With Spain as the current hotspot in the European financial crisis, it is easy to lose sight of the broader features of the Spanish predicament, which, I submit, was political and cultural before it emerged as financial. One reason for the dramatic escalation of the risk premium on Spanish bonds is the government’s low credibility - itself the consequence of a heady mix of self-contradiction, lack of transparency, and downright lying. On November 20, 2011, after years of corrosive opposition, Mariano Rajoy rose to the presidency of the government on assurances that he understood the crisis and knew how to handle it.  He now feels trapped in a situation he cannot control, not least because much of the damage is of his own party’s making. To be sure, the socialists contributed mightily to the public debt, exacerbated it by denying the crisis when it was already in evidence, and worst of all, did not act to control the housing bubble, which left in its wake banks filled with toxic assets and a severe credit crunch. But at the root of the housing and mortgage bubble were the dangerous liaisons between the banking system and regional governments such as those in  Madrid and Valencia, that have long been steeped in the Partido Popular’s reckless politics and corrupt practices (epitomized by Bankia’s lurid ambitions and costly rescue.)

The banking crisis is dragging down the Spanish economy and bringing the country’s financial structure into uncharted territory. This is a seemingly paradoxical outcome for a country that a few years back boasted a positive balance and a higher growth rate than its neighbors. What happened to upend the triumphant rhetoric of presidents Aznar and Zapatero? To a certain extent the markets appear to have overreacted, and their knee-jerk response to rising debt caused in part by investors’ demand for higher interest on Spanish bonds threatens to bring about a self-fulfilling prophecy. Before the market developed these jitters however, Spain’s public debt was in fact lower than Germany’s, even as the latter functions as the basis against which the financial risk of other countries is measured. In the last week of June 2012, the distance between Spain's and Germany's debt risk was 504 basis points, while that between the US and Germany was only 13. In relation to GDP however, Spain’s public debt remains significantly lower than that of the U.S. At the end of 2011, Spain’s public debt was 68.5% of its GDP, while the US’s was 110.2%.  In spite of this, the US continues to have no trouble financing its debt, and the American dollar has been rising in recent months and continues to be regarded as a safe haven, while the euro is at risk.

Why all the fuss about Spain? The answer lies in a combination of causes.  In the first place, there is the big hole punched into Spanish banks by the large-scale default on loans irresponsibly pushed on overly optimistic borrowers; and then there is the unlikelihood of an economic recovery vigorous enough to guarantee the debt’s financing. Saddled with debt, subjected to salary cuts, and adrift in a dwindling job market, Spanish consumers will hardly be able to fuel a meaningful recovery for some time.  At present, the combined debt ofSaish families is nearly 100% of national GDP. Corporate debt is even larger. And it is not the private sector alone that is stuck. The loss of confidence also affects the Bank of Spain. For a long time the country’s central banking authority turned a blind eye to the bad lending practices of private institutions, and so it shares the blame for the illusion of an ever-expanding and ever-appreciating housing sector. When the fantasy receded, thousands of families, as well as the owners of small and middle-sized companies, were left stranded in a financial desert; and once the economy actually began to shrink, the government increasingly lost its ability to finance the debt.

Is Spain at risk of leaving the Eurozone? While this cannot be ruled out, it is unlikely. The possibility of going back to the peseta is precluded by the fact that foreign, mostly German and Chinese, investors, whose money helped pump up the housing bubble, now make up the bulk of Spain’s creditors. They will hardly sit by and allow Spain to devalue its way out of the mess. Although he dragged his feet, Rajoy has finally applied to Brussels for rescue funds and will submit to European oversight.  The proposed solution will undoubtedly involve further dismantling of services, salary cuts, and higher unemployment.  This is a bitter pill that will test Spain’s already shaky social cohesion. Rajoy will dispense it because he has no alternative, or rather because the alternative—letting the sick banks fail instead of nationalizing their losses—is not acceptable to the financial markets. Adding to the markets’ nervousness is the fact that Rajoy has proven to be singularly maladroit at administering the medicine.  This is where politics and culture come into the picture.

Spain’s troubles go back to the origin of its current regime in the late 1970s. They are rooted in a faulty transition that was expected to convert a country without democratic traditions into a full-fledged western democracy. But today all of Spain’s core institutions have fallen into disrepute: after years of covering its scandals, the monarchy has finally disgraced itself irreparably; the Supreme Court is affected by corruption at its core; the president of Madrid's regional government (a militant and vocal member of the extreme right wing of the Partido Popular) is calling for the dissolution of the Constitutional Court (i.e. for a return to undisguised authoritarian rule); and the tone of the debates in Congress could hardly fall to a lower level. Spanish democracy is ailing, but for anyone who has observed it with attention since its inception, the confirmation of what was once merely an inkling can hardly be cause for surprise.

In the 1970s, Spain’s bid for democratic legitimacy and admission to the European Community required the restoration of Basque and Catalan self-government, which Franco had suppressed. At the time, the provision of institutional guarantees for these nationalities was seen as a requirement of justice meant to correct decades of persecution. The Basque Country and the semi-Basque region of Navarre emerged from the transition with an important privilege. They collect their own taxes. From this revenue they transfer an amount to Madrid and use the rest as they see fit. Fiscal independence in the hands of a responsible government led to a clear improvement in the Basque standard of living and, and, not incidentally, to a certain insulation from the current crisis. Catalonia, with a larger economy, was denied that privilege. In fact the opposite occurred: its economy was made hostage to a state that, under the pretext of redistribution, severely impaired its growth and development.  Since Franco’s death, Catalonia’s leading position within Spain and its capacity to compete globally (it still accounts for 25% of all Spanish exports) have been eroded through an unfair fiscal burden and hostile decisions in matters of territorial development. Year after year, Spain’s government has defaulted on the execution of public works approved for Catalonia in the former's budget, thus retarding the latter's modernization and straining its finances to the breaking point.  Rajoy’s government will not even honor the state’s appropriations for Catalonia mandated by current fiscal law. In a display of cynical reason, the central Spanish government now blames regional governments for Spain’s public debt, obscuring the fact that the combined debt of the 17 autonomous communities is only 16% of the total, while that of the central government accounts for 76%. The remaining 8% is municipal debt. By shifting the responsibility for the crisis to the regional governments, Rajoy is patently using the current emergency as an opportunity to dismantle the structure of regional autonomy enshrined in Spain's current constitution.  The result of course would be to abrogate the limited degree of self-government that Spain only grudgingly conceded to Catalonia in the former's hour of democratic need.

As usual, propaganda is based on plausibility. It is true that Spain’s system of regional governments is costly, and a revision is long overdue. Most autonomous communities were invented ad hoc by the central government for the purpose of generalizing the autonomy principle and dissolving Catalonia’s historic claim to autonomy within a so-called “autonomous common regime” that as popularized at the time as “coffee for all.”  While history required the articulation of a state with two or three autonomous regions based on tangible cultural differences, Madrid’s politicians created 17 “autonomous communities” by administrative fiat. And since Madrid was unwilling to slim down the state’s bureaucracy, parallel administrations were created, adding to the cost of government. Since the beginning, the unwieldy system of “autonomous governments” was financed through the transfer of funds from the most productive to the least productive regions with a regularity and volume that ended up crippling the donors. These have been, with predictable monotony, the regions on the Mediterranean seaboard that possess a distinct culture and language: Catalonia, Valencia, and the Balearic Islands. So striking is the fiscal imbalance that for decades Spanish governments have refused to publicize the figures, even though this refusal constitutes the violation of a standing congressional order to make them available. But how the cookie crumbles is made evident by the president of Extremadura’s admission that a new fiscal deal for Catalonia would be catastrophic for his region. Catalonia suffers from a political paradox. As a “wealthy region” in a “poor country,” it never benefited from the European structural and cohesion funds of which Spain was the largest recipient, but instead became a net contributor on a level higher than France. Economists calculate that the Catalan fiscal deficit, that is, the percentage by which taxation exceeds allocations, rests anywhere between 8 and 10% of Catalonia’s GDP (roughly $20 billion annually for a region of 7,000,000 people.) Over time, the magnitude of such siphoning of resources impacts an economy, leading to obsolescent infrastructure, the impoverishment of the service sector, the deterioration of the educational system, and the inevitable loss of competitiveness. Catalonia’s public debt in 2011 was $52 billion, approximately 20.7% of the Catalan GDP. Two and a half years of a balanced fiscal relation with the rest of Spain would have sufficed to mop up all Catalan public debt.

Spain’s troubles were political before they became financial, but politicians will not resolve them. The country needs to be further integrated into the European structure through a common fiscal policy and a commonly regulated banking system; more importantly however, Spain needs to be politically accountable to Brussels and meet European standards of justice and democratic procedure.  This would do much to bring about economic rationality. A country on the brink of default cannot afford to build unprofitable fast-speed trains to provincial destinations, boondoggle expressways in a radial system stemming from Madrid, or airports without air traffic.  Nor should it insist on an extravagant freight train route that requires drilling through the thick of the Pyrenees instead of building a cheaper and commercially sensible coastal itinerary, a plan that, without Brussels' better judgement, the Spanish government would have rejected for the ostensible purpose of isolating Barcelona’s harbor, the busiest in Spain.  The senseless megalomania and castigation of specific territories cannot be explained along traditional ideological lines — such projects have been developed by socialists and conservatives alike — but by long-term cultural continuities. The recent bout of megalomania was buoyed by billions in structural funds, while the territorial grievances, notorious to anyone who is conversant with Spanish history, went on as before, shielded by Spain’s membership in the core Western institutions.

Spain would gain much from trading sovereignty for rationality, and from being forced to invest for economic rather than merely symbolic payoff. A dishonored monarchy, a politicized justice, and a corrupt party system are as much toxic assets as those the banks hold, and if intervention is inevitable, the discipline mandated from outside ought to touch the country to the quick. If and when Brussels decides to put the Iberian house in order, it ought to recognize which administrations have practiced fiscal restraint and are capable, under good governance, of meeting European standards. Spain could well be the last ditch of the European monetary union and of the political union itself. But timely political reform in Spain could be the last opportunity not only to keep the country within the EU but also to hold it together as a meaningful political project.

Silvio Berlusconi has been a force in Italian politics during the past two decades. As the country’s prime minister and richest man, the media mogul managed to slip through sex scandals and criminal charges only to be forced out of office by Europe’s debt crisis.

As a new government led by economist Mario Monti takes place, Ronald Spogli talks about Berlusconi’s fall, what’s next for Italy and whether the United States should get involved in the eurozone’s tailspin. Spogli, who served as the U.S. ambassador to Italy from 2005 to 2009, is a Stanford trustee and major benefactor to the university’s Freeman Spogli Institute for International Studies.

What will Italy’s government look like under Mario Monti, and how will it trim the country’s $2.5 trillion debt?

Monti is an economist by training and has been president of Bocconi University, Italy’s most prestigious business school. He was the European Commissioner and that position earned him international influence and experience. So here’s somebody who has economic savvy, institutional gravitas, and the ability to be perceived as above politics.

The new government is expected to carry out the stability program enacted immediately before Berlusconi’s resignation on Saturday.  This law contemplates asset sales to reduce debt, among other measures.  The idea of a wealth tax has been floated in Italy – which by most measures is the richest country on the continent – as a way to immediately and significantly pay down the nation’s debt. 

The Monti government is likely to consider this and other options to reduce the country’s indebtedness.  However, it will have to gain parliamentary approval for any new laws. And depending on the nature of the bill proposed, passage of legislation could prove problematic.

How did Berlusconi manage to survive sex scandals and corruption charges, only to be brought down by Italy’s financial crisis?

I think he survived because for most Italians, his personal life was less relevant than his actions and promises as a politician who could do good things for Italy.

He came into power in 1994, and his ability to dominate Italian politics for nearly two decades has been the main story. He came in with an expectation that as Italy’s richest man and as a successful businessman, he would help jumpstart a country that had begun to stall economically. The notion was that after stagnation had begun to creep in, Silvio Berlusconi was the person to break the logjam and move Italy forward.

But for the last 20 years, Italy has had half the economic growth rate of Europe. That’s the biggest issue against Berlusconi. But nobody is 100 percent convinced that he’s really gone for good. He has an amazing ability to resurrect himself. He’s proven that throughout his political career.

How does Italy’s debt burden fit in to the rest of Europe’s economic woes?

Image

In terms of the sheer magnitude of the problem, the Italian circumstance dwarfs Greece’s situation and the ability of the initiatives meant to deal with other countries’ crises. The issue is whether the new Italian government will be able to calm the bond markets.

Restoring credibility is absolutely vital. The fundamental concern is that there’s no offered solution to an Italian debt problem. There is no bailout being contemplated that’s big enough to be able to deal with the issue, unlike Greece.

The euro crisis has claimed the political lives of prime ministers in Greece, Spain and Italy. Can we expect more high-profile political casualties?

It’s interesting how the markets – in such a short period of time – have forced a political change that the internal Italian political system has been unable to achieve for quite some time. It’s difficult to speculate as to whether those forces will move to more counties. But it certainly wasn’t contemplated that they’d have this impact on Italy, so its fair to say that nothing is completely off the table.

In the United States, candidates vying for the Republican nomination in next year’s election say America shouldn’t get involved in Europe’s financial mess. Is that the right attitude?

Europe is extremely important to the United States. Not just for economic reasons, but for political reasons. This is a European problem to solve. On the other hand, if it gets to the point where it continues to have a very damaging impact on the world’s capital markets, I think the resolve to keep it as an isolated problem may fade.

Beyond the narrowly defined economic impact of the crisis, we have many issues of global security that we cannot effectively deal with without the help of Europeans. If they’re going to go into a pronounced period of economic contraction, that’s going to heavily impact their ability to be a great partner for us.  Italy is a perfect example of this concern. We counted on its help in the Balkans, Afghanistan, Iraq and Lebanon. Those are expensive missions, and if the country doesn’t grow its economy, it’s harder for them to be a great American ally.  Italy’s economic situation extends to our basic international security interests.

Italy's economic crisis is the subject of a Nov. 18 presentation given by Roland Benedikter, a scholar at FSI's Europe Center. 

While academic political science has not had much to tell policymakers of late, there is one book that stands out as being singularly relevant to the events currently unfolding in Tunisia, Egypt and other Middle Eastern countries: Samuel Huntington’s Political Order in Changing Societies, first published over forty years ago.¹ Huntington was one of the last social scientists to try to understand the linkages between political, economic and social change in a comprehensive way, and the weakness of subsequent efforts to maintain this kind of large perspective is one reason we have such difficulties, intellectually and in policy terms, in keeping up with our contemporary world.

Huntington, observing the high levels of political instability plaguing countries in the developing world during the 1950s and 1960s, noted that increasing levels of economic and social development often led to coups, revolutions and military takeovers rather than a smooth transition to modern liberal democracy. The reason, he pointed out, was the gap that appeared between the hopes and expectations of newly mobilized, educated and economically empowered people on the one hand, and the existing political system, which did not offer them an institutionalized mechanism for political participation, on the other. He might have added that such poorly institutionalized regimes are also often subject to crony capitalism, which fails to provide jobs and incomes to the newly educated middle class. Attacks against the existing political order, he noted, are seldom driven by the poorest of the poor; they instead tend to be led by rising middle classes who are frustrated by the lack of political and economic opportunity—a phenomenon noted by Alexis de Tocqueville in his masterful analysis of the origins of the French Revolution and raised again in the early 1960s by James Davies’s well known “J-curve” theory of revolution.²

Something like this Huntingtonian process has unfolded in recent months in both Tunisia and Egypt. In both cases, anti-government protests were led not by the urban poor or by an Islamist underground, but by relatively well-educated middle-class young people used to communicating with each other via Facebook and Twitter. It is no accident that Wael Ghonim, Google’s regional head of marketing, emerged as a symbol and leader of the new Egypt. The protesters’ grievances centered around the fact that the authoritarian regimes of Ben Ali and Mubarak offered them no meaningful pathway to political participation, as well as failing to provide jobs befitting their social status. The protests were then joined by other groups in both societies—trade unionists, Islamists, peasants and virtually everyone else unhappy with the old regimes—but the driving force remained the more modern segments of Tunisian and Egyptian society.

Societies lacking institutions that could accommodate new social actors produced a condition Huntington labeled praetorianism, in which political participation took the form of strikes, demonstrations, protests and violence. The military often seized power in such circumstances because it was the only organized actor in society capable of running a government. The Egyptian Republic’s first autocrat, Gamal Abdel Nasser, came to power in precisely this manner back in July 1952, when his Free Officers movement represented the rising Egyptian middle class. The tragedy of modern Egypt is that there has been scarcely any meaningful political development in the more than half-century since then—meaning, in Huntington’s terms, the rise of modern institutions that could peacefully channel citizen participation.

Socioeconomic development, meanwhile, has proceeded apace: Between 1990–2010 Tunisia’s Human Development Index (a composite measure of health, education and income compiled by the UN) rose 30 percent, while Egypt’s rose 28 percent. Both countries produced tens of thousands of college graduates with no discernable future and a lopsided income distribution in which a disproportionate share of the gains from growth went to a small group of politically connected insiders. Huntington’s analysis of Egypt in the 1950s and 1960s thus remains eerily relevant today.

In Political Order Huntington was also making a broader point about the process of development itself. The significance of his book needs to be seen against the backdrop of post-World War II modernization theory, which in turn drew on classic 19th-century European social theory articulated by academics like Edward Shils, Talcott Parsons and Walt W. Rostow. American modernization theory argued that development was a single, seamless process. Economic development, changing social relationships like the breakdown of extended kinship groups and the growth of individualism, higher and more inclusive levels of education, normative shifts toward values like “achievement” and rationality, secularization and the growth of democratic political institutions, were all seen as an interdependent whole.

By pointing out that the good things of modernity did not necessarily go together, Huntington played a key role in killing off modernization theory. Political development was a separate process from socioeconomic development, he argued, and needed to be understood in its own terms. The conclusion that flowed from this point of view seemed at the time counterintuitive to the point of stunning: Without political development, the other aspects of modernization could lead to bad results—to tyranny, civil war and mass violence.

There were other reasons why Western modernization theory fell into disrepute by the 1970s: It came to be regarded as too Eurocentric—indeed, as too Americentric insofar as it seemed to posit American society as the pinnacle of modernization. It failed to recognize the possibility that countries like Japan and China might take roads to modernity that would look very different from the ones pioneered by Britain and the United States. But even if one agreed that the end point of development should be some form of industrialized liberal democracy, Huntington made it clear that arriving at the desired destination was far more elusive and complicated than modernization theorists believed.

The central piece of policy advice that emerged out of Huntington’s work was the concept of the “authoritarian transition.” If political systems opened up to democratic contestation too early, before the development of political parties, labor unions, professional associations and other organizations that could structure participation, the result could be chaotic. Authoritarian regimes that could maintain order and promote economic growth, Huntington argued, might oversee a more gradual institutionalization of society, and make a transition to democracy only when broad participation could be peacefully accommodated. This form of sequencing, in which economic development was promoted before a democratic opening, was the path followed by Asian countries like South Korea and Taiwan, which made democratic transitions in the late 1980s only after they had succeeded in turning themselves into industrialized powerhouses. It was also the development strategy recommended by Huntington’s former student Fareed Zakaria, as well as by the leaders of many authoritarian governments, who liked the idea of economic growth better than the idea of democratic participation.³ We will return to the question of how well that strategy worked in the Middle East later.

Development in Silos 

As interesting and important as Huntington’s work was, it lay outside of mainstream thinking about development, which from the start was a highly Balkanized academic field that was dominated by economists. Few scholars have sought to understand development as an inter-connected process with political, economic and social parts. Few scholars have sought to understand development as an inter-connected process with political, economic and social parts.Development economists looked primarily at economic factors like capital, labor and technology as sources of economic growth, and thought neither about the consequences of growth for politics nor the relationship of political institutions to growth. The Harrod-Domar growth model that was dominant in the 1950s suggested that less-developed countries were poor primarily because they lacked capital, which then led development agencies like the World Bank to try to kick start growth with generous infusions of capital for physical infrastructure. It was only when steel plants and shoe factories in sub-Saharan Africa went idle due to corruption or lack of organizational capacity that they were forced to go back to the drawing board.

The political scientists, for their part, scaled back their ambitions from large Huntingtonian-style theory and focused primarily on political phenomena. Beginning in the 1980s, there was increasing interest in the problem of transitions into and out of democracy; with democratic transitions in Spain, Portugal and nearly all of Latin America, this became a particularly pressing issue. There was some revival of interest in the democracy-development linkage, but it never led to a clear consensus on the causal links connecting the two phenomena.

The academic interest in transitions corresponded to the burgeoning of democracy promotion as a distinct field of international practice, both on the part of the United States and of other democracies around the world. The idea was planted during the 1970s, when the institutes linked with the German political parties played a key role in beating back an attempted Communist takeover in Portugal and facilitating that country’s transition to democracy. The 1980s saw the establishment of the National Endowment for Democracy (NED), a taxpayer-funded but quasi-independent organization devoted to support of pro-democracy groups around the world. One of the NED’s early successes was its funding of the Solidarity trade union in Poland before the collapse of communism. The 1990s saw the growth of a host of international organizations capable of monitoring elections and the funding of the Democracy and Governance branch of the U.S. Agency for International Development to the tune of almost $1.5 billion annually.

By the late 1990s, there was some degree of convergence in the agendas of economists and political scientists. By that point Douglass North and the school of “New Institutional Economics” he founded made economists aware of the importance of political institutions—particularly property rights—for economic growth. Economists increasingly sought to fold political variables like legal systems and checks on executive power into their models. Political science had itself been colonized at this point by economic methodology, and it was natural for such rational-choice political scientists to start looking at the economic impact of political institutions.

The return to a more interdisciplinary approach to development was marked as well by the tenure of James Wolfenson as President of the World Bank from 1995 to 2005.⁴ Wolfenson early on gave a speech on the “cancer of corruption” and signaled to the institution that, henceforth, political issues like corruption and good governance would be taken seriously. The publication of the 1997 World Development Report, The State in a Changing World, marked an intellectual break with the Washington Consensus focus on economic policy and state downsizing, and the Bank created a new branch devoted to reform of developing country public sectors. These changes constituted an open admission that politics was a critical component of development, and that the state was not simply an obstacle to growth but often a necessary underpinning for it. Increasingly, donor agencies have seen the promotion of democratic accountability as one tool in the fight against corruption.

This modest degree of convergence should not, however, obscure the continuing degree of compartmentalization that exists in the field of development. While paying lip service to the importance of institutions, most economists and field practitioners still see politics as at best an obstacle to the real work of development, which is improvement in incomes, health, education and the like, and not as an independent objective of development strategy. (Amartya Sen is an important exception to this generalization.) The democracy promotion agencies, for their part, spend relatively little time worrying about economic growth, social policy or public health, which in their view are goods often used by authoritarian regimes to buy off populations and prevent democratization.

The intellectual confusion surrounding development has led to severely Balkanized policies both in the United States and in the international community that often work at cross purposes from one another.The intellectual confusion surrounding development has led to severely Balkanized policies both in the United States and in the international community that often work at cross purposes from one another. For example, the authoritarian or semi-authoritarian regimes of Meles Zenawi in Ethiopia, Paul Kagame in Rwanda and Yoweri Museveni in Uganda have been aid darlings over the past decade because of their track records in promoting economic, health and social goals. At the same time, democracy promotion groups have been highly critical of them and have supported opposition groups and civil society organizations seeking accountability and limits on executive power. To be sure, aid agencies don’t object to greater government accountability on the part of these regimes, while the democracy promotion community wouldn’t stand in the way of progress on HIV/AIDS or malaria. Yet no one takes a larger view and asks, for example, whether existing aid programs are helping to keep the regime in power or, conversely, are destabilizing it.

Egypt itself presents a good case of this particular form of policy incoherence. Despite the fact that Egypt ranks as one of the top American aid recipients, it is hard to say that Washington was pursuing development goals of any sort there. The United States was primarily interested in stability. Despite brave speeches on democracy by both Condeleezza Rice and Barack Obama in Cairo, the United States actually pulled its punches in pushing serious democratic reform on Egypt, particularly after the Hamas electoral victory in Gaza in 2006. Nonetheless, U.S. economic aid programs were still pushing education and economic policy reform programs in the country. Had American aid administrators taken the Huntingtonian view that their assistance was covertly designed to promote an expectations gap and delegitimate Hosni Mubarak, this might have been a clever strategy. But no such cleverness existed. Instead, it was simply an example of compartmentalized aid programs doing their thing in ignorance of the interdependent effects of politics and economics.

What Is to Be Done?

Ideas precede action. Before we can hope to generate a coherent set of policies for Egypt, or anywhere else for that matter, we need a better understanding of development—that is, how changes in economy, politics and society over time constitute a set of discrete yet interlinked processes. Whatever the shortcomings of classic modernization theory, it at least began from the insight that the phenomenon under study required development of a master social science that transcended existing disciplinary boundaries. This objective is as far away as ever in academia, where the traditional disciplines keep a chokehold on how younger academics think and do research. Today, the single most popular form of development dissertation in both economics and political science is a randomized micro-experiment in which the graduate student goes out into the field and studies, at a local level, the impact of some intervention like the introduction of co-payments for malaria mosquito netting or changes in electoral rules on ethnic voting. These studies can be technically well designed, and they certainly have their place in evaluating projects at a micro level. But they do not aggregate upwards into anything that can tell us when a regime crosses the line into illegitimacy, or how economic growth is changing the class structure of a society. We are not, in other words, producing new Samuel Huntingtons, with the latter’s simultaneous breadth and depth of knowledge.

On a policy level, we need far more mutual understanding between those who promote socioeconomic development and those who work on democracy promotion and governance.On a policy level, we need far more mutual understanding between those who promote socioeconomic development and those who work on democracy promotion and governance. Traditional development agencies like USAID already think politically to the extent that their aid projects are designed to support U.S. foreign policy. But they, like their counterparts in multilateral organizations like the World Bank, are not trained to do political economy analysis; they do not seek an understanding of the political context within which aid is used and abused, and what is not sought is very rarely found. We call for the liberalization of ports in Haiti, for example, without trying to understand which particular politicians are benefiting from existing arrangements that keep them closed. For their part, democracy promoters focus on democratic transitions, providing help to opposition parties and civil society organizations in authoritarian countries. But once a transition occurs, as it did after the Orange and Rose revolutions in Ukraine and Georgia, they have relatively little to offer new democratic governments in terms of policy agendas, anti-corruption strategies or help in improving the delivery of services that citizens want.

Beyond these relatively minor adjustments, a more robust theory of social change might tell us that, in certain circumstances, the best way to destabilize an authoritarian society would be not the funding of civil society groups seeking short-term regime change, but rather the promotion of rapid economic growth and the expansion of educational access.⁵ Conversely, there are many societies we know will simply waste development assistance dollars because they are ruled by unaccountable authoritarian regimes. In such circumstances, it might be a more efficient use of aid resources to cut development aid entirely and to work only for political change. This is, in effect, what has happened to Zimbabwe under Robert Mugabe, but the country had to sink very far before anyone considered pulling the aid plug.

Huntington got a number of things wrong. The authoritarian transition was not a universally applicable formula for development. It worked reasonably well in East Asia, where there were a number of figures like Lee Kwan Yew, Park Chung-hee or the Chinese Communist Party leadership, who used their autocratic powers to promote rapid development and social change. Arab authoritarians were cut from a different cloth, content to preside over economically stagnant societies. The result was not a coherent development strategy but a wasted generation.

The aspiration of social science to replicate the predictability and formality of certain natural sciences is, in the end, a hopeless endeavor. Human societies, as Friedrich Hayek, Karl Popper and others understood, are far too complex to model at an aggregate level. Contemporary macroeconomics, despite dealing with social phenomena that are inherently quantified, is today in crisis due to its utter failure to anticipate the recent financial crisis.

The part of social change that is the hardest to understand in a positivistic way is the moral dimension—that is, the ideas that people carry around in their heads regarding legitimacy, justice, dignity and community. The current Arab uprising was triggered by the self-immolation of an overeducated 26-year-old Tunisian vegetable seller whose cart was repeatedly confiscated by the authorities. After Mohamed Bouazizi was slapped by a policewoman when he tried to complain, he reached the end of his tether. Bouazizi’s public suicide turned into a social movement because contemporary communications technologies facilitated the growth of a new social space where middle-class people could recognize and organize around their common interests. We will probably never understand, even in retrospect, why the dry tinder of outraged dignity suddenly ignited in this fashion in December 2010 as opposed to 2009, or ten years before that, and why the conflagration spread to some Arab countries but not to others. But we can certainly do a better job in putting together the few pieces we do understand, in a way that would be useful to policymakers coping with the reality of social change.

¹Huntington, Political Order in Changing Societies: With a New Forward by Francis Fukuyama (Yale University Press, 2006).

²Davies, “Towards a Theory of Revolution”, American Sociological Review, Vol. 27 (1962).

³Zakaria, The Future of Freedom: Illiberal Democracy at Home and Abroad (W. W. Norton, 2003); see also Zakaria, “A Conversation with Lee Kuan Yew”, Foreign Affairs (March/April 1994).

⁴For a description of the Wolfenson presidency, see Sebastian Mallaby, The World’s Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations (Penguin Press, 2004).

⁵See Harold James’s retroview, entitled “Growing Pains”, of a classic December 1963 essay by Mancur Olson (“Rapid Growth as a Destabilizing Force”) in The American Interest (September/October 2006).