Bertelsmann Transformation Index 2018 “Democracy under Pressure”

Bertelsmann Transformation Index 2018 “Democracy under Pressure”
Bertelsmann Transformation Index 2018 “Democracy under Pressure”

Arseny Sivitski, Director of Center for Strategic and Foreign Policy Studies contributed to the Bertelsmann Stiftung’s Transformation Index 2018 “Democracy under Pressure: Polarization and Repression Are Increasing Worldwide”.

Restrictions on free speech, unfair elections and populist hunger for power — it is by no means just autocrats who have been tightening the screw of repression. Governments in democracies have also increasingly been trying to govern with a hard hand. And social division is deeper than it has been for a long time. The current Transformation Index of the Bertelsmann Stiftung shows what is behind this development, and which countries have been particularly affected.

The quality of democracy, market economy and governance has fallen to its lowest level in twelve years on a worldwide average. This is the key finding of the latest Transformation Index of the Bertelsmann Stiftung (BTI). Since 2006, it has regularly analyzed political and economic developments in 129 developing and transformation countries. Conclusion: 40 governments, including some of more advanced democracies, have curtailed the rule of law over the past two years, and 50 countries have seen restrictions on political freedoms. The rulers of many countries have addressed the global economic challenges only insufficiently and frequently on the backs of the poor and marginalized. Many governments are unable to respond adequately to the growing social, ethnic and religious conflicts — or oftentimes even foment these tensions.

From the point of view of Bertelsmann Stiftung, a major reason for the poor results is that many governments are not capable or inclined to react to social conflicts by engaging in dialog and seeking a consensus. Governments’ willingness to defuse conflicts has decreased in 58 countries since 2006, according to the index. Once elected, many rulers curtail political liberties and rights in order to expand their political power. This is particularly the case with authoritarian populists like those in Hungary or Turkey, even though they have come to power via grassroots movements and polarization themselves. “Many rulers try to cement their claim to leadership through repressive measures. However, in the long run, ruling by coercion and not by dialog always leads to a dead end,” says Aart De Geus, Chairman of the Bertelsmann Stiftung, commenting on the research findings.

Since 2006, the Transformation Index of the Bertelsmann Stiftung (BTI) has analyzed and monitored the quality of democracy, the market economy and governance in 129 developing and transformation countries on a regular basis. The assessments are based on detailed country reports authored by 250 experts from leading international universities and think tanks. The current assessment period is from February 1, 2015, to January 31, 2017. The BTI is the only cross-national index that measures governance quality through self-collected data and provides an analysis of political management in transformation processes.

Global findings: Polarization and repression increase

Findings for the BTI 2018 depict a world of increasing political instability and a rapid decline in the acceptance of democratic institutions. In more and more countries, government leaders are deliberately undermining the checks and balances designed to hold the executive accountable, thereby securing not only their power, but a system of patronage and the capacity to divert state resources for their own personal gain. At the same time, protests against social inequality, mismanagement and corruption are growing.

Accordingly, the quality of democracy, market-economic systems and governance in developing and transformation countries has fallen to its lowest level in 12 years. The Transformation Index of the Bertelsmann Stiftung (BTI) identifies three developments that account for this trend:

Governance: An increasing number of governments no longer responds effectively to growing domestic tensions. In many countries, protests against mismanagement, inefficiency (especially regarding the lack of a coherent anti-corruption policy) and a system of patronage are generally mobilized along existing ethnic, religious or social cleavages. Every so often, elites in these countries even instrumentalize these cleavages to foster polarization and the consolidation of their power. In such a context, increasingly few on all sides demonstrate a willingness or ability to engage in dialogue.

Economics: The fall in commodity prices put pressure on many export-dependent economies, resulting in a decline of economic performance and macroeconomic stability in one third of the countries surveyed. Many elites have failed to respond to global challenges with economic policies that ensure stability and social inclusion. In 72 countries, poverty and inequality are strongly pronounced, persistent, and evidently structural in nature. Within the last ten years, the share of BTI countries achieving a moderate to good level of social inclusion has fallen from one-third to one-fourth.

Politics: The long-term trend of increasing restrictions on political freedoms and the rule of law continues unabated. While in recent years this was primarily due to greater repression in hardening autocracies, in this study there are above all some relatively advanced transformation countries whose governments are showing a more authoritarian leaning. The lack of responsiveness of governments against the background of social exclusion and a lack of economic prospects has led to a crisis of confidence in the established political system and to the rise of populist parties in many countries.

All global findings are represented here.

Post-Soviet Eurasia: A stable crisis

Since 2014, the situation in post-Soviet Eurasia has been dominated by the Ukraine conflict. All the problems associated with it remain unsolved. Both politically and economically, Russia remains the deciding factor in the region, though an increasing number of countries are attempting to free themselves from Moscow’s grip.

Since February 2014, when the mass Euromaidan demonstrations brought down the regime of Viktor Yanukovych, post-Soviet Eurasia has been dominated by the Ukraine crisis. It has become a reference point for the politics of each country in the region. This is seen, for instance, in the moves made by autocrats who fear that they might be the next victims of regime change. This fear triggered repressive and defensive measures in line with the Moscow model soon after the revolution in Kiev, as well as propaganda denouncing the chaos and bloodshed of the revolution as an inevitable feature of all such democratization efforts. The crisis has also fueled a renewed Cold War between Russia and the West, which has initiated an escalating spiral of reciprocal sanctions and military rearmament. This makes it difficult even for those not directly involved to avoid confrontation mode and the competing integration overtures of East and West. And, finally, the recession in Russia and the economic crisis triggered by the drop in oil prices have affected all the region’s national economies to varying degrees.

All of these problems remain unsolved. Despite repeated ceasefire agreements, the Ukraine crisis remains at an acute pitch in the Donbass, and tensions between Russia and the West show no sign of easing. Even with the price of oil stabilizing at around $50 per barrel in mid-2016, almost every country in the region lingers some distance below former growth rates. With no further political upheavals since then, the greatest challenge has been to manage economic problems and prevent collateral damage. This has resulted in a kind of habituation — crisis mode as a fact of day-to-day life.

This state of affairs has led to growing disparities within the region, but no breakthrough in transformation — this is the dual message of the BTI 2018. The regional average shows that all three BTI indices have shifted only marginally since the BTI 2016. Nonetheless, unlike with most other regions, they have all experienced an uptick since the BTI 2016, which at least suggests stabilization. At the same time, the development paths of individual countries are clearly heading in very different directions, which is particularly apparent in economic transformation. Ukraine managed the greatest improvement in the reporting period, and is now the region’s economic transformation front-runner. The country consolidated its economic position following near collapse, and introduced some fundamental reforms. Conversely, the drop in oil prices has now registered with full effect in the respective national economies of the raw material-dependent autocracies. This is particularly true of Azerbaijan, where 90% of the country’s export revenues come from unprocessed energy sources, along with a significant portion of the budget.

The range in terms of the state of democracy across the region is even more pronounced. As with the BTI 2016, this dimension is headed up by Mongolia, while the autocratic regime of Turkmenistan fares worst, as it traditionally has. Belarus made the greatest political progress as a result of Alexander Lukashenko’s recent efforts to draw closer to the European Union, but some skepticism regarding the durability of this approach is warranted in light of similar advances in the past. In Tajikistan, on the other hand, President Emomali Rahmon has done everything he can to not just establish family hegemony in the Central Asian fashion, but also to consolidate it through increasing repression.

The death of Uzbekistan’s President Islam Karimov in September 2016 wrested power from the hands of his family, although long-serving Prime Minister Shavkat Mirziyoyev would certainly not have come to office without the consent of its leading members. The sincerity of his reform proclamations remains to be proven. The greatest deterioration in governance came in the Republic of Moldova, which has become the victim of a near-total “state capture” by oligarch Vladimir Plahotniuc.

Post-Soviet Eurasia is witnessing an increasing divergence in national priorities and strategies. The Ukraine crisis has, however, united the region’s countries in one respect — they are each attempting to extract themselves from Moscow’s political hegemony in their own way, Russia’s long economic shadow notwithstanding. This reduces Russia’s power to set the regional agenda.

Treading familiar pathways

While some Eurasian autocrats may be experimenting with political liberalization, they are holding tight to the status quo. The most interesting laboratory for transformation in the region continues to be Ukraine. But now the agreed-upon reforms must be implemented.

At first glance, the classification of countries as democracies and autocracies seems to map directly onto the geopolitical split in the region, which remains unchanged in the BTI 2018. The three Eastern Partnership countries in the region that are bound to the EU by association agreements — Ukraine, Georgia, Moldova — appear alongside Mongolia in the stable group of defective democracies. Meanwhile, the eight-strong group of autocracies comprises four of the five countries in the Eurasian Economic Union’s sphere of influence around Russia, plus Azerbaijan, Tajikistan, Turkmenistan and Uzbekistan.

The exception proving the rule of two fixed, homogeneous blocs was Eurasian Economic Union member Kyrgyzstan, which has numbered among the BTI’s highly defective democracies since 2012 and has now been upgraded to the status of defective democracy. In the pro-EU camp, on the other hand, Ukraine consolidated its development, but Moldova’s democracy is coming under increasing pressure. The experience of these two countries underscores the fragility of transformation processes in Eurasia.

By contrast, the consolidated autocracies find themselves on a stable development path — admittedly a path of negative development that makes evolutionary change increasing unlikely. One opportunity for such evolutionary change arose in Uzbekistan with the death of long-serving President Islam Karimov in September 2016. Even if it is too soon to offer a definitive judgment, the staging of the transfer of power as well as the very limited changes initiated since then invite skepticism. But Uzbekistan, at least, has achieved an organized, peaceful transfer of power without recourse to dynastic succession and, overall, the signals are pointing to a cautious opening.

Geopolitical division with diverging trends

The same cannot be said for neighboring neo-patrimonial autocracies. On the contrary, Tajikistan’s President Rahmon has set about extending his family’s authority. Rahmon’s oldest son was appointed mayor of the capital, Dushanbe, in January 2017, while his daughter now serves as his chief of staff. At the same time, the president has stepped up repression against the Islamic Renaissance Party. There are similar developments in Azerbaijan, where a constitutional referendum in September2016 saw the term of the presidency extended to seven years and the creation of a new position — first vice president. On February 21, 2017, Ilham Aliyev conferred this title on his wife, Mehriban Aliyeva, prompting speculation of a future position swap. Here, the pawn would become king in name only in a game where falling oil revenues allow little scope for distribution and the will to implement urgently needed economic reforms increasingly clashes with oligarchical interests; political reforms are not even up for debate. There is a fear that the unresolved conflict around Nagorno-Karabakh will once again provide a welcome distraction from internal politics. The undiminished volatility of this situation manifested itself in April 2016, which saw the heaviest fighting since the 1994 ceasefire.

Opponent Armenia, which held its own constitutional referendum in December 2015, is nominally pursuing a path toward parliamentary democracy. To maintain his influence while facing term limits, President Serzh Sargsyan is looking to curb the power of the once-almighty office of the president. In any case, the parliamentary elections of April 2017, in which the ruling RPA party only just managed an absolute majority, indicated that it may be harder to pull the strings in the background. One dubious model for these developments might be Georgia. There, the ruling Georgian Dream party managed to win a constitutional majority in 2016, the opposition is paralyzed, and the parliament has largely served as a vicarious agent of the executive — while party founder Bidzina Ivanishvili has been operating successfully in the background for years.

The re-entry of Belarus into the group of moderate autocracies is due to the partial liberalization that the regime has been experimenting with for the past two years. In 2016, two opposition candidates made it into parliament for the first time in 12 years. Since then, there have also been consultations with Belarusian NGOs, and the government handed down its first human rights plan. This issue also found its way into talks with the EU, which suspended sanctions against Belarus following the release of all political prisoners in October 2015. Admittedly, the limits of this liberalization became apparent after the assessment period for the current BTI. Following protests against a law targeting “social parasites” in February and March 2017, more than 200 demonstrators were temporarily detained. This did not result in a re-introduction of sanctions; Belarus is apparently too important a partner in the Ukraine crisis, especially in light of the country’s recent moves to distance itself from Moscow. Also worth noting is the fact that detention figures during Russian demonstrations against corruption and Putin, which Alexei Navalny instigated to remarkable effect around the same time in March 2017, were significantly higher.

Ukraine remains the most interesting laboratory for transformation in the region. Certainly, the leadership of President Petro Poroshenko represents the old oligarchical system in many respects, with constant efforts to torpedo the reform process and the OSCE monitoring commission revealing that Kiev is anything but a bystander in the ongoing fighting in the east of the country. At the same time, pressure from civil society and the international community has managed to set numerous reforms in motion. But while administrative and judicial reforms and the creation of an independent agency for combating corruption are certainly essential, it is only their implementation that will decide whether the democratization of Ukraine actually bears fruit this time — or whether it will be buried by the oligarchy, as it was after the Orange Revolution.

Another implications of the stable crisis on Post-Soviet Eurasia are described here.

Belarus country report: Executive Summary

July 2015 marked the 25th anniversary of Belarus’ declaration of independence from the Soviet Union. In October 2015, President Lukashenko secured a fifth term in the presidential election. In September 2016, parliamentary elections took place. The results of these elections differed from previous ones insofar as, for the first time since 2004, two opposition candidates—Anna Kanapatskaya of the United Civil Party and independent civil society activist Elena Anisim of the Belarusian Language Society—became members of parliament.

Despite the fact that the OSCE did not recognize the presidential elections as free and fair, unlike in 2010, they were not followed by a brutal crackdown on civil society or the imprisonment of major opposition figures. Moreover, some improvements in the political environment in Belarus were recognized by the West and this opened a window for a normalization process. In October 2015, following the release of political prisoners and the peaceful elections, the European Union suspended sanctions against Belarusian authorities. Similarly, the United States temporarily lifted sanctions against several major Belarusian state-owned enterprises.

Hosting the negotiations of the OSCE Triliteral Contact Group on the resolution of the Ukraine crisis in 2014 and a high-level Normandy format summit in Minsk in February 2015 worked to intensify contacts with the Western capitals.

Despite efforts to diversify its foreign policy and economic cooperation, Belarus is still heavily dependent on Russia. However, Russia’s illegal annexation of Crimea in 2014 and the destabilization of Donbass had an important psychological impact on Alexander Lukashenko, who is increasingly concerned by Russia’s aggressive stance with regards to Ukraine and the West. His threat perception has changed considerably since the beginning of the Russia-Ukraine conflict and Russia is perceived as a potential threat to national sovereignty and independence.

Despite economic and political pressure from the Kremlin on the Belarusian leadership, Lukashenko still resists supporting Russia’s aggressive foreign and military policy. Minsk refused to establish a Russian military base on the territory of Belarus in 2015 and avoided getting involved in a confrontation with the NATO the following year.

Economic conditions in Belarus continued to deteriorate, driven by the contraction in Russia, lower export revenues and domestic structural problems. The economy contracted by 3.9% in 2015 and 2.6% in 2016. In order to overcome these negative trends, the Belarusian government worked with the World Bank to produce a Roadmap for Structural Reforms in Belarus in 2015, which provide the basis for applying to loan programs with the Eurasian Fund for Stabilization and Development and negotiations with the International Monetary Fund.

The situation with democracy institutions and human rights has not changed significantly in the review period. However, the environment for civil society improved slightly and Belarusian authorities included human rights issues in the negotiating agenda with the West. In October 2016, Belarus adopted its first interministerial human rights plan.

Strategic Outlook

The next parliamentary and presidential elections are not until 2020, and the long interim period opens possibilities for economic and administrative reforms. However, the Belarusian authorities will hardly improve the situation significantly with regards to democracy and human rights institutions, as this is no longer a precondition for Western engagement. Rather, it appears that only the minimum expectations of Western counterparts are to be met in order to obtain more economic assistance from international financial institutions.

Relations with the United States and the EU have already been normalized, which provides some deterrent to new repressive policies. Nevertheless, if threats to internal or external stability (as a result of the deteriorating economic situation, the growth of protest sentiments or foreign interference) appear, the Belarusian authorities will again apply strict measures of political control and restrictions on political rights.

The greatest challenges in such a scenario would be a deepening of the economic crisis and a potential Russian political and military interference in domestic affairs. Both factors could trigger a rollback in political and economic development.

However, Alexander Lukashenko will be trying to preserve the status of Belarus as a regional security and stability provider, keeping a distance from Russia and reaping economic and political dividends from the West and China.

According to the World Bank, the Belarusian economy is expected to remain in recession in 2017 (-0.9% of GDP) and to start recovering only in 2018 (+1.1 % of GDP). Domestic demand will remain subdued, as the space for domestic stimulus is very limited. Current account balances are likely to worsen as commodity prices are projected to remain low and the terms of trade to further deteriorate. The gross external debt and public debt are projected to rise until 2017, reaching about 83% of GDP and 52% of GDP, respectively, with a gradual decline to follow afterwards, as GDP increases.

Serious improvements in the business environment are needed to stimulate new private businesses. In recent years progress has been made. In the 2017 Doing Business rating by the World Bank, Belarus achieved the 37th place of 190 countries. In order to capitalize on this achievement, additional institutional and policy changes are necessary to induce productivity-led growth. This will include enterprise restructuring and facilitating an orderly exit of inefficient firms. Improving the incentives system and the governance of state-owned enterprises will allow these companies to move away from quantitative production targets toward maximization of profits and returns on investment. In addition, better conditions have to be created to attract foreign investment, including through joint ventures and contract manufacturing arrangements.

Full Belarus country report is available here.