Oct 14, 2018

Investing in autocrats

Brazilian presidential candidate Jair Bolsonaro. Photo: Mauro Pimentel/AFP/Getty Images

It feels like the Cold War is back. States are engaging in shadowy extrajudicial killings on foreign soil, even as the world watches the rise of authoritarian strongmen like Rodrigo Duterte, in the Philippines, and Jair Bolsonaro, in Brazil.

What's happening: Bolsonaro handily won the first round of presidential elections last week and is expected to similarly win the runoff on Oct. 28. Brazil's stock market jumped 6% at Monday's open, greeting the election result with glee, although it then fell back in line with global stock-market losses.

  • Bolsonaro, who served in the military during the Brazilian junta, first came to international prominencein 1993, when he attacked "irresponsible democracy" in front of the national parliament and proclaimed that he was "in favor of a dictatorship."
  • If Bolsonaro becomes president, expect more bloodshed and less democracy in Brazil. Also, expect the kind of pro-business economic policies that have been meet with the resounding approval of the Wall Street Journal's editorial page.
  • The chart of the Chilean stock exchange under the Augusto Pinochet dictatorship below shows that markets are gruesomely amoral. Bolsonaro knows that one of the most effective ways of holding on to power is to keep the capitalists on his side.
Expand chart
Adapted from Girardi et. al., 2018, "Institution shocks and economic outcomes: Allende’selection, Pinochet’s coup and the Santiago stock market"; Chart: Andrew Witherspoon/Axios

Driving the news: Big business also loves China and (at least until this week) Saudi Arabia. Neither country has ever had democracy, and both are major human rights abusers.

  • The list of bigwigs appointed to a major new Saudi advisory board includes (for the time being) venture capitalist Marc Andreessen, Uber founder Travis Kalanick and Dow Chemical's former CEO Andrew Liveris.
  • The seeming murder of Washington Post columnist Jamal Khashoggi, however, has touched a nerve within the global elite that Saudi Arabia's war crimes in Yemen did not.
  • The big Saudi "Davos in the Desert" conferencescheduled for later this month is seeing a raft of desertions, including Richard Branson, Steve Case and Dara Khosrowshahi, the CEO of Uber, in which the Saudi sovereign wealth fund is a major shareholder. Jim Yong Kim, the World Bank president who c0-founded Partners in Health, has also pulled out.
  • Financial attendees, on the other hand, seem to be less squeamish about consorting with the Saudi regime. Still attending, as far as we know (but probably secretly hoping that the conference will end up being canceled): TPG's David Bonderman, JPMorgan's Jamie Dimon, BlackRock's Larry Fink and, of course, Treasury Secretary Steven Mnuchin.

The bottom line: It's very easy to proclaim oneself a believer in "responsible capitalism." But when forced to make a choice, business tends to stick with anything that looks profitable.

  • Very few businesses are actually cutting ties with Saudi Arabia. Pulling out of a single conference is relatively easy virtue-signaling.
  • If businesses do change their minds about projects there, it's more likely to be because of expropriation risk than it is to be a triumph of high-minded democratic idealism.

Go deeper

In photos: Authorities issue warning as Americans venture out for Memorial Day weekend

Venice Beach in Los Angeles on May 24. Photo: David McNew/Getty Images

Authorities urged Americans to maintain social distancing and wear masks against the coronavirus amid reports of packed beaches and bars during the Memorial Day weekend.

Driving the news: Law enforcement stepped up beach patrols, authorities on Florida's Gulf Coast closed parking lots because they were full and there were crowded scenes at Lake of the Ozarks bars in Missouri, per AP, which reports a shooting injured several people at a packed Daytona Beach in Florida.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9:30 p.m. ET: 5,405,029 — Total deaths: 344,997 — Total recoveries — 2,168,408Map.
  2. U.S.: Total confirmed cases as of 9:30 p.m. ET: 1,642,021 — Total deaths: 97,698 — Total recoveries: 366,736 — Total tested: 14,163,195Map.
  3. World: White House announces travel restrictions on Brazil, coronavirus hotspot in Southern Hemisphere Over 100 coronavirus cases in Germany tied to single day of church services — Boris Johnson backs top aide amid reports that he broke U.K. lockdown while exhibiting symptoms.
  4. Public health: Officials are urging Americans to wear masks headed into Memorial Day weekend Report finds "little evidence" coronavirus under control in most statesHurricanes, wildfires, the flu could strain COVID-19 response
  5. Economy: White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election — Public employees brace for layoffs.
  6. Federal government: Trump attacks a Columbia University study that suggests earlier lockdown could have saved 36,000 American lives.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 1 hour ago - Politics & Policy

Republicans sue California over mail-out ballot plan

California Gov. Gavin Newsom during a February news conference in Sacramento, California. Photo: Justin Sullivan/Getty Images

President Trump accused Democrats of trying "Rig" November's general election as Republican groups filed a lawsuit against California Sunday in an attempt to stop Gov. Gavin Newsom (D) from mailing ballots to all registered voters.

Driving the news: Newsom signed an executive order this month in response to the coronavirus pandemic ensuring that all registered voters in the state receive a mail-in ballot.