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The consequences of democracy
For economic growth, human development, & peace
Thanksgiving!
Class structure
I. Recap: • Does economic development promote democracy?
Przeworski et al. Ch 2
II. Consequences of democracy for… 1. Economic growth? - Przeworski et al. Ch 3 & 42. Human development - Siegle et al.3. Peace - Mesquita et al.
III. Discussion: Policy implications?
I: Recap Przeworski et al
1. Are democracies more likely to emerge as countries develop economically? (The ‘endogenous’ or ‘modernization’ thesis)
• Industrialization, urbanization, education, communication, mobilization…democratization
2. Having emerged for other reasons, are they more likely to survive as democracies in developed nations? (The exogenous thesis)
• Emerge due to war, death, economic crisis, foreign pressures, succession crisis, etc
• Level of income cannot predict when dictatorships fall
Model
Affluent Democracy
Poor Dictatorship
Regime change
Democracy
Democracy
Dictatorship
DictatorshipDictatorship
Regime change
Table 2.1 p.82
Conclusions Ch2.
“To summarize, the level of economic development, as measured by per capita income, is by far the best predictor of political regimes. Yet there are countries in which dictatorships persist when all other observable conditions indicate that they should not; there are others in which democracies flourish despite the odds.” p.88.
II: Consequences of democracy for growth, development, and peace
Impact of democracy on human development
Sources:– Przeworski et al 2000. Democracy & Development– Joseph T. Siegle, Michael Weinstein and Morton
Halperin. 2004. ‘Why democracies excel’ Foreign Affairs 83(5):57-72.
– Morton H. Halperin, Joseph T. Siegle, and Michael W. Weinstein. 2005. The Democracy Advantage Routledge
Key Questions
Is there a trade-off between economic and political development?Do developing countries have to choose either higher per capita income/less democracy (the ‘China/Singapore model’) or democratization and poorer economies (the ‘India’ route)?Complex normative and empirical issues
Discussion
What is the impact of democracy on economic growth?Reasons why democracy may harm growth?
Reasons why democracy may benefit growth?
Change in democracy and economic development
Democracy & development
Fear that democracy hindered economic development– Galenson (1959), Huntington (1968), O’Donnell (1973)– Rise of unions > pressures on wages/ consumption/ inflation– Shift from investment to consumption– Democratic regimes more vulnerable to public pressures– Stronger governments can take difficult decisions in long-term national
interest (the ‘authoritarian advantage’)Counter arguments – North (1990), Barro (1990), Olson (1991), Sen (1994)– Democracies better allocate resources to productive uses– Some government intervention in economy is optimal for growth – Dictatorships are less efficient than markets– Sen: “no democracy ever experienced a famine” – press & opposition
Przeworski et al.
Does democracy undermine investment?Growth rates of productive inputs– Investment share in GDP – Probit model controlling for income, Britcol, religion
Unit of measurement: type of regime per year 1950-1990 (dictatorship v. democracy)
Przeworski et al.
Conclusions: “There is no trade-off between democracy and development, not even in poor countries.” p178.In poor countries (with incomes below $3,000), the two regimes are almost identical in their:– Investment shares– Growth of capital stock– Growth of labor force– Output per worker– Product wages
Democracy need not be sacrificed to economic developmentYet important distinction between rich and poor nations
Przeworksi et al.
Poor nations invest little, get little value from total factor productivity and pay low wages– Most poor nations remain poor– Regimes make no difference for growth– Democracy is fragile in poor nations so most have dictatorships
More affluent nations ($2500-3000+)– Total growth rates similar for dictatorships and democracies– Yet reasons for growth differ…
• Wealthy dictatorship grow by using a lot of labor and paying low wages (repressing unions) – labor-intensive productivity, higher birth rates/fertility but shorter longevity (esp. for women)
• Wealthy democracies grow by using labor more effectively: slower population and labor growth rates but higher wages, benefit more from technical progress
Przeworski et al. conclusions
The kind of regime does not affect the rate of investment, the growth of capital stock (p153), or the growth of total income (p156)“There is no trade-off between democracy and development, not even in poor countries.” P.178“Much ado about nothing.”Strengths and limits of this account?
Potential criticisms of Przeworski
1. Definition/classification of regime types?2. Focus on economic, but not human, development 3. Limited period of analysis: post-1990 developments?4. Under-specified model –
– Limited institutional controls?– Limited cultural controls?
5. Outliers to the model – eg Singapore, Saudi Arabia?
Halperin, Siegle and WeinsteinClassification of nations
Compare all nation states 1960 to 2001Low-income nations (per capita less than $2000)Contrast low-income autocracies and democraciesClassification by Polity IV
Ref: Halperin, Siegle and Weinstein
Halperin, Siegle and WeinsteinConcepts
Democracy: “Governance systems in which national leaders are selected through free and fair elections, there are institutions that foster a shared distribution of power, and citizens have extensive opportunities to participate in political life.”Polity IV democracy index
Use Polity IV index
Rates 161 states every year since 18000-10 scale
• Constraints on the chief executive (1-4)» (Independence of the chief executive)
• The competitiveness of executive recruitment (1-2)» (Extent to which chief executive is chosen through competitive elections)
• The openness of executive recruitment (1)» (Opportunities for non-elites to attain executive office)
• The competitiveness of popular participation (1-3)» (Extent to which non-elites are able to access institutional structures for political expression)
Democracies: score 8 to 10Intermediary states: 3 to 7Autocracies: score 0 to 2
Halperin, Siegle and WeinsteinEconomic Growth
Among all countries, democracies have realized consistently higher levels of economic growth from 1960-2001 (2.3% vs. 1.6%).Among low-income countries, no difference in per capita growth in GDP between democracies and autocracies (1.5% to 1.3%) (confirms Przeworski)– When East Asia is removed, the authoritarian growth rate of
growth drops while the democratic rate remains steady– Low income democracies have less volatile growth– Note: prob. of missing/unreliable data for autocracies
Halperin, Siegle and WeinsteinEconomic indicators
0.74
3.26
-0.15
2.66
1
3.16
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
PerCap GDP Growth 1975-2002 GNP Annual Growth 1975-95
Autocracy
Mixed
Democracy
Note: Poor nations only (GDP/cap under $2000)
Polity DEMOC: 35 Autocracies, 25 Mixed, 16 Democracies
Halperin, Siegle and WeinsteinEast Asian exceptionalism?
What of S. Korea, Taiwan, Singapore, Vietnam, Indonesia and China? Rapid growth under autocracies. Exceptions. Why?
• Pursuit of market economics• Access to capital markets• Constraints on leaders• Relative social equality• Openness to Western markets• Security interests
Also failures (Burma, Cambodia, N. Korea)
Halperin, Siegle and WeinsteinSocial Indicators
90
75
114
54
107
74
116
55
29
43
6067
0
20
40
60
80
100
120
140
Aids/100000 InfantMortality ChildMortality LifeExp
Autocracy
Mixed
Democracy
Note: Poor nations only (GDP/cap under $2000)
Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies
Halperin, Siegle and WeinsteinSocial Indicators
55.5
34.5
62.9
5453.6
38.4
70.4
52
67.6
20.5
80.3
69
0
10
20
30
40
50
60
70
80
90
Educ enroll 2002 Illiteracy Water Gender (GDI)
Autocracy
Mixed
Democracy
Note: Poor nations only (GDP/cap under $2000)
Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies
Halperin, Siegle and WeinsteinSocial indicators
On average, low income democracies consistently have superior levels of welfare across various measures of human development
• Life expectancy• Secondary school enrollment• Agricultural production• Childhood mortality• HDI
Growing divergence in recent decadesDue to greater effectiveness NOT higher welfare spending (eg education)
Halperin, Siegle and WeinsteinGovernment expenditure
24.5
4.22.7
9.7
20.2
3.52
10.5
22.9
4.1
1.63.2
0
5
10
15
20
25
30
Central Govnt Educ Military Aid rec'd
Autocracy
Mixed
Democracy
Spending & aid as % GDP.
Poor nations only (GDP/cap under $2000)
Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies
Halperin, Siegle and WeinsteinA ‘democratic peace’?
Autocracies more stable?Autocracy, poverty and conflict are related. Democracies are less likely to engage in conflict with other democracies than any other regime type– Less external conflict (?)– Fewer civil wars
Democracies are less likely to be state failures - one of the three most important factors (The State Failure Project)
Democratic peace
Democracies rarely fight each other
Why?– Constraint of risk-averse mass public?– Constraint of multiple interest groups?– Transparency of decision-making process leads
towards greater trust and predictability– An Imperial (US hegemonic) peace?
Ref: Bueno de Mesquita et al. 2003. The Logic of Political Survival MIT Press
Halperin, Siegle and WeinsteinPolicy implications?
Multilateral agencies should prioritize democracies by…1. Use democratic selectivity when allocating aid
• Eg MCA
2. Revise charters WB, IMF & regional banks to favor democratic regimes
3. Use democracy-impact statements4. Separate security aid from development aid5. Develop cohesive Development Policy coordination Council
(Sec State, Treasury, MCA, USAID)
III: Discussion exercise
Ford Foundation Discussion Exercise
Policy Analysis Role Playing Exercise: Ford Foundation Program ManagementDivide into pairs to discuss the following. You have 15 minutes to develop your joint recommendations and the reasons for your conclusions.
You are employed as Senior Program Managers for the Ford Foundation. The Foundation has decided to invest $50m over a ten year period in the Rights and Social Justice Program aimed to encourage Governance and civic society in the developing world. “In governance we foster effective, transparent, accountable and responsible governmental institutions guided by the rule of law and dedicated to reducing inequality.”
The Foundation has asked you to advise them about suitable criteria for this Program when evaluating how to prioritize applications for different projects in Africa, Asia and Latin America. The Foundation wants to know which of the following two options they should follow.
(i) To prioritize investments in projects which will directly encourage economic growth and social equality in developing countries, (including improving education , encouraging literacy, and reducing extreme poverty), on the grounds that human development will gradually create the necessary social and cultural foundation for democratic consolidation.OR(ii) To prioritize investments in projects in developing countries which will directly encourage the reform of political institutions, including funding independent advisors to promote free and fair elections, effective party competition, the organization of voluntary and professional associations in civil society, and a free press.Focus your discussion on any two poorer developing countries (defined as those with a per capita GDP (PPP) of less than $4,000). What are your recommendations, and why? Use information from your experience, from Przeworski, and from the data to support your conclusions.
Democracy and Development, 2004
Rich autocracies
Poor democracies
Next class:Huntington’s Clash
Wed: Does Huntington predict a clash of ‘civilizational cultures’? Reading: Huntington Ch.1-3