The Rest of the “Great” Democracies

The Middle Abdicates, Part IV
Jacques Paquier /​Flickr Emmanuel Macron. January 30, 2018. Emmanuel Macron. January 30, 2018.
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Things fall apart; the centre cannot hold; Mere anarchy is loosed upon the world.” —“The Second Coming” by William Butler Yeats

Last week we observed that our own mother country, the United Kingdom (redubbed the Dis-​United Kingdom) is crumbling before our very eyes. But the DUK is hardly alone. Let’s take a quick look at our final six democracies.

France. France (GDP of $2.7 trillion, or roughly half that of Japan), is Germany-​without-​Mother-​Merkel. Like the Germans, the French were governed for many decades after World War II by either the center-​right (de Gaulle, Sarkozy) or center-​left (Pompidou, Mitterand).

But the collapse of the USSR hit French political life hard — after all, the biggest party in France was the Socialists, suddenly hopelessly discredited. Following the Presidency of the hapless François Hollande, French politics fractured badly, and for a time it seemed likely that Marine Le Pen would actually be elected President.

Then, more or less out of nowhere, Emmanuel Macron formed a new party — En Marche — and was elected President, with the old center-​right and center-​left parties left in tatters. Since the only reason to vote for Macron was that he wasn’t Le Pen, the French political system is essentially broken.

It’s true, of course, that the French have always imagined that a perfectly sound way to run a country is for everyone to go on strike whenever they feel like it. But before Macron the cohesion of the main center-​right and center-​left parties made the strikes mostly symbolic.

Now, however, France is reduced to governance-​by-​strike-​and-​shutdown. No sooner had Macron bought off the yellow vests than more than 800,000 people went on strike over a relatively modest pension reform proposal. Polls showed that a full 76 percent of the voting public supported pension reform, but no matter. Lawyers, teachers, students, air-​traffic controllers and many others hit the streets, bringing the country to a standstill.

But so what? Chaos now has no consequences because there are no heavily armed, hostile nations around to take advantage of it. The Germans have been disarmed, the Russians are held at bay by the U.S. (disguising itself as NATO), and the Chinese are out-​of-​sight and out-​of-​mind. With no enemies menacing its border, la France s’effondre.

Italy. With $2 trillion of GDP, mostly produced in the industrial north of the country, Italy is the seventh largest economy among the world’s democracies. Like Germany and France, Italy was governed for decades after World War II by center-​right and center-​left parties. But today the two largest Italian parties — Five Star and the Northern League — are both radical populists. And although they are bitter rivals it’s hard to tell much difference between them on policy issues.

But, really, Italy doesn’t fall neatly into my thesis — that democracies only remain stable and centrist when they are menaced by powerful enemies. That’s because, powerful enemies or not, Italy has always been chaotic. Since World War II — you could look it up — Italy has had 66 governments, the majority lasting less than a year. The country vies with India as The World’s Most Ungovernable Democracy.

Brazil. With GDP of $1.9 trillion, Brazil’s economy is nearly as large as Italy’s. Unfortunately, Brazil can’t be analyzed according to my theory because a) the nasty bully Brazil feared for most of its political life wasn’t a heavily armed Communist or fascist power, but that fearsome military machine, Argentina, and b) Brazil has been a democracy only since 1989.

Canada. Canada is a tiny country population-​wise, but it punches way above its weight GDP-​wise. It boasts only 37 million people (it’s smaller than California) but its GDP of $1.7 trillion is nearly as large as that of Brazil (209 million people) and is larger than that of Russia (145 million), South Korea (52 million), Spain (47 million) and Mexico (130 million).

From the perspective of the U.S., Canadians can seem like one big (okay, small) blob of undifferentiated niceness. In fact, Canada is a country built atop huge geopolitical fault lines.

The main fault line, of course, is the one between French-​speaking Quebec and the rest of the country. As recently as 1995 sovereignty for Quebec nearly passed, narrowly failing when 51% of Québécois voters rejected it.

Newfoundland and Labrador, the easternmost province of Canada, is also perpetually restive. Newfoundland, it’s often forgotten, has a long history of independence. It was a British self-​governing colony from 1855 to 1907, a self-​governing member of the British dominion from 1907 to 1934, and a free-​standing British crown colony until 1949, when it finally and belatedly became a province of Canada.

Finally, the western provinces of Alberta (especially), British Columbia, Manitoba and Saskatchewan seem to be perpetually alienated from the eastern part of the country. In 2001 the Alberta Agenda was promulgated, urging Alberta (and, by extension, the other western provinces) to assert their distinctiveness in the same manner as Quebec has done.

Canada manages to hang together only because a) they actually are nice people, even the Québécois, and b) they are terrified of America.

South Korea and Spain. We can quickly dispense with the last two democracies ranked by GDP, South Korea (GDP of $1.6 trillion) and Spain ($1.4 trillion).

South Korea is already the broken half of what used to be Korea. And even the full Korea was governed by Japan from 1897 (informally) and 1910 (formally) until Japan’s defeat in World War II. Then the country was divided and the southern section was governed by autocratic military regimes until democracy finally took hold under the Sixth Republic in 1987. Whatever divisive issues South Koreans have are kept under very tight control because North Korea sits just north of them and China sits just north of that.

I’ve written elsewhere about the chaotic Spanish Republic, which descended into civil war. The Spanish, desperate for stability and terrified of the USSR and Germany, ended up with Franco, who ran the country for 40 years.

Spain isn’t a country in the same sense that the U.S. is a country. Instead, under the Spanish constitution Spain is a collection of some 17 autonomous regions and two autonomous cities. As a result, with no external enemies in sight, Spain is bedeviled by “peripheralism,” according to which any region is entitled to devolution (control of their own regional polity) or even independence. In 2014, for example, Catalonia (Barcelona) held a referendum in which 81 percent of the voters chose independence from Spain.

Spain recently had to hold its fourth national election in four years and the winning party managed to capture all of 120 seats in the 350-​seat Congress of Deputies. Spain is, in fact, perpetually falling apart.

Greg Curtis

Gregory Curtis is the founder and Chairman of Greycourt & Co., Inc., a wealth management firm. He is the author of three investment books, including his most recent, Family Capital. He can be reached at . Please note that this post is intended to provide interested persons with an insight on the capital markets and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.

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