Democracy vs. autocracy: which is worse?

Key Markets report for Thursday, 13 March 2025

In one of my recent interviews I suggested that we need to reexamine democracy and its role in our system of governance. This is not a popular position, given that the concept of democracy has become a deeply entrenched part of our system of values in the West. The reason this question came up was because apparently, the Trump administration has been turning increasingly authoritarian.

One of his advisors, Peter Thiel was heard suggesting that the U.S. needed a king, or a king-like figure at helm (I have heard this second hand and wasn't able to find the exact quote or where/when he said this). This has caused some alarm among a number of people who are otherwise supportive of the administration. The reason, I believe, is that many people have a vague sentimental attachment to the idea of democracy and take it for granted that it's the best, or at least the least bad way to manage a society. Supposedly, it's the government of the people, by the people and for the people.

There are a few reasons why we should question those beliefs. First, we need to look at what a system of governance actually delivers as opposed to what we're told that it should deliver. Most people want things like peace, prosperity, safe streets, comfortable living in beautiful environments, a sense of community, well developed infrastructure, technology that's actually useful and reliable, freedom of expression, and high quality education and healthcare. Given the staggering productivity of our economies, there's no reason why we shouldn't have that and our politicians never hesitate to promise exactly those things.

Somehow, however, our democracies can't seem to deliver on much of that and instead we have forever wars, never ending economic and financial crises, rising poverty, unsafe streets, chronic anxiety, deteriorating health, increasingly ugly living environments, decaying infrastructure, technologies built for surveillance and control, censorship and repression, lousy education and even lousier healthcare. How to explain all this? We're told that we can't afford nice things, but we can always afford wars and trillion dollar "defense" budgets.

Can autocracies be good?

Second, our beliefs about autocracies are probably distorted because they're largely based on bad examples: cases where dictatorships truly were harsh, repressive and brutal. At the same time, we tend to ignore those regimes that actually deliver what ordinary people desire. The most recent example is Russia. Under the "democratic" regime of Boris Yeltsin, Russia was a basket case: it was one of the most corrupt nations of the world, its economy was depressed, infrastructure decaying, poverty rates at 40% of the population, rampant crime rates and the whole country on the verge of disintegration.

Not surprisingly, the West loved Yeltsin, the democrat, but then came the evil dictator Putin who reformed Russia and reversed its decline. In the West, we tend to have strong and often negative opinions about Putin, but the Russians, who actually live under his government and feel the effect of its policies on their skin, overwhelmingly approve Putin's performance.

We also have strong opinions about Xi Jinping and the evil "CCP" but again, the Chinese people who live in China beg to differ: according to studies by the Chinese Academy of Social Sciences (CASS), an overwhelming majority of the Chinese approve of their government's performance (in some cases over 90%).

Of course, this tends to be dismissed as CCP propaganda, but according to Harvard Kennedy School of government, between 2003 and 2016, the Chinese government's approval rating ranged between 86% and 93%! The reason, perhaps, is because the Chinese government does, in fact, deliver many of those things people want in their lives. We may feel like we know better in the West, but it's the Chinese who live in China.

The lived experience

Third, I have to mention my lived experience. I was born in former Yugoslavia and grew up under the one-party communist regime under the evil dictator Josip Broz Tito. After the regime collapsed (I was 21 at the time), we had wars of secession and the newly independent countries there copy-pasted the Western system of governance: all wonderful liberal democracies, bursting at the seams with freedom and human rights. I also lived in democratic United States, Switzerland and also the cradle of Western democracy and birthplace of Magna Carta, Great Britain.

Then, for the last 28 years I've lived in the nondemocratic Principality of Monaco. With the possible exception of Switzerland, my lived experience leaves me in no doubt that life tends to be much better under nondemocratic regimes. The transformation of Croatia from a federal republic of the communist Yugoslavia to the independent liberal democracy that we have today, has been a massive negative. If you polled the citizens of former Yugoslavia whether life was better under Josip Broz Tito or under Western style liberal democracy, an overwhelming majority would opt for the evil dictator.

Social organizations and leaders

Finally, a philosophical reflection on democracy. Suppose you were a passenger or crew on a ship sailing through a storm. Would the ship be more likely to come through the storm intact if it were run by a competent captain and all hands on deck obeyed his orders, or if it were a democracy? All human organizations - sports teams, militaries, religious organizations, business companies, symphonic orchestras, native tribes... they all operate under captains, generals, CEOs, chieftains, etc.

In fact, in nature all social animals have matriarchs or patriarchs whom the rest follow. Clearly, there must be strong reasons for that - it could be the question of the group's survival. This is not to say that we should give up on personal liberty and become unquestioning, obedient cogs in the machine. But we should question how exactly the machine operates.

Who exactly is in charge?

Today, what we call liberal democracy is merely a label and we can see clearly that it can be manipulated, rigged or even cancelled altogether if the people vote wrong. That implies that there are powers above the legitimate government structures who hold democratic institutions in subordination. From society's point of view, the problem is that we do not know who's really in charge or where the buck stops. Our elected leaders now shamelessly read identical scripts, handed to them by some secret someone, and they follow that someone's orders.

Have they no thoughts of their own?

That further implies that what we call democracy is in fact an elaborate maze of institutions that misdirects and dissipates the will of the people, appeases them with periodic election rituals and conceals the real power behind the throne. All these complications are absent in autocratic regimes: people know who's in charge, where to direct their grievances and whom to overthrow if the discontent boils over. This is why autocrats are always vulnerable to social unrest and must heed the will of the people. Failing that, they risk ending up like Marie Antoinette, Nicolae Ceauscescu or Benito Mussolini.

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Trading signals for Key Markets, 13 March 2025

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