Chapter 2 Setting the Record Right

1. Chapter 2Setting the Record Right Kurumi Ishida and ItzKeihan

2. Which model is more suitable to.., • Propel economic growth in low-income societies? • Propel Socio-economic progress in low income societies?

3. Authoritarian government to propel economic growth • Authoritarian regime was better suited to mobilizing the nations’ limited financial and human resources • Authoritarian governments are better equipped to overcome cultural and legal obstacles POST-COLD WAR • Movements toward democracy by developing countries • However democracy was still thought to hinder economic development

4. Why? • Macro-economic populism 2. Politicians vulnerability to the influences of wealthy individuals 3. Slowness to act due to check and balance system 4. Tendency to precipitate political instability

5. Should the international community support democratization in developing countries? • 1960-2005 • Democracies versus autocracies (low income) • Low income = per capita income below $2,000 ⇒Democracies, have on average out-performed autocracies in levels of economic growth

6. Median Growth Rates for Low-IncomeDemocracies and Autocracies (1) Median Growth Rates for Low-Income Democracies and Autocracies 2.04 0.76 Median GDP/Capita Growth Democracies and Autocracies • Relative stability, less volatility in growth rates • 5/100 worst performers • (per capita economic growth rates)

7. (2) Median Growth Rates for Low-Income Democracies and Autocracies Outside of East Asia • Probability of experiencing economic disaster is 1% against 3.4% of autocracy. • Its volatility is regardless of income level

8. Socio-economic ProgressSocial Indicators (1) Median Levels of Life Expectancy Averaged life expectancy rates 8-12 years higher Median levels of Secondary School Enrollment School Enrollment India: 60% Cameron: 40% (25% higher per capita)

9. Socio-economic ProgressSocial Indicators (2) Median Levels of Cereal Yields Median Levels of Childhood Mortality

10. Median Levels of Various Social Welfare Indices by Political Category

11. Median Levels of Human Development Index (1975-2005)

12. Growing gap phenomena • Decrease in the number of autocratic government • Widespread market-based economic performance • Increase in accessibility of telecommunications, transport, and air travel ⇒Democratic governments are more competetive in absorbing and adapting new information

13. Social Welfare Expenditure • 1990s, low-income democracies spent 0.5% of GDP per capita more on primary scvhool children

14. Is Democracy an Advantage for economic prosperity? • pairs of countries with similar, economic and geographic origins, but under different political system. • Which one is better off economically? • East Germany vs. west Germany • North Korea Vs. South Korea • Haiti Vs. The Dominican Republic • China Vs. Hong Kong and Taiwan States that were/are relatively open and democratic, have developed more rapidly than those of authoritarian authoritarian counterparts.

15. Democratic Advantages #1 • Shared Power • Vertical Accountability: citizens, mass media and civil society hold leaders accountable for their action. Therefore, in democracy • Government Serve the public interest among other Alternatives • Democratic system act accordance to the political center of society=> Majority population. Whereas, In Authoritarianism, it is other way around

16. Democratic Advantages #2 • Shared Power • Horizontal Accountability: Government power is shared between Parliament, Judiciary, executive branch Therefore,in Democracy, • Self-reinforcing mechanism for curtailing Abuse of power. • Radical and devastating policy could be avoid. Whereas, in Authoritarianism, • frequently Abuse of power by chief executive • Uncheck policies e.g. Feminine of 1990s in North Korea which had killed 10% of its population. “Amartyasen emphasize “contemporary democracies with a free press have never experiences a major famine”

17. Democratic Advantages #3 • Shared Power • Great Allocation of opportunities: Separation of government and economic opportunities (free market economy) Therefore, in Democracy • Government Adherence to the rules of law • Creation of private property rights • Economic productive and asset creation Whereas, in Authoritarianism • The rules of law could be violated often • Creation of private property rights need political affiliation.

18. Democratic Advantages #4 • Openness • Information Access: Free flow of information to public, freedom of speech and expression. Therefore, in Democracy: • the policy of government is face with public and civil scrutiny • Counterproposal and opinion are taking into consideration (journalist, scholars, business leaders…etc) • the quality of analysis of the policy is high Whereas, in Authoritarianism: • The right of giving counterproposal are taken away. • Lack of public observation of policies. • Low quality of policies

19. Democratic Advantages #5 • Openness • Greater transparency: openness contribute to greater levels of transparency Therefore, in Democracy: • Decrease the level of corruption (late 1990s on average level of corruption in democratic states were nearly half those autocracies) • Emergence of corporate-government Whereas, in Authoritarianism: • Great concentration of power and increase the level of corruption • Economic monopolies hamper economic development.

20. Democratic Advantages #5 • Adaptability • Political Stability: an established mechanism for current and future peace and stability of the countries. Therefore, in Democracy: • Legitimate mechanism for succession process (through constitution). • Periodic election and peaceful replacement of ineffective leaders. Whereas, in Authoritarianism: • Absence of transition mechanism, and the succession process must be reinvented every time • As MancureOslon Argue “the stability of even durable autocrats is limited to a single lifetime”.

21. Democratic Advantages #6 • Adaptability • Democracy as Learning Organization: • Self Surveillance and adaption => govern through trail and errors. • Successful policy are expanded and ineffective are discarded. • “Democratic governance does not guarantee coming up with the ‘right’ policy, it does guarantee the option of changing a policy if it is ‘Wrong’”. Superiority of democracies over authoritarian state during East Asian Financial crisis. • South Korea • Election of 1997 promised the structural reform. • Reform-minded Kim Dae Jung won election and significant poilicy reforms were undtaken • Followed by the revitalization of economy. • Indonesia • Crisis expose structural weakness of authoritarian government • Leading to the collapse of Suharto regime • Has not yet recovered from the crisis (check book publication date)

22. East Asian exceptional miracles #1 • South Korea, Taiwan, Indonesia, singapore,And china have all realized rapid economic growth under autocratic system. • It present conceptual and empirical challenge to the notion of superiority of democracies. • While states such as: Philippine(Marcos’s regime), Combodia, Burma and North Korea under authoritarian rules remained with very low economic growth. • Therefore, authoritarian-runs economic daynamo is not necessarily the outcome of political system, But some exceptional factors such as: following Slides

23. East Asian exceptional miracles #2 • Good Economic policies. • Market oriented policies . E.g Uphold property right => vibrant private sectior • Macroeconomic stability. (Fiscal surplus, stable exchange rate, discipline monetary policies and inflation under control,…) • Agriculture sector as an engine of economic grow at early stages =>60-90% of pupulation engaged in Agriculure sector. • Investment in Agriculture Technology => Increased in production of Rubber, Palm oil, silk, rice,…etc • Chinese businessmen. • Taking advantage from the synergy of extensive regional dynamism. Particularly Expertise and capital mobility of ethnic chines • Taking Advantage of neighboring markets.

24. East Asian exceptional miracles #3 • Japanese Capital. • Benefit from availability of Japanese capital. • Japanese bank invested heavy in east asian emerging markets. by mid 1990s, 40% asset liability were Japanese banks. • Access to Market. • Pursued of aggressive export-oriented growth strategies. • Opening of market while West maintain large trade deficit. • Meanwhile, East Asian dynamos benefited largely from closeness to China. • Collective interests. • High level of income-equality at early stage of development. • Access to health care and education as they grew economically • Improvement of human capital and their higher level of contribution to ecomomic productivity and investment.

25. East Asian exceptional miracles #4 • Capital Mobilization. • High rate of investment. • Higher labor participation • Transfer of labor from Agriculture to manufacture. • External Influence. • Geopolitical development. • United States containment policy. • US and UK helped in shaping legal and economic institution in South Korea, Taiwan, Singapore, Hong Kong, Thailand, And Malaysia. (Property rights laws, land reforms, financilainstitions) • Strong intuitions. • Development through competent and efficient civil structures • Information flow. • Free expression within the scope of government regulation. • e.g. toleration of student protest in South Korea during 1960s-70s • Press freedom since three decades=> increased effficienty of finanical transactions and spurring economic development.

26. Chapter 3Sustaining New Democracies Haruka Yoshitome

27. Main Contents • Which countries qualify as Democratizers? • What is Democratic Backtracking? • Relations of Economic Decline and the Erosion of Support for Democratization • Distinguishing characteristics of democratic backtrackers

28. Which Countries Qualify as Democratizers? • Having Elections…? –Mubarak, HuJintao, Kim Jung Il.. • Shifting away from authoritarian rule…? –Belarus, Turkmenistan, Uzbekistan.. • 83 countries categorized as Democratizers • 60% under $2,000 • 75% under $4,000 (Polity IV democracy index) • Contemporary Democratization is a developing country phenomenon Phony Democratizers

29. Successful Democritizers seem to have better income levels, do they? →Income level does NOT determine the extent of democratization • Proximity and exposure to successful democracies • Joining the EU • Economic vitality • Natural resource dependence • Duration of democratization • Regional effects stronger influences on outcome

30. What is Democratic Backtracking? • Definition:countries having once started down the democratic path, they experienced a decline or a point more in their Polity-democracy score • 49 countries have experience→ 30 countries have experienced “democratic collapse” • happens within the first five years of a transition (usually) • Why causes it? 1. Economic Hardships 2. Parliamentary System

31. However... • Within the 49 countries that backtrack, 39 have made a full or partial recovery…why? • Democratic Resilience • Collapse is not the end of democratization, but a step for political maturity • Democracy puts down deeper roots, enabling it to withstand economic storms that last for years (not in all cases, and not forever) • Despite a three year period of stalled growth, no backtracking happened –ex) Brazil, Mexico, Senegal

32. Once a democratizer has reached a middle income, regression is rare • Should policy makers hold off pushing democracy in the developing world until the country achieves a “take-off” stage in prosperity? -ex) Zakaria $6,000 threshold • By controlling other factors, income level does not emerge as a defining factor explaining backtracking in countries experiencing economic stagnation.●Rate of Economic Growth ●Inflation ●Strength of the Private Sector ●Extent of Dependence on Natural Resources • Geography is a distinguishing factor in identifying backtrackers.ex) Africa, Latin America, former Soviet Union West Africa, Andean Region, Caucasus -greater Black Sea Region • “the neighborhood effects” works in reverse, accelerating backtracking NO!

33. Economic Decline and the Erosion of Support for Democratization • 1. Unmet Expectations●Underestimation of challenges ●Demand for immediate fix • 2. Governing Coalitions●Ideological, economic, regional, ethnic, religious groups need to have the same understanding -ex) Belarus • 3. Crime and Corruption●reliance on attitudes of public-spiritedness and willingness to compromise ●realization of unfair distribution of wealth • 4. Opening to Authoritarians ●any change better than current situation?

34. Characteristics of Democratic Backtrackers • Economic characteristics of recession related backtracker • Higher Inflation • Peru, Germany • Constrained Private Sector • Lower private sector access to credit • Smaller share of capital managed • Elevated debt –service levels • Latin America and Africa ●Former Soviet Union -Reliance on natural resource●Latin America -Exploitation and growing inequality●Africa -Size of fiscal deficit

35. Key Factors for fighting backtracking • Development of independent financial institutions • Diversifies power within society • Control of inflation • Protects the power of the low, middle income households that might otherwise strain new democratic institutions • Lower debt-service levels • Increases flexibility a democratic government has for fixing hardships from economic reform

36. Thank You for Listening!