What does it mean to have a "functioning democratic political system based on a market economy"?

Question

The NATO fact sheet linked in this answer states that one prerequisite for joining NATO is a

functioning democratic political system based on a market economy

What does that mean? A democracy "based" on a type of economy? In my admittedly simplistic view, a political system is the basis of forming a government, and then that government can enact policies, including economic policies. "Basing" a democracy on the economy seems to be putting the cart before the horse.

I (partially) understand the idea of democratic capitalism, where the ideas of government and economy are discussed in tandem. My cursory searches suggest that in those discussions, economic policy is viewed as a product of the government. From Wikipedia:

The policies which characterise the system are enacted by democratic governments.

So is NATO referencing a viewpoint on politics and economy that I can't see? Or is it just peculiar phrasing for the idea of democratic capitalism?

Answer 1

Here, NATO wants candidates to have

[s]hown a commitment to promoting stability and well-being by economic liberty, social justice and environmental responsibility

It also expects candidates to

[c]onform to basic principles embodied in the Washington Treaty: democracy, individual liberty and the rule of law

So NATO seems to have concluded that a market economy provides an economic liberty which is part of the style of liberty and democracy that they want to embrace. There may be other democratic choices, but NATO at the time found them incompatible with membership in their club of like-minded allies.

This is qualified by

Bearing in mind that there is no fixed or rigid list of criteria for inviting new members to join the Alliance

Keep in mind that every membership decision is an individual case. There are few enough candidates that NATO does not have to automate the decisionmaking process by internal regulations. This is a political statement of principle, laid out as the starting point of the negotiation process.

Answer 2

TLDR: This criteria had to do with post-USSR Eastward enlargement criteria and shows up in a NATO summit of January 1994.

This was what I originally thought, and put as a comment:

I wonder if it wasn't a blurb added at the time to explicitly filter out Communist countries, keeping in mind NATO's original reason for being was to oppose Communism in the European theatre. No more, no less. However, if that is the case, how would that be proven? You need an "X was added at the request of Y to achieve Z". You sometimes see widely publicized attributions of small edits in treaties to some party for some reason, but that is not always the case, even if minutes of meetings still exist somewhere.

I was wrong. When I wrote this, I thought it was something that was old in NATO's DNA, from the beginning. But it seems to be more recent than that, 1993-1994 timeline.

It surfaced during the January 1994 NATO summit. As per "Security and Defence and enlargement of the European Union (2)", from the EU Parliament:

In December 1994 the North Atlantic Council announced that it was studying the enlargement of NATO. Several principles were proposed.

1. The aim is still defence of the Alliance's vital interests and promoting stability throughout Europe.

2. Reasonable and gradual enlargement of NATO should be open and not secret.

3. There is no timetable or list of countries invited to join. Questions 'who?' and 'when?' will not be answered until the end of the first half of 1995.

4. Each country will be considered individually and not as part of a group.

5. The Alliance alone will decide which countries can join and when. No non-member country will have the right of veto.

6. Even though membership criteria have not yet been defined, future members must be democratic countries with a market economy, committed to security policies, and responsible and capable of contributing to the Alliance.

7. Each new accession to NATO will entail a solemn commitment for the United States: a defence treaty that holds out the American umbrella for the country concerned.

Furthermore an article dated May 1995 says indicates the criteria had been a recent development (and thus likely triggered by the collapse of the Warsaw Pact). And it also indicated that NATO thought it could afford to be picky:

During the Cold War criteria did not play a major role when NATO expanded. When the Federal Republic of Germany joined NATO in the mid-1950s it so under clearly different circumstances than did Spain in the early 1980s. Both cases, however, served the Alliance's strategic interests.

...

which criteria should be applied has been debated for more than a year. Among them are:

Commitment to democracy and market economy.

At a guess? NATO explicitly did not want to take on take on East European countries that hadn't "reformed" to its liking. Not so much Russia, as places like Bulgaria or Rumania for example (both countries that took a while to shake off old habits).

It wasn't meant to keep Communist countries out, there were not many left in Europe by that point.

But it might have been meant as a carrot: you can join us if you are like us. Part of it might have been to pressure countries into capitalist reforms which could prove profitable to existing NATO members. Part of it might have been to steer free of train wrecks - post-Soviet Eastern Europe went through some pretty drastic economic contractions after 1991.

But if you want to know more you probably need to expend more Google-fu around the run-up to this January 1994 NATO summit and the horse trading around enlargement at that time.

Answer 3

Politics and economy are inseparable
From the Marxist-Leninist viewpoint (exposed already in the Communist manifesto, and developed in many works afterwards), a political system is inseparable from the economic one, since

• The distribution of wealth is ultimately determined by those who hold the political power (distributing the wealth either directly to themselves or to the interest groups who help them to remain in power, e.g., specific voter groups)
• Those who control the wealth or the redistribution of it ultimately have more political power (either via bribery or, as mentioned above, by exchanging wealth for political influence).

One then argues for the inevitable succession of political economic systems from the primitive society to slavery (in the sense it applies, e.g., to ancient Greece and Rome), to feudalism, to liberal democracy/capitalism, to communism. As a remark: socialism is considered a transitory stage between capitalism and communism.

Thus, liberal democracy, with its accents on individual freedom and individual rights is coupled with capitalism, which is just an extension of these ideas to the economic sphere. Communism implies subjugation of individual interests and rights to the common good, and therefore is incompatible with liberalism. Instead a communist society is governed in a dictatorial manner - name dictatorship of the proletariat (although in practice ends up being a dictatorship of the people put in charge, as history has shown) - it is an essence a totalitarian society, i.e. a society where the government is free to interfere in individual affairs - political, economical, personal, etc.

What does it have to do with NATO?
While it is unlikely that NATO based its doctrine on the Marxist principles directly, it is very likely that this doctrine was based on opposition to these principles, i.e., being their full reflection with the change of color (black is white and white is black).

Remarks:

• Note that capitalism is used here as a technical term, not as a designation for everything related to the rich - the rich obviously exist under any political/economic system, even under communism. In this sense crony capitalism is a misnomer for what is really an abuse of the powers given to government for caring for the common good.
• Similarly, socialism in everyday parlance is used as a synonym for anything social and therefore good. None of the countries referred to as socialist in modern political discourse are actually called socialist or use this term in their legal documents - they are social democracies. The countries that did call themselves socialist were mainly those of the former Soviet block.

Answer 4

NATO was formed at the beginning of the Cold War to counter the Soviet bloc and its (presumed) expansionist tendencies. It wanted to emphasize capitalism as a fundamental principle because most socialist (as well as many purely authoritarian) regimes style themselves as democratic republics, which creates ambiguity. There was a general ideological agreement among major powers that power should ultimately be vested in the people (without commenting on whether that principle was actually practiced by any nation). The main disagreement was whether 'the people' should exercise that power through a Liberal-individualist model that featured capitalist-style competition, or whether the 'the people' should exercise power through a social-collectivist model that featured extensive economic organization and planning. NATO based itself on the first model.