Author: Laurence Neville

MILESTONES / GLOBAL

by Laurence Neville

150_July_Regulars_Milestones

Renaissance’s Robertson: “China in risky period”

China will become a democracy by 2017, while Russia is highly likely to become a strong democracy within the next few years, according to a remarkable report published by emerging-markets investment bank Renaissance Capital. The report analyzes 150 countries and 60 years of history and concludes that increasing wealth is entrenching democracy in many emerging markets.

“Political risk can be measured. Revolutions can be predicted,” says Charles Robertson, Renaissance Capital’s global chief economist and the report’s lead author. “There are sufficient data on political history to give us guidance on which countries are most likely to make the shift from autocracy to democracy, and when. We can also look at the risks along the road to democracy that might see a country temporarily become an autocracy again.”

The report asserts that democracies are “immortal” above the per-capita GDP level of $10,000—which now includes Mexico, Brazil and Turkey—and that just five democracies with GDP per capita above $6,000 have become autocracies. High levels of wealth protect democracies and threaten autocracies. “To put it in per-capita income terms, once we have fed ourselves, housed ourselves and are thinking about buying a car, we begin to demand political rights,” says Robertson. This trend should bode well for increased democratization in Kenya and Ghana, according to the report.

Given its current GDP per capita and continuing growth levels, China has “entered a most dangerous political period,” according to the report: “Theoretically, China may hope that if it can boost per-capita GDP above $10,000, then political risk will decrease. This is a highly unlikely scenario. Non-energy-exporting countries always become democracies.” The good news for the global economy is that a transition to democracy is possible with no interruption to growth.

Although Russia, as a major energy exporter, should be immune to creeping democratization, the report notes that the country’s “energy wealth per capita is not comparable with the Gulf sultanates” and it is “now the richest weak democracy in the world.” The report concludes that “there is close to a 30% chance of it becoming a strong democracy in any given year” and that a “fully competitive presidential election race” is possible in 2018.