The consequences of democracy

1. The consequences of democracy For economic growth, human development, & peace

2. Thanksgiving!

3. Class structure • Recap: • Does economic development promote democracy? Przeworski et al. Ch 2 • Consequences of democracy for… • Economic growth? - Przeworski et al. Ch 3 & 4 • Human development - Siegle et al. • Peace - Mesquita et al. • Discussion: Policy implications?

4. I: Recap Przeworski et al • Are democracies more likely to emerge as countries develop economically? (The ‘endogenous’ or ‘modernization’ thesis) • Industrialization, urbanization, education, communication, mobilization…democratization • 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

5. Model Regime change Democracy Affluent Democracy Dictatorship Democracy Poor Dictatorship Dictatorship Regime change

6. Table 2.1 p.82

7. 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.

8. II: Consequences of democracy for growth, development, and peace

9. 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

10. 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

11. Discussion • What is the impact of democracy on economic growth? • Reasons why democracy may harm growth? • Reasons why democracy may benefit growth?

12. Change in democracy and economic development

13. 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

14. 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)

15. 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 development • Yet important distinction between rich and poor nations

16. 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

17. 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?

18. Potential criticisms of Przeworski • Definition/classification of regime types? • Focus on economic, but not human, development • Limited period of analysis: post-1990 developments? • Under-specified model – • Limited institutional controls? • Limited cultural controls? • Outliers to the model – eg Singapore, Saudi Arabia?

19. Halperin, Siegle and WeinsteinClassification of nations • Compare all nation states 1960 to 2001 • Low-income nations (per capita less than $2000) • Contrast low-income autocracies and democracies • Classification by Polity IV Ref: Halperin, Siegle and Weinstein

20. 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

21. Use Polity IV index • Rates 161 states every year since 1800 • 0-10 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 10 • Intermediary states: 3 to 7 • Autocracies: score 0 to 2

23. 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

24. Halperin, Siegle and WeinsteinEconomic indicators Note: Poor nations only (GDP/cap under $2000) Polity DEMOC: 35 Autocracies, 25 Mixed, 16 Democracies

25. 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)

26. Halperin, Siegle and WeinsteinSocial Indicators Note: Poor nations only (GDP/cap under $2000) Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies

27. Halperin, Siegle and WeinsteinSocial Indicators Note: Poor nations only (GDP/cap under $2000) Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies

28. 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 decades • Due to greater effectiveness NOT higher welfare spending (eg education)

29. Halperin, Siegle and WeinsteinGovernment expenditure Spending & aid as % GDP. Poor nations only (GDP/cap under $2000) Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies

30. 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)

31. 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

32. Halperin, Siegle and WeinsteinPolicy implications? Multilateral agencies should prioritize democracies by… • Use democratic selectivity when allocating aid • Eg MCA • Revise charters WB, IMF & regional banks to favor democratic regimes • Use democracy-impact statements • Separate security aid from development aid • Develop cohesive Development Policy coordination Council (Sec State, Treasury, MCA, USAID)

33. III: Discussion exercise

34. Ford Foundation Discussion Exercise Policy Analysis Role Playing Exercise: Ford Foundation Program Management Divide 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.

35. Democracy and Development, 2004 Poor democracies Rich autocracies

36. Next class:Huntington’s Clash Wed: Does Huntington predict a clash of ‘civilizational cultures’? Reading: Huntington Ch.1-3