Fareed Zakaria, one of the leading theorists of neo-liberal political economy takes a hard look at the neo-conservative order that has followed. To understand what is going on, it is necessary to disentangle two concepts from seemingly closely related ideas. The first is neo-liberalism and its degeneration into neo-conservatism, the second is the difference betwen illiberal and alliberal, or even anti-liberal, states. Zakaria has written continuously on the threat of illiberal democracy, and it is necessary to disentangle two groups of states which conduct formal elections, but which show a continuous disregard for liberal democracy.

Neo-liberalism was a series of ideas, and a movement, which argued that the collapse of communism left no alternative to a particular vision of market and government institutions. That vision was that by subjecting "less democratic" nations to the discipline of Western exporting markets and Western financial institutions, that fledgling states would have to walk a straight and narrow line, and thus avoid falling into the evils of socialism, laborism, populism or other "illiberal" movements which would, in neo-liberalisms view, pervert democratic institutions to pursue questionable and self-destructive aims.

The first instrument of this idea was the "Washington Consensus", which put Latin America and other peripheral nations on a steady diet of exporting social benefit cuts, and hard currency. Democracy bloomed, or so it was thought, and lead to nations with hard currencies, low inflation, export oriented economies - and therefore with a good ultimate prognosis.

What has not been realized is that neo-liberalism has turned to neo-conservatism, which means neo-mercantilism and neo-imperialism in bed with each other. The failure of neo-liberalism was not external, but internal. The core nations of the West, particularly the United States, were not willing to maintain the discipline required to be the virtual gold standard of the world. What kept neo-liberalism on track was not the discipline it imposed on peripheral nations, but the discipline in oil consumption and dollar creation that it imposed on central nations. It is not the peripheries where the problems of a particular series of economic arrangements are found.

The Washington Consensus' death can be dated from two particular actions. One was setting the Euro artificially high in its original parity, and the ECB allowing it to slide to an artificially low value. This was an attempt to gain export market share for Europe, and thus, by a unilateral move, improve their economic position within the core nation competition. Since Europe is at a knife edge of imports and exports, additional exports mean additional growth.

The second action was America's refusal to enact tax increases in the wake of the Asian financial crisis. Alan Greenspan, correctly, flooded the world with dollars and cut interest rates in the face of a financial contagion that had reached into the core of US markets. However, while this was the correct way to meet a temporary dearth of dollars in the world, the United States economy was already overheating. The correct action would have been to use counter-cyclical policies on the fiscal side: raise taxes, use the money to reduce the national debt, and thus allow for lower interest rates on the other side. In essence, mop up the excess dollars that Fed policy was creating after they had done their work of preventing good countries from becoming temporarily insolvent.

These failures set up a chain reaction - the obvious outcome of which was the 1999-2000 bubble in technology stocks and in associated large cap stocks in the US. Even as the majority of the market entered a "stealth bear" mode, the visible rise of key companies made it seem as if there was a permanent boom. This boom drew in the savings of the rest of the world, particularly those individuals in peripheral countries seeking to shelter their gains from the inevitable crash.

The poster child for this is Argentina - the dollar board neo-liberal model country that went from boom to bust very, very, very fast. The currency went into meltdown, employment went into freefall and the poverty rate skyrocketted. In other times, Washington would have lead a bailout, and the terms would have been so low that it was an offer that could not be refused. Previously the Clinton administration had been able to convince Argentina to shut down its atomic weapons program, simply because the dollars were too good to pass up.

To put it colloquially, the dollar really was almighty at the peak of the Washington Consensus. As long as neo-liberalism was regarded both internally and externally as a discipline, then it would, at least, deliver what it advertised - a growing circle of organization, increase in trade volumes, and lowering of manufacturing costs which would both reduce inflation, and hold down commodities prices, while pushing investment out from the center to the periphery.

This pushing out of investment was a crucial part of the cycle, because it is that investment which would produce growth in peripheral nations, and convince their populations that the sacrifices of converting to a modern liberal democracy that is part of the neo-liberal trade and financial world order is worth it, it would produce cities, factories, water, electricity, schools and personal wealth. It meant a sacrifice of tribalism, the autonomy of subsistence poverty and reactive associations between religion and politics.

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The collapse of the neo-liberal boom has lead to the rise of a neo-conservative world order, and a halting of progress towards free trade and neo-liberal trade institutions. It has also, I will argue, lead to a change in the effective monetary basis, and therefore of monetary behavior. But that is for farther down the essay.

Let's start with a clear exegesis of the difference between neo-liberalism and neo-conservatism. Neo-liberalism is a hard money standard system based on the idea that trade is force which both produces prosperity and enforces discipline. That prosperity is the reward for the discipline, but the discipline itself is a valuable thing. "Monetary discipline," wrote Robert Mundell, "is a learned behavior." The discipline would prevent excessive social spending, inflation, agitation, tribalism, backsliding into communism, obstruction by subsistence groups to development and the rise of oligarchies. Thomas Friedman and Nicholas Kristoff were the acolytes for this view: namely that since exporting was the source of hard currency, and nations had to give economic liberty to generate maximum exports, they could not then maintain repressive political regimes.

In 1997, Zakaria published an enormously influential article in Foreign Affairs: The Rise of Illiberal Democracy. It is, in essence, a manifesto for the modernist idea that the problems with modern institutions are the hold overs from previous traditionalized orders that will seize the power and technology of the modern age and use it to terrible ends. The ur-root of this idea is one held across the Western intellectual spectrum, it is the diagnosis for why Nazi Germany rose – a backwards anti-semitism , a hold over from the 19th century, seized control of modern and technologically advanced market and political apparatus, and used it to overthrow, first the constitutional restraints on the Weimar Repuiblic, and then to unleash global cataclysm.

Because Zakaria is so often associated with right of center ideas and politics, it is important to emphasize that the basis of his analysis has much broader adherence – from Marxists such as Adorno, through liberals such as Isiah Berlin, through Austrian school thinkers like Hayek – the 19th century's hang over, is the source of modern ills. It is, in short, an idea we can find in Thomas Mann's searching for a reason why "the most civilized nation on earth" would produce the Nazi terror.

He quotes Huntington's formalist definition of Democracy:

Elections, open, free and fair, are the essence of democracy, the inescapable sine qua non. Governments produced by elections may be inefficient, corrupt, shortsighted, irresponsible, dominated by special interests, and incapable of adopting policies demanded by the public good. These qualities make such governments undesirable but they do not make them undemocratic. Democracy is one public virtue, not the only one, and the relation of democracy to other public virtues and vices can only be understood if democracy is clearly distinguished from the other characteristics of political systems.

Zakaria then adds, approvingly:

This definition also accords with the commonsense view of the term. If a country holds competitive, multiparty elections, we call it democratic. When public participation in politics is increased, for example through the enfranchisement of women, it is seen as more democratic. Of course elections must be open and fair, and this requires some protections for freedom of speech and assembly. But to go beyond this minimalist definition and label a country democratic only if it guarantees a comprehensive catalog of social, political, economic, and religious rights turns the word democracy into a badge of honor rather than a descriptive category. After all, Sweden has an economic system that many argue curtails individual property rights, France until recently had a state monopoly on television, and England has an established religion. But they are all clearly and identifiably democracies. To have democracy mean, subjectively, "a good government" renders it analytically useless.

But, in fact, this is a very troubling assertion as two important scholars point out.

The more famous is Prof. Bruce Ackerman of Yale University, whose two volume survey of constitutional crisis in the United States makes clear that Democracy rests on constitutionalism, and that constitutionalism cannot be reduced to formalism, because at key moments, formalism is violated to establish what is seen as a larger constitutional goal. Since the constitutional orders formed by these violations – specifically the Constitution of 1787, the post-civil war Amendments and the New Deal – were remarkably politically durable and effective, violation of formalism is not a good indicator of a collapse in Democracy or Constitutionalism. It takes to monumental surveys to establish this point, but I believe that readers of We the People in its two volume form will be persuaded that he presents decisive historical proof that the formalist view of Democracy is insufficient, at least, to account for the behavior of successful Democracies at points of crisis.

The rising young scholar who also addresses this point forcefully is Jennifer R. Mercieca of Texas A&M University. Her work on the "Republican Fiction" in the formation of the American Republic makes it clear that there is a tension between different definitions of the world "Democracy" and that underlying that tension is a political narrative. In essence, people must believe in republicanism and democracy in order to see them in operation. Without the trestles of word, image and context that this provides, there is no ability to act within a democracy.

These two scholars, when combined, produce a simple counter to the simple formalist definition of Democracy, and an analytically useful counter-definition of the word. A Democracy is a nation which, not only holds elections, but which links the story of the national unit to that process. It is not enough to hold a vote, a Democracy defines itself by holding elections, and seeing these as the genuine expression of the will of the people, a people who are, in their nature, reflective of some source quality of good.

Note how this dual construction underlies Huntington – there is a sine a qua non, the election, which absolves all other sins of the government so long as it is maintained. Zakaria argues, correctly, that elections are not self-justifying in producing even the minimal goods of liberty that elections rely upon. That is, there is no inherent equilibrium in democracy to support even the minimal pillars upon which "free and fair" elections rest. Since free and fair implies basic liberties which Democracy, as Huntington defines it. It is easy to list states which hold elections, and then repress the freedoms upon which any free and fair election must rest.

The reason Ackerman and Mercieca provide ideas which are analytically useful is that they differentiates between kinds of states which violate what we would think of as constitutional norms while still holding elections. There are illiberal Democracies – that is states which have a functioning play of constitutional power, popular approval, elections, and yet routinely violate minimal liberty – and there are states which are undemocratic, even though they go through the procedure of holding elections. States of the first kind fail Ackerman's test of being able to have elections be mandates on constitutional issues, and states of the second kind fail the more basic Merciecan test of having a political fiction that binds the good intrinsic in the people to the good intrinsic in their institutionalization of elections.

To make explicit the difference: states which have the political fiction in place which Mercieca describes have a pegagathetic, perhaps compressible to pagathetic, myth. The people are the source of the good, the way a spring is the source of a river. Nations which meet the Ackerman test of being able to submit constitutional issues to an election, have the archagathetic quality. That is, they believe that the process of election is the achetypical good. The two are not the same thing. In one, the true will of the people is expressed in elections, in the other, the people can only have a political will if they can shape their political destiny by the outcome of elections, even if that violates particular formal details of their constitutional basis.

Starting with Mercieca first – a nation which does not define the "good" quality of its people in terms of its democracy lacks the "political fiction" needed to behave as one. These nations truly are "illiberal" in the paradigm that Zakaria presents. That is, the "good" is defined in pre-democratic terms, and the government is a reflection of the organization of a pre-democratic power, whether religious, tribal or otherwise. They are therefore heedless to violations of their own constitutional limits, because constitutional limits are seen as hindering the will of the true good, which is not reflected in elections, but in some deeper quality. If the election doesn't reflect that quality, then the votes are wrong and need to be corrected.

An example of this is, of course, Iran. Iran is illiberal in that the basic quality of the good is adherence to the Shia Islam which is practiced, combined with an adherence to the norms of social behavior which are said to be based in it. Their political fiction is not that the people are good, but there is a greater good which animates the people. Of course, the epicenter of this kind of unliberal Democracy is sub-Saharan Africa, where many nations have political systems which are merely entrenchments of pre-existing tribal divisions. And the emblematic example is the genocide in the Lakes region, and the follow on war over the Congo. The pre-modern forces are clearly on display, and are merely seeking a democratic façade.

However, not all states which hold elections that are not liberal democracies are victims of a hangover from pre-democractic times. Not all ruling parties are strongman governments who organize pre-modern tribal or religious forms.

Instead, there are those states which fail Ackerman's test, namely, the ability to approach formalism with sufficient flexibility, and the ability to make a particular election a matter of overt confidence.

What this means is simpler to feel than to explain in all of its detail. In moments of crisis, constitutional boundaries – that is, rules, laws, norms, customs or structures – come into question. When the basic nomology of a nation is in question, then there must be some means to decide it. How can one decide what the rules are, when the rules do not sufficiently cover the changes needed? Ackerman's answer is that a victory in an election where the nomology is made the issue of confidence is the answer. That is, if a contest's results are made, by public statements and promises, decisive of the larger constitutional issue, then the state has accepted that elections are a deeper good than other goods. They are archagathetic.

States which do not possess the first are aliberal – that is, the concept of liberty as liberalism in any form uses it does not have any meaning to them. One can see the rise of the first parties that expressly called themselves liberal as being a direct attempt to overthrow pre-democratic sources of organization. The "liberal" parties of Latin America in the early 19th century were anti-colonial, anti-aristocracy, and anti-church, as well as being explicitly uninterested in the racial make up of the citizenry. In short, liberalism's long campaign to destabilize pre-liberal sources of social organization rests on a fiction that Democracy can provide the meaning that previously church, class and state provided.

States which fail Ackerman's test are illiberal, that is they recognize that politics gives meaning, but they are willing to subvert that meaning in favor of other goods.

The reason these two classes look the same is that illiberal states often use aliberal rhetoric. That is, they argue that they are restoring pre-liberal goods that have been destroyed by the coming of liberalism. However, the act on a different level, and have analytically different profiles. Aliberal states have no problems with elections that turn out 95% to 3%. In fact, they see such lopsided elections as being proof that the pegathetic quality that binds the nation together is in place. Illiberal states are uncomfortable with this, since such lack of competition implies that elections are fake, fraudulent, not an expression of the basic good of the people. But they have little to no problem with overturning the results of elections that turn out "the wrong way", as Algeria nullified elections which would have put an Islamicist government in power, and the Islamicists, for their part, began a campaign of terror. Clearly neither side "got" Democracy.

The second part of this article will look at Zakaria's formulation, and his analysis of the present, in terms of these two tools – namely, the collapse of neo-liberalism as a force that disciplines the West, and the difference between states which are aliberal, and states which are illiberal.