Authoritarian states in focus after Mideast turmoil

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Unexpected revolt on North Africa’s streets has shattered any easy assumptions powerful authoritarian leaders will survive indefinitely, perhaps even pointing to similar risks in Moscow and Beijing.

Western policymakers and many investors viewed Middle East strongmen such as Egypt’s Hosni Mubarak and Tunisia’s Ben Ali as fixed points in an unstable region, largely ignoring growing social and economic strains that has now yielded violent unrest.

Many fear what happens next, particularly after the violence in Cairo this week. For those who had begun to wonder if Western states were losing their dominance to authoritarian emerging economies such as China and Russia, recent events could signal that demands for democracy remain a powerful force, Reuters reports.
“The Egypt situation is a wakeup call for authoritarian regimes which believe that in longevity they can find stability,” said Joel Hirst, international affairs fellow in residence at the U.S. Council on Foreign Relations.

A number of Arab states have moved quickly to make concessions, if only symbolic, in an effort to avoid any repeat of the popular revolt the brought down Tunisia’s president Zine al-Abidine Ben Ali.

Jordan’s King Abdullah reshuffled his government, Algeria announced political reforms and Yemen’s president said he would not stand again in elections.

But with markets largely taken by surprise by the unrest, particularly in Egypt, some suggest investors should charge a higher risk premium in authoritarian states without democratic “release valves” and particularly clear succession plans.

SHORT MARKET MEMORIES
“A democratic/liberties deficit in a country may be a risk factor which until now analysts may not have taken seriously enough,” said Daniel Kaufmann, senior fellow at the Brookings Institute and the co-creator of governance indicators produced with the World Bank and widely seen as some of the leading measurements of country investment risks.

But predicting how explosive that would be was complex, he said, depending on a range of factors including unemployment, perceptions and worries over corruption and the penetration of technology and social media.
“The actual timing of a destabilizing ‘ignition’ is also exceedingly difficult to predict,” Kaufmann said.

Certainly, while Egypt’s unrest did knock markets worldwide — particularly in the Middle East and North Africa — there is little sign of investors selling off Russian, Chinese or Venezuelan assets over fears of hidden regime dangers.

Indeed, Moscow markets looked to be performing particularly well, supported by heightened oil prices boosted by worries over other key producing countries such as Saudi Arabia. Analysts say markets traditionally struggle to price such longer term risks.
“Financial markets have very short memories,” said Royal Bank of Canada emerging markets strategist Nigel Rendell. “In authoritarian regimes, they tend to assume the status quo will continue forever until something really blows up.”

The problem for rulers in Russia and China, experts say, will come if and when they are no longer able to deliver economic success or corruption worries alienate the populace.
“When the members of the aspiring middle class no longer believe that their brighter future is tied to the stability of the existing regime, this produces unrest,” said Nikolas Gvosdev, professor of national security studies at the U.S. Naval War College in Rhode Island.

That certainly seems to have been the case in Egypt and Tunisia, where an increasingly better educated, tech-savvy and often English-speaking youth struggled to find jobs. They look to have provided the first protesters, then followed by others.

REFORM OR CRACKDOWN?

Much also depends on how distant rulers are seen to be from the rule. For Russia’s Prime Minister Vladimir Putin and his immediate cohort, analysts say the danger could lie in becoming too closely associated with perceived corrupt oligarchs.

Mubarak and Ben Ali, some say, simply lost touch.

China’s Communist Party leadership is seen much more diverse and multi-centered than personality-dominated rule in Russia, Egypt or elsewhere, perhaps making it more survivable. Leaders change in cycles, and no one person has absolute power.

But elites in all states are seen facing a rising threat from the information age and social media platforms that recent events suggest can act as a powerful accelerant for dissent.

China blocked the word “Egypt” from some of its social networking sites and keeps a tight grip on Internet access.
“In some cases they will effectively let pressure out through reforms, in some cases severe — but effective — crackdowns, and in some cases falling in the middle,” said Ian Bremmer, president of political risk consultancy Eurasia Group.

Bremmer’s book “The J Curve” charts a curved relationship between openness and stability in a state. In less developed states, autocratic rule brings calm whereas in the developed stability comes from openness.

The transition, he warns, can be risky. “It’s in the middle where you have to worry,” he says.

So few expect Western officials to either stop worrying about Beijing and Moscow or pull support overnight from their long-term authoritarian allies such as the Saudi monarchy.



They might try to nudge the latter in the direction of the South Korea or Taiwan-style reform, but that could take decades.