Democracy and Development

1. Democracy and Development Nnadozie, Chapter 11

2. 1.Defining Democracy • Process Democracy-involves the election of leaders in free and fair periodic elections of leaders by citizens. • Principled Democracy: Individual rights protected with majority rule, independent judiciary, protection of individual and minority rights with political competition, and rule of law.. • Joseph Schumpeter, “Democracy is an institutional arrangement of arriving at political decisions in which individuals acquire the power to decide by means of competitive struggle for the people’s vote.”

3. 1.Measuring Democracy? • The most widely used index of democracy is the Freedom House Index (FHI) that ranges from 1 to 7, where FHI=1 (completely Free), and FHI=7 (completely authoritarian) FHI Ranges: Free= 1-2.5 , Partly Free= 3-5.5 Not Free= 5.5-7.00

4. 2.The Relationship Between Development and Democracy: Theories of Democracy • The Impact of Development on Democracy-4 approaches • 1. Modernization Theory: prosperity leads to emergence of prerequisites to democracy • 2. Neo-modernization: Regimes with income below $2000 are likely to collapse under economic downturn. • 3. Civil Society Theory: Societal pre-conditions or requirements for democracy. CS includes: labor unions, student groups, chamber of commerce, teachers union, women’s group, church groups, etc. . • 4 Structural Explanation; Based on business cycles. Bourgeoisie (class of business people) independent of the state tend to be democratic.

5. 3.The Legacy of Democracy in Africa • Two movements toward “democracy” involves: the de-colonization period of the 1960s, and the wave of democratization that began in 1989-following the collapse of Soviet Union and end of the Cold war • The colonial origin of non-democratic Africa • A colonial African state had three features: Europeans holding large industries, Asian in the middle engaged in wholesale and retail trading, and Africans engaged in farming, market trading, and rudimentary services. • At Independence there was no business class or bourgeoisie in most African states.

6. 4.Democratization and Emergence of Representative Democracies • There was some experimentation with governance which involved military coups in the 1970s. • Before 1989, only three countries were free based on FHI with 1-2.5, (Botswana, Senegal, Mauritius) 17 partially free, and 25 countries not free. • After 1989, there was a wave of democratization that led to 8 countries to be free (Benin, Botswana, Cape Verde, Mali, Mauritius, Namibia, South Africa, 22 are partially free, and 18 are not free- according FHI measure

7. 5.What is the future of Democracy in Africa? • Democracy is difficult to sustain and consolidate in Africa for various reasons • At least two preconditions may be needed 1. Accepting political opposition as legitimate. 2. Having access to wealth and income outside the government. Natural resource wealth such as Oil and Land is state government controlled and owned. There must be a some private sector independent of the government.

8. 6.Democracy and Development • The impact of Democracy and Development is mixed. This is a “Chicken and egg problem”. • Empirical results for in 1980s and later show that multiparty democratic states have better economic policies than autocratic ones. • Among those countries with more freedom the more established one’s with democratic institutions over 10 years are better (see table 11.1, 11.2)

9. 7.The Recent Economic Performance of Democracies in Africa • Established democracies have outperformed new democracies. • The effect of democracy in Africa has been the those that manage to become democracies outperform authoritarian an states • New democracies seem to do at least as well, if not better, than autocratic states

10. 8.Concluding Remarks • Whether development leads to Democracy or vice versa is difficult to answer? • But, even if democracy does not lead to economic growth, freedom to choose, and freedom to have basic political and civil rights, and other rights are desirable in themselves. So, democracy and freedom is a basic human goal on its own merit. • In the long-run democracies can achieve development than autocratic states.

11. Political Instability-Chapter 12 • I. Introduction • II. Institutions and Economic Development • III. Theoretical Issues • IV. Empirical Results • V. Summary and Policy Implications

12. I. Introduction • Economists have Neglected Institution’s (rules) and politics in the process of development • Endogenous Theory recognizes economic policy is an important determinant of long-run economic growth • Political Instability (PI) affects economic development, • Investment is endogenously determined by PI

13. Introduction: Political Instability • Economic Development is multi-dimensional concept aimed at improving the living standards and range of choices available the majority of citizens of a country. It includes freedom to choose and freedom from servitude or misrule. • Political stability is necessary but not a sufficient condition for economic development

14. II.Institutions and Economic Development • Institutions are social rules, conventions and other elements of the structural framework of the social and economic interaction • Institutions can be formal like laws, constitutions, property rights, and contracts • Institutions can also be informal such as “social capital”

15. II. Institutions and Development cont. • Political institutions are central to process of economic development.. • A stable political system with a strong and efficient judiciary that provides secure property rights, and enforces the rule of law and predictable is key for economic progress..

16. Institutions and Development • The political system must be predictable and stable that respects the rights of the majority participation in a periodic free elections. • Unstable social system is one that changes in unpredictable way.

17. Concepts of Political Instability • Political stability occurs when there is a constitutional mechanism that ensures the peaceful transfer of power of government. • Three types of PI: elite, communal and mass. Elite PI involves coups d’etat, violence removal of government. Changes by community groups (ethnic, religious, etc), and Mass PI is an attack on the national political system to over through government . • Regime threatening PI: coups, revolutions • Non-Regime threatening PI: strikes, riots, crises to get concessions from government.

18. C. Studies of PI and Economic Development • PI has a negative and significant impact on physical quality of life in Africa (Mbaku) • After accounting for export and investment instability, PI has negative effect on economic growth in African economies ( Alexander and Hansen • PI weakens government to make it difficult to make necessary reforms (Edwards and Tapeline)

19. Conceptual/Theoretical Issues • Political Instability and Economic Growth • PI affects interaction between individuals and organizations negatively. It increases uncertainty and therefore decreases savings and Private investment. • PI is likely to lead to corruption, proliferation of rules, and regulations, confusion, misallocation of public resources and bureaucratic inefficiency

20. Policy Implications • PI affects economic growth directly and indirectly via reduced investment… • Example, structural adjustment programs of the IMF and the World Bank may create short-term hardship that may cause PI and ultimately on negative economic impact on economic growth in the short-run • On the other failure to carry out the necessary reforms may create economic stagnation and worsen or prolong PI.

21. Conclusion and Policy Implications contd. • All governments (democratic or autocratic) should promote economic growth and development as a way of securing PI • Economic stagnation leads to PI which further leads to further stagnation and decline. • The growth effect of elite driven PI is likely to be narrow and short lived compared to the effects of a broad measure of PI

22. Chapter 13: Inequality and ConflictArticle by Professor Wayne Nafziger of KSU • I. Introduction: • II. The Impact of Stagnation and income decline • III. Failure of Adjustments to Chronic Deficits • IV. Failure of Agricultural and Rural Development • V. Income Inequality- Cases of Nigeria and South Africa • V. Military Centrality and Conflict Tradition • VI. Conflict & Competition For Mineral Resources • VII. Conclusion and Policy Implications

23. The Political Economy of Inequality and Conflictin Africa • 20% of African live in countries that suffer from state and rebel violence driven conflicts. • The World Bank estimates civil war in Africa lowers GDP per capita by 2.2% annually • Political Economy approach takes into account of economics and politics or politicians who make decisions as well as interest groups and people who are affected.

24. I. INTRODUCTION cont. • Nafziger and his co-author have analyzed the relationship between humanitarian emergencies and their sources based on annual data from 1980-1995 for Africa and other LDCs. • These analysis shows stagnation and decline in GNP, high military expenditure ratio to GNP, a culture of violent conflict, and slow growth in food production are the primary sources of humanitarian emergencies.

25. II. STAGNATION & DECLINE INCOMES • Policies of Governing elites are the root causes of deadly political violence, including genocide and structural violence-examples- Sudan, Rwanda, Sierra Leone, etc. • The increase in interstate and intrastate conflict and violence and humanitarian emergencies in the last two decades of the 20th century are linked to negative economic growth in the 1970s,1980s and stagnation in the 1990s. • Africa GDP Per capita was lower in the late 1990s or today, than at the end of 1960s.

26. II. STAGNATION & DECLINE INCOMES • In African states such as Nigeria, Sierra Leone, Zaire, and Liberia, etc..economic decline led to Ethnic conflicts and a rise in rebellion in response to predatory rule. • Predatory rule involves regimes that govern through coercion, personality politics, that tend to degrade the institutional foundation of the state..They lack democratic institutions. • In some predatory states, the ruling elite and their clients use their positions and access to plunder the national economy through graft, corruption, and extortion, and unethical private business practices.

27. II.Stagnation and Decline income • Political Economist Claude Ake of Nigereia writes” Instead of being a force for public good, the state in Africa tend to be privatized by dominant elite faction.. • The state engages in ‘rent-seeking’: a behavior to obtain private benefit from public action and resources • Stagnation and Negative growth interacted with State predation in leading to downwards spiral in states such as Angola, Ethiopia, Sudan, Somalia, Liberia, and Zaire

28. II. Economic Stagnation and decline: External Factors • Worsening international conditions such as long term decline in commodity terms of trade, rising trade protection, exclusion from global capital flows and flows of foreign investment, and capital flight has contributed to Africa’s poor economic performance. • The terms of trade for Africa fell by 52% from 1970-92, 38% from 1980-92, and export purchasing power fell by 4% and 29% in 1970-92 and 1980-92, respectively,

29. III. Failure of Adjustment To Chronic External Deficits • International economic institutions compel local elites to promote structural adjustments programs (SAPS) threatening the positions and contributing increased opportunistic rent seeking and overt repression. • The resulting SAP cuts in spending reduce funds to distribute to clients and requires greater military and police support to remain in power.

30. IV. The Failure of Agricultural and Rural Development • About 70% of Africans make their make their living from agriculture and related activities … • Agriculture contributes to the rest of the economy in providing food, foreign exchange, labor supply, capital transfer and markets , • Declining productivity in agriculture is a primary driving force for the general economic decline, poverty and food insecurity in many Africa.

31. IV. Agriculture and Rural Development • From 1962-89, food output per capita grew at the annual rate of 0.5% in developing countries, 0.3% in developing countries, and 0.4% overall, but declined by 0.8% in Africa . • In other words food production per capita increased in all regions of the world except in Africa as shown in figure 13.1

32. IV.Agriculture & Rural Stagnation and decline • India and Africa both produced 50 million tons of food grains in 1960, in 1988 India produced 150 million tons (after green revolution technological improvements) and Africa produced about 50 million or about 1/3 of India in 1988. • India yield per hectare increased by 2.4% per year, while Africa grew at the rate of 0.1%

33. V. Income Inequality • Policies that lead to high income inequality in Africa are: • Historical legacies of discrimination such as colonialism, apartheid and policy failures. • Government policies of in land and natural resource use, including lack of land reform. • Differential access to resources and wealth based on regional and ethnic bias. • Growing regional inequality and limited regional integration

34. V. Income Inequality-Example- Nigeria • In Nigeria, rising Inequality during oil boom contributed to conflict that led to civil war or the Biafran War in 1967-70, • Nigeria’s oil fueled growth after the war rose to 8% per year (1970-79), and the revenues were stolen by various corrupt military regimes.

35. V.Income Inequality: Example-South Africa • About 3750 people were killed in internal repression and resistance against Apartheid toward its demise in 1993. • South Africa’s Gini Coefficient is 0.65 with the top 10% of the population receiving 30% of national income • Life expectancy was 52 for blacks, 62 for Asians and mixed races (“colored people”) and 74 for whites , compared to 54 for Africa as a whole. • Adult Literacy was 67% for non whites, & 85% for whites • Apartheid ended in 1994 with leadership of Mandela & ANC and a pressure by the global anti-apartheid movement. Still the economic inequality persists.

36. VI. Military Centrality and Conflict • Military was used to create wars and conflicts under autocratic rulers. Massive wealth and money was diverted to military, that is often used to violently remove elected governments.. • A culture of violent political culture in states like Rwanda, Burundi, and Congo has resulted in massive displacement of population and humanitarian emergencies. States such as Somalia have collapsed due to conflict by war-lords following dictatorial rule.

37. VII. Competition & Conflict Over Minerals and other Natural Resources • The struggle to control mineral and other natural resources is an important source of conflict in Africa. Examples include Angola, Sierra Leone, Liberia, Congo. • Here, autocratic rulers and warlords use exclusive contracts with foreign firms for diamonds, and other minerals to extract revenues and collect taxes. • Examples: Charles Taylor of Liberia in late 1990s, Mobutu Seko of Zaire/Congo 1965-97. Mobuto fell to rebel forces of Laurent Kabila until Kabila was assassinated and replaced by his son Joseph in 2001

38. VIII. Conclusion and Policy Implications • Humanitarian emergencies are associated with high inequality, conflict, and military centrality (high military exp./GNP), abundance of mineral resources, and inversely related to GDP per capital growth and food output, and external adjustments. • The major changes Africa needs to make are institutional changes including democratization, legal system reform, effective financial institutions, greater investments on quality education and establishment of functioning democratic institutions. These take time. • There is a substantial scope for international and national governments and NGO actors to coordinate long term sustainable policies to reduce Africa’s vulnerability to conflict and policy driven humanitarian emergencies…

39. Next Lectures Next Lectures- Corruption and Development (Chapter 14-Nnadozie)-PP Handout Agriculture and Natural Resources (Read-Todaro, chapter 9) Test #3 ( On material covered after test #2)