12 Leaders The EconomistJuly 22nd 2017
(^2) engineered mergers of ports, railway-equipment makers and
shipping companies; a vast chemicals combination is
planned. Such deals often seem intended to spawn national
champions, not to pare overcapacity.
The other disturbing trend is the proliferation of “state cap-
ital investment and operation” companies (SCIOs). The state
has thus far tended to dominate in heavy industries, transport
and energy, leaving private firms to forge ahead in technology.
SCIOs will, in part, function like state-run private-equity funds
whose remit is to extend the reach of government. Provincial
governmentshave published plans to push funds into areas
such as biotechnology and cloud computing.
The entrenchment of state firms brings dangers both for
China and for the wider world. Domestically, evidence shows
thatSOEs underperform private businesses. Abigger role for
them will mean more inefficiency and slower growth over the
long term. State enterprises are also a principal culprit in the
alarming build-up of corporate debt in China (nearly 170% of
GDPat the end of last year). The IMFestimates thatreform of
SOEs could bring a $1trn economic dividend over the course of
a decade. Their persistence will impose concomitantcosts.
SOEs also risk provoking a backlash as they target increased
foreign sales. With their opaque finances and domestic priv-
ileges, Chinese state enterprises are easily accused of having
unfair advantages when they venture abroad. That could
nourish protectionist sentiment, or prompt other countries to
increase state support for their own firms.
Beat the retreat
Optimists hope for a repeat of a familiar pattern, where a per-
iod of retrenchment is followed by a spurt of reform. In this
narrative, progress will be made again after the party’s five-
yearly congress this autumn, when Mr Xi will have a freer
hand to pursue reforms. Sadly, that is wishful thinking.
Strengthening the SOEs is consistent with Mr Xi’s belief in
tighter state control of just about every aspect of society. A reg-
ulatory clampdown on bank lending to big companies, for ex-
ample, is a way notjust to clean up shadowyfinancial prac-
tices but to influence how private firms spend their cash.
Previous leaders have managed the tension between a lib-
eralising economy and an obsession with stability through a
mix of rapid growth and political repression. Mr Xi does not
want to change that recipe. But he is doing something more
radical: reversing the state’s retreat from the economy. 7
N
O ONE batted an eyelid ear-
lier this year when Turk-
menistan’s strongman, Gurban-
guly Berdimuhamedov, was
“re-elected” with nearly 98% of
the vote. Why, one wonders, did
he bother with an election at all?
Yet in a growing number of frag-
ile new democracies, especially in Africa, where similarly ab-
surd results were once common, elections have become genu-
ine. Since 1991 incumbent governments or leaders have been
ousted at the ballot box at least 45 times, most recently in Ni-
geria, Ghana, the Gambia and Lesotho.
Nerves still jangle at election time, especially when the out-
come is likely to be close, patronage and corruption are perva-
sive, and rigging and violence have blighted previous ballots.
A fraudulent election can tarnish a country’s reputation,
threaten its stability, and deter investment and aid.
Kenya, whose voters go to the polls on August8th, isjust
such a case. Violence after an election in 2007 left at least 1,
dead and 700,000 displaced. The country is the economic and
strategic hub of east Africa, so a credible election this time mat-
ters not only to Kenyans but to many beyond their borders. For-
eign and local observers will be vital to ensuring a clean con-
test in such a “transitional democracy” (see page 47).Beat the cheat
In the bad old days no one (except the hapless citizens of the
countries concerned) seemed to care much if elections were
rigged, provided they were more or less peaceful. Internation-
al monitors would swan in a few days before the poll and—
more negligently—fly out again a day or two after it, often de-claring the election to have been “free and fair” because they
had seen voters cast their ballots without violence. No matter
that fraud and bad blood often increase after polling day.
The likes of Robert Mugabe in Zimbabwe prefer monitors
from the African Union, who in the past have endorsed sus-
pect results (they have recently become a bit more rigorous).
More ambitious places, such as Kenya and Ghana, crave the
imprimatur of the European Union and respected American
outfits, notablythe National Democratic Institute, the Interna-
tional Republican Institute and the Carter Centre.
Nowadays foreign monitoring teams start to arrive a good
month before the big day and stay for at least a month after it.
The outsiders help in several ways. They provide expertise on
technology, especially concerning the registration of voters
and the method of vote-counting. Monitors also help co-ordi-
nate “parallel vote tabulation”, whereby samples of the results
from randomly selected polling stations are collected and pre-
sented quickly to prevent fraud in the later counting process.
Crucially, foreign monitors support local watchdogs who do
most of the work and face the greatest risks.
Foreigners alone cannot ensure fair elections. They rely on
the co-operation of local governments, to gain access to the en-
tire process, including the voters’ register. But they can raise the
bar against rigging. Beyond constraining the incumbents’ pow-
er, their scrutiny can build popular trust in the elections—and
make it easier for losers to accept defeat.
It is an expensive business, but worthwhile. Worryingly, the
Trump administration istrying to slash the State Department’s
budget which helps support democracy, including election
monitors. Congress is right to resist such cuts. Fair elections
make Africa more stable. Giving up on them spreads anger and
poison around the world. 7Helping fragile democraciesWhy monitors matter
Foreign observers and local citizen-watchers can make the difference between a fair election and a disaster