It's really not about "Democracy" at all, and I find very dangerous broad proclamations such as:
"Democracies never fight each other!" or "Democracies never lose insurgency!"
The reason being that some huge importance is then placed on democracy itself, which leads to dangerous policies, such as the one embarked under the Bush administration of promoting and imposing one form of governance that we think is best. To me that always seemed a little too much like what we were so opposed to the Soviets doing during the Cold War; and also very counter to the American principles of Self Determination that are codified in our Declaration of Independence and that shaped our foreign policies all the way up through the end of WWII.
So, I think one gets to this concept of why insurgency don't fare well in democracies far better by starting not with the form of governance in place, but instead by going to what causes insurgency in the first place.
Many focus on human aspects at the bottom end of Maslow's hierarchy as being causal. Lack of security, hunger, etc. But history really simply does not support that as being the true cause. Many people are widely hungry or fearful in their nations, and are loyal citizens. So it must be something else.
Many then point to dynamic leaders that are opposed to the government, and the ideologies they use as being causal. Yet this too falls short of any historical study conducted with even a basic understanding of the nature of insurgency. If the populace is not ripe for insurgency no amount of ideology or charisma will incite it to insurrection. As I have stated before, the Pied Piper is a fairly tale.
So where I am currently at is that insurgency is caused by poor governance, that being:Some situation or condition, real or perceived, that is so egregious to some significant segment of the populace, that they also perceive they cannot resolve through legitimate means, so as to move them to seek change through illegitimate means.
The safety valve that democracy provides is that if it is a democracy that the populace has confidence in, then it provides the hope of addressing such conditions through legitimate means. The key is that other forms of governance that also provide some mechanism of legitimately addressing such grievances will also effectively deter insurgency.
This is why I am a firm believer of promoting self-determination. This in of itself implies some democratic process in determining what form of government one wants to live under. To have someone else impose democracy is really not very democratic at all. So if a populace votes for dictatorship, then they have exercised democracy and achieved the form of government they desire. Any government desired by a populace is superior to any form of government imposed upon them. Likewise, any country that is seen as an enabler of such self-determination is far less likely to find it self on the blame line (target list) of a populace that drifts into conditions of poor governance than a country that has directed the establishment or sustained artificially the despotic power.
Legitimacy and goodness. Promote goodness for others, but avoid taking on a perception of legitimacy for their governance. This strikes at causation. A good democracy achieved through self-determination is very resilient to insurgency for this reason. It self-corrects "poorness" and it has "legitimacy" that is fully recognized and accepted by a majority of the populace.
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