The Free Enterprise and Democracy Network is focused on private sector solutions and market reforms that help democracy deliver.
On December 9-10, the first Summit for Democracy brought together “leaders from government, civil society, and the private sector to set forth an affirmative agenda for democratic renewal and to tackle the greatest threats faced by democracies today through collective action.”
The summit marked an important rallying point for supporters of freedom and yielded a set of commitments to reinforce democratic values and institutions. Central to this effort is demonstrating how democracies deliver for their citizens in the form of opportunities, rights, responsiveness, and resilience.
Following the summit themes, FEDN offers the following observations on the state of democracy and priorities for action. Acknowledging that conditions vary across backsliding democracies and competitive authoritarian systems, network members identified the trends below based on their country circumstances, mostly emerging markets across the world.
Defending against authoritarianism
Authoritarianism is rising within countries through the concentration of power in the executive branch, the capture of political institutions by economic elites, and excessive state power over the economy. The weakening of checks and balances on authority, in part exacerbated by the pandemic, has produced impunity. A combination of repression and clientelism has displaced pluralism and representative democracy.
Dependence on foreign authoritarian powers has been magnified by a dearth of international support for democracy. Sanctions are not working as intended. The international community must respect good governance everywhere and act sooner to prevent and counter democratic backsliding.
A grassroots push is needed for bottom-up change. Unfortunately, civil society does not understand the role of business in democracy while business is often complacent, blind to dangers ahead, until it is the target of regulatory action. Civil society should be empowered with a mechanism to monitor backsliding. A culture of entrepreneurship, buoyed by opportunities in the digital economy, is an effective means to break up power structures.
Corruption emboldens autocrats and their cronies while undermining democratic systems. It is manifested in the capture of institutions and industries and, today, is embedded in international financial flows.
Corruption is propagated through regulatory systems designed to serve inside players, through schemes hatched at the top of government, and through the influence of cartels over the economy. In countries where suspicion of markets runs high and government is the default solution to any problem, rent-seeking actors dominate. Shady deals in the form of corrosive capital from abroad serve special interests and expose countries to authoritarian exploitation of governance gaps.
The fight against corruption is linked to the preservation of democratic institutions. Democracy consists of majority rule together with the rule of law. It will require concerted measures to build up democratic institutions and a rules-based economic order, including: strengthened judiciaries, transparency and disclosure requirements, the reduction of market entry barriers, open societies, improved public administration, and international commitments to the rule of law. The business community must show leadership in areas of self-regulation, compliance, and integrity.
Promoting respect for human rights
Civic space is closing fast in many parts of the world. While civic activism, increasingly led by women, has been high in the context of the pandemic, governments have cut off telecommunications and the Internet, as well as sources of finance, to suppress independent activity. Restrictive NGO laws continue to appear, and political persecution is severe in a number of countries.
The private sector may enjoy greater space than do civic activists in authoritarian settings but is not immune to crackdowns. Businesses expressing their independence have been shut down. Closed political systems may allow certain market freedoms but investors’ rights are at the discretion of the rulers. Businesses must be mindful of human rights in their own operations. Environmental, social, and governance standards (ESG) are increasingly important in emerging markets and represent not only risk management but areas of opportunity for business. While all firms must act ethically, opaque, corrosive capital poses particular hazards to workers’ rights and environmental conditions in recipient countries.
The rights of marginalized groups become more secure when they are economically empowered. To this end, it is essential to lower barriers to economic participation by women, youth, minorities, and refugees as well as to give them a voice in the policy-making process. Promoting entrepreneurship among diverse communities creates pathways to democratize opportunity and catalyze inclusive growth.
The starting point for action is to help people understand, especially young people, how democracy enables them to have a better way of life. Making the case for democracy will include explaining how the rule of law matters to individual well-being and economic prosperity, and how democracy offers more sustainable, more inclusive, and more legitimate solutions than do authoritarian and illiberal approaches.
The linkages between the summit themes must be established in order to defend and prepare for democratic transformation. Conditions that breed corruption also breed authoritarian behavior, while human rights are tied to the potential for civic and political action. Moreover, open market economies—based on individual liberty, rule of law, and equality of opportunity—must be part of the equation to foster pluralistic, strong societies and accountable government.
The private sector has a necessary role as part of the solution, whether through its operations, partnerships in community, or voice in the policy arena. Businesses must recognize their rights, responsibilities, and roles so that they act sooner in defense of liberal democracy before their interests are directly threatened. The private sector should advocate for democratic values and rule of law and become a champion for inclusive opportunities.
Investments in collective action are needed to enlarge civic space, set higher standards, and push for more democratic government. The private sector and civil society must find ways to work together, building bridges instead of allowing rulers and elites to play one constituency against another.
Finally, members of the Free Enterprise & Democracy Network stress the importance of bringing substance to the lofty goals of advancing democracy. The fight for democratic ideals must be translated into policies and coalitions in each country, opportunities for citizens to engage, and support from international actors. It will require respect for fundamental values paired with imaginative solutions.
The Free Enterprise and Democracy Network (FEDN), founded by CIPE, provides a mechanism for private sector leaders and advocates of freedom across the world to exchange ideas, support one another, and make the case for democratic, prosperous societies. FEDN currently has more than 60 distinguished members from over 40 countries.
The FEDN secretariat especially acknowledges contributions to this statement by the following members: Soji Apampa, Jorge Botti, Nishan de Mel, Rainer Heufers, Maali Qasem Khader, Milos Nikolic, Jaroslav Romanchuk, Marek Tatala, Claudia Umaña Araujo.
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