It's been a messy week in Mongolia, with the collapse of its coalition government, legislators switching sides and protesters breaking into the headquarters of its largest political party.

But democracy is sometimes like that. As Winston Churchill once said, "no one pretends that democracy is perfect or all wise." The real threat to freedom and democracy in this stalwart U.S. ally comes less from recent events, but rather from long-term economic and social challenges -- which Mongolia needs the support of its Western allies to overcome.

Mongolia's democracy is young. It has been barely 16 years since the Mongolian People's Revolutionary Party (MPRP), which ruled the country as a puppet of the Soviet Union since the 1920s, decided to follow the global trend toward democracy. Importantly, it chose the East European model of a parliamentary system of government, rather than an autocratic presidential system favored by its neighbors in the newly independent former Soviet Central Asian republics. Unlike those Central Asian states, most of which are still autocracies, Mongolia has had several constitutionally elected governments since 1990, with every political transition being a peaceful one.

That's not to say elements of the bad old days don't linger on. The MPRP is still a disciplined Leninist party distrustful of a free media. State television is unashamedly dominated by the MPRP. Eagle TV, the country's sole independent cable news station, has to contend with regular political pressure.

Nonetheless the political process continues to work -- albeit in the messy and inefficient way of many a democracy. The seeds of the recent turmoil were sown in the June 2004 elections for the Grand Hural, Mongolia's parliament. A reunited democratic opposition (which had lost power four years earlier after splintering over a mixture of policy and personality issues) staged a major comeback, winning 34 new seats under the banner of the Motherland Democratic Coalition. The MPRP were reduced to 37 seats from 72, leaving the 76-member parliament evenly divided between the two sides.

The result, after much bargaining, was an MPRP-reformist "Coalition of 61" government which included 24 opposition politicians, including a leading democrat, Tsakhia Elbegdorj, as prime minister. But it was always an unstable coalition, and last Friday it fell apart when a democratic legislator defected to the MPRP, giving the party effective control of the parliament. The MPRP promptly withdrew from the coalition government, citing popular discontent over slowing economic growth and rising inflation as its excuse, and successfully engineered a vote of no confidence. Anger over the MPRP's tactics prompted 1,000 protesters to storm its headquarters last week, although rather than ransacking the building they confined themselves to a peaceful sit in.

On Tuesday, the MPRP named Miyeegombo Enkhbold, a hardworking former mayor of Ulan Bator and now the party's chairman, as its candidate for prime minister. Mr. Enkhbold is a long-time protégé of President Nambaryn Enkhbayar, who was also Mr. Enkhbold's predecessor as MPRP chairman. Mr. Enkhbold is expected to be confirmed as prime minister by parliament, possibly as early as today. However the bulk of the opposition has said it will not join another coalition with the MPRP, which will make it more difficult to form a new government quickly.

Nonetheless, the prospect of continued political turmoil in such a strategically important state is causing little concern in Washington. Mongolia has been a loyal American ally in recent years, sending troops to Iraq and Afghanistan, voting with the U.S. in the United Nations, and serving as Washington's eyes and ears as a formal observer in Beijing's Central Asian security alliance known as the Shanghai Cooperation Organization. Its strategic importance was demonstrated by visits by U.S. President George W. Bush and Defense Secretary Donald Rumsfeld last year.

But no one expects its pro-Western foreign policy to change as a result of the present turmoil. Senior figures in the MPRP have already pledged that Mongolia will keep its small contingent of troops in Iraq and Afghanistan under the new government.

Yet the situation still merits watching closely. Sandwiched between two giant neighbors that together account for half of Mongolia's trade, Mongolia is in a delicate geopolitical situation. China alone provides 30% of Mongolia's foreign investment and virtually all of its textile industry. The prevailing view in the MPRP is that the country cannot develop without China. In Ulan Bator for last summer's presidential election, I listened as one politician privately worried about, "a view that Mongolia needs a powerful, stable, one-party government like China's or," as my interlocutor caught herself and quickly added, "Singapore." By contrast, Mr. Elbegdorj's Democrats were serious about anti-corruption legislation, free market legislation and strengthening Mongolia's parliamentary model. "The loss of Elbegdorj is a definite setback," one diplomat warned me.

However the real threat to Mongolian democracy lies in its chronic economic woes. Unemployment stands at 14.2%, while 36% of the population live below the official poverty line. Slowing economic growth suggests there is little prospect of any improvement in the short-term. Official corruption, although generally for the benefit of family or clans rather than personal enrichment, becomes more widespread the longer the government cannot resolve these social ills.

If President Bush wants to keep Mongolia democratic and preserve it as a beacon of freedom in benighted Central Asia, the priority needs to be providing additional resources to help Mongolia's economy. A Free Trade Agreement with Mongolia would be a good start, offering incentives for industrial investment in Mongolia -- especially in sectors that China competes in. As American FTA's with Jordan and Morocco demonstrate, an FTA also has political and security dimensions that would enhance Mongolia's independence from its two neighbors.

The administration could also lobby for Mongolia's admission to regional security organizations such as the Asia Pacific Economic Cooperation Forum and the Northeast Asia Security Dialog, a step that would ease the pressure it faces from China and Russia. Washington could also usefully keep an eye on freedom of expression on the Steppes. One cannot overestimate the moral influence that the United States, European nations, Japan and other democracies have among Mongol citizens.

It may take a little time, but Mongolia will emerge from its present turmoil with a new government formed peacefully -- in a shining example of how democracy, for all its inefficiencies, can work in a part of the world where it is still all too rare. But unless more is done to address Mongolia's economic woes, the question is how much longer the country can continue to serve as such an example.

John J. Tkacik Jr. is a research fellow in the Asian Studies Center of The Heritage Foundation.