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Democracies should not be fooled by the oligarchies

Liberal democracy faces a new and decisive challenge: Figuring out how to deal with the "post-Communist oligarchies" of Russia and China. These regimes – authoritarian, capitalist and eagerly integrated into the global economy – are without precedent. Figuring out how to deal with them is the greatest strategic and moral question the West faces today. How we answer it will determine the shape of the 21st century, much as the struggle with Communism and fascism shaped the 20th.

This is the assertion Michael Ignatieff, former leader of the Liberal Party, made in a powerful lecture in the Latvian capital, Riga, earlier this month. His thesis came to mind during the annual St. Petersburg International Economic Forum, held last week as the gracious former imperial capital for which the forum is named glowed in the pure white light of the summer solstice.

Central to his argument is his insistence that "history has no libretto." It isn't marching toward any particular destination, including liberal democracy, he said. "It is a cliché of optimistic Western discourse on Russia and China that they must evolve toward democratic liberty," Mr. Ignatieff argued. As he explained to me in a telephone conversation this week: "The simple point is that we thought they were coming toward us. What if they are not?"

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The optimistic Western cliché he described was very much the conventional wisdom in St. Petersburg. It is what the visiting Western business titans wanted to believe, and it is what the presiding Russian government chiefs wanted them to believe.

Klaus Kleinfeld, chief executive of Alcoa and chairman of the U.S.-Russia Business Council, said in an interview that President Vladimir Putin's opening speech at the conference was "very, very good. He was basically clear that he stays on the course of reforms. He stays on the course of modernization."

When I suggested Mr. Putin might instead be taking Russia backward – freedom of assembly was sharply curtailed this month – Mr. Kleinfeld demurred.

Referring to the reformist promises of Mr. Putin's speech, he said: "We have to take that at face value." Russia's progress needs to be judged in historical context, Mr. Kleinfeld said. "I think most people who are easy with their criticism measure Russia against countries that had much, much more time to go into a market economy."

In other words, Russia is on the right path, just give it time.

This is a useful notion for Russian leaders – and for Chinese ones, too – and a comforting one for their Western business partners. It is useful because assurances that you are on the path toward liberal capitalism can serve as a catch-all justification for whatever illiberal policy you happen to be pursuing at the moment.

Believing that the duo Mr. Ignatieff calls the "post-Communist oligarchies" are on the liberal capitalist path is comforting for the liberal capitalist companies that do business with them, too. After all, for all the kowtowing required to do business in Russia and China, the rewards are vast.

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Consider the experience of London-based oil giant BP, which paid $7-billion (U.S.) in 2007 to establish a 50-per-cent stake in TNK-BP, its Russian joint venture. BP's trials at the hands of both its Russian partners and the Russian state are the stuff of legend. But shareholders and the board care more about the $19-billion BP has received in dividends since making the deal. That's quite apart from BP's share of TNK-BP, which analysts think could be worth between $25-billion and $30-billion.

The optimistic cliché of inevitable liberal evolution is convenient and comforting. But that doesn't make it right.

If Russia and China really are not marching toward liberal democracy, that is a problem not just for their repressed people, but also for us. Mr. Ignatieff argues that our attitude toward Russia and China is a question of great import because the two "are attempting to demonstrate a novel proposition: that economic freedoms can be severed from political and civil freedom, and that freedom is divisible."

He is right that this is the fundamental operating proposition of Russia and China, and he is right that it poses the most serious challenge liberal democracy faces anywhere today.

It is no surprise this question was not on the agenda in St. Petersburg. But surely it should be squarely on the agenda in Western capitals – and even in Western boardrooms.

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