at the height of a pandemic for the elusive promise of future SDG-related inflows.” A political commitment to protect the seventy DSSI eligible countries was there, but dissipated in the face of a stronger commitment to protect the legal status quo  - or more crassly, profit margins - in western financial centers. For Ukrainians, this has echoes of 2014, when a previous wave of western commitments to deal with corruption and cronyism in the country crashed against a wall of offshore bank accounts, shell companies, and London post office boxes. President Zelenskyy’s and thirty-seven other Ukrainian politicians’ names appeared in the Panama Papers, but the phenomenon of offshore wealth and financial secrecy are global problems necessitating a global solution. To focus on the role of individual Ukrainians is to lose the forest for the trees. For a Marshall Plan for Ukraine to succeed, it must include efforts to rein in the ability of private bondholders to use western legal systems to squeeze much-needed capital and assets out of Ukraine, or any other poor or developing country. Addressing the role of western financial services firms in facilitating the swift and secretive movement of assets and capital around the world is equally vital, and in a warming world of renewed great power competition that will require more responsive and democratic governments worldwide, for many countries beyond Ukraine.
Democracy Notes
Published: 17/05/2022
Slovenian Elections: A Win for Democracy, a Loss for Populism in Europe
 Political newcomer Robert Golob’s victory in Slovenia’s April 24th general election may be both a step forward for its own democracy as well as a setback for populist strongmen in Europe.   The triumph of Golob and his Freedom Movement, just formed in January, is a reversal for neighboring Hungary’s rightwing populist leader, Viktor Orbán, who just won his fourth term in office but can no longer count Slovenia amongst his ideological allies. Brussels will be relieved in view of Slovenia’s turbulent EU rotating presidency last year and as the Commission clashes with Hungary over the rule of law.  Slovenia’s outgoing Prime Minister Janez Janša has been criticised for undermining a range of rights, including press freedoms. He has also been accused of corruption. In a strange twist, Janša’s leadership has eroded the democracy he had worked to build during the Slovene Spring. In his youth, Janša was a leftist before traversing the political spectrum; what started as anti-communism in his rejection of the Yugoslav regime veered into rightwing populism. After significant declines in media integrity and civil liberties, Slovenia was named a backsliding democracy in the Global State of Democracy’s 2021 report.    Golob, who envisages the creation of a modern welfare state based on a green transition, inclusive society, and the rule of law, had framed the election as a “referendum on democracy.”    In 2020, civil liberties for the first time sunk below East-Central European averages, with indicators on freedom of expression, freedom of association, freedom of movement and social group equality each downgraded to mid-range performance. Weakened checks on Janša’s regime have served to hasten backsliding. Judicial independence fell in tandem with government delays in appointing prosecutors and complying with judicial rulings; media integrity has been tested by Janša’s “war with the media.”    In spite of its small population, Slovenia has played an outsized and influential role in its neighborhood, and advocated for EU enlargement to include the Western Balkans during its 2021 EU presidency.    Signs of hope   The election also stood out for a number of historic breakthroughs. Of the 90 seats up for grabs in the National Assembly, the Freedom Movement won 41 of them, higher than any single party in the history of Slovenian parliamentary democracy.   In addition, electoral participation shot up, lending the result legitimacy and signaling representative and broad-based support. Slovenian electoral participation, which was high in the early years of democracy, has largely remained below the global average since 2012. The recent elections reverse this long-standing trend. Last month, 70 percent of 1.7 million eligible voters went to the polls, compared to 52 percent in the 2018 parliamentary elections.   Golob was able to tap into growing public discontent manifest in anti-government protests which he successfully galvanized into the ballot box. Further, civil society organizations played a critical role through promoting voter participation, providing resources and practical information on how to vote, and even organizing free transport to polling stations. Finally, the Freedom Movement was able to offer a new party appeal, creating a bandwagon effect that drew votes from other established parties. New parties can improve responsiveness of government and can often innovate to capture emerging social issues and reflect public sentiment.  With a clear mandate for his agenda, Golob is unlikely to encounter problems with the types of inertia that brought down the last governing center-left coalition at the beginning of 2020. The new administration will need to focus on restoring waning fundamental rights and impartial administration and shoring up media integrity. The experience of Slovenia can provide important lessons for recovering from backsliding and will be a country to watch carefully as the new parliament convenes its first session.   
Democracy Notes
Published: 13/05/2022
Building Global Support for Ukraine: Borders and Migration
The previous post in this series examined how overseas development assistance (ODA) to domestic refugee resettlement effectively displaced the cost onto those countries least equipped to bear it, and the consequences this has for European and American calls for global unity in supporting Ukraine. As this alone is insufficient to explain the reticence of the Global South to isolate Russia, understanding the conflict requires a deeper dive into where European policy has used development aid for less than democratic ends. Putting aside far-right figures who object to any and all state funds leaving national borders, development aid has been criticized by actors on both the left and the right as an anti-democratic and neo-colonial institution that undermines national sovereignty and fosters economic dependency. These critiques usually focus on the broad spectrum of development aid, and although separating out what is and is not “democracy and governance” aid and measuring its efficacy is methodologically tricky, metanalyses show that it does, in fact, contribute to democratization and to a lesser degree, protects against democratic backsliding. A key part of the efficacy of ODA targeted to strengthening good governance and protecting democracy is not just the impact of the programs, NGOs, and technical support programs funded, but the leverage that donor states and institutions are able to use to extract concessions in return for providing ODA. In other words, coercion is effective, which raises the obvious problem of when coercion is used for less than democratic ends. Since 2015, a key priority of EU donor governments has been to link development aid to recipient states’ willingness to accept rejected asylum seekers and prevent population flows towards the EU. Given the reordering of European domestic political coalitions that followed the 2015 migration crisis, it is not surprising to see the following new domestic political priorities reflected in foreign policy. That said, the responses seem to prioritize short-term political fortunes over long-term planning. It is difficult to envision how pushing for increasingly militarized and policed borders around the world serves to promote democratic values or even regime stability, and development experts also find that developing ODA programs to prevent migration is at odds with core development goals like reducing poverty. European successes in limiting migration flows have thus far required cooperation with authoritarians and turning a blind eye to their human rights abuses. Under the auspices of the €5 billion Emergency Trust Fund for Africa, which began with the otherwise laudable goal of identifying and addressing the root causes of migration, hundreds of projects have effectively enforced “an externalized border policy of the European Union”, pressured cash-starved African governments to harden their borders for no domestic benefit, and in some cases, damaged local economic networks to the extent that net irregular migration increased. These policies engender hostility in the Global South and undermine the call for the solidarity of democracies against growing autocratization. As both China and Russia are adept at playing past communist ties and anti-western rhetoric to their advantage in Africa, there is no easy shortcut to building democratic support for European policy goals on the continent – development aid should prioritize expanding and protecting democracy, even if it means delaying the achievement of other policy goals. More broadly, European policymakers should be conscious of history, and recognize that behaviour that rouses memories of colonialism can only undermine their ability to achieve their policy goals on the continent. This blog is the second in a three-part series.