May 3, 2011
Can Poor Countries Afford Democracy?
Can Poor Countries Afford Democracy?—Posner
I agree with Becker that wealth creates the conditions for democracy, but I would suggest a slightly more complex causal sequence: wealth creates the preconditions for liberty (i.e., rights), and liberty the preconditions for effective democracy.
As John F. O. Bilson explained in a 1982 article (Civil Liberty—An Econometric Investigation, Kyklos, vol. 35, pp. 94, 103), "Almost any reasonable theory of freedom would predict a positive correlation between freedom and real income. On the demand side, freedom must be considered a luxury good so that the resources devoted to the attainment of individual freedom are likely to be greater when per capita income is high. On the supply side, it is undoubtedly more costly to repress a wealthy person than a poor person and the need to do so is probably less acute." As people become wealthier and therefore more self-confident, and education (another "superior good" in the economist's sense (what Bilson calls a "luxury good")—the demand for it is a positive function of income) becomes more widespread and secure property rights become more highly valued, and with society able to afford, as the demand for law and order grows, a sophisticated security apparatus (including an independent judiciary) that maintains law and order without creating destabilizing resentments, what Bilson calls "freedom" and I call "liberty" become established features of the society. Pretty soon, however, people want more than "negative" liberty, the protection of personal security and property rights; they want a say in the choice of their rulers—they want the right to vote; it is an expansion, or at least the illusion of an expansion, in their liberty in the broad sense of having control over one's destiny to the maximum feasible extent.
For this progression to work, the distribution of income and wealth mustn't be too skewed—if the entire wealth of a country is concentrated in a tiny class, the demand for rights by the people as a whole, or at least a large swatch of people, will be weak, if Bilson and I are correct that liberty is a superior good.
It is no surprise, therefore, that democracy emerged in countries like Great Britain, the United States, France, and Germany after—though often long after—a considerable degree of liberty in the narrow sense that does not include the right to vote had been obtained by the citizens of these countries as a result of the rise of a substantial middle class. (This leaves unexplained the democracy without liberty found in a few ancient polities, such as Athens.) Magna Carta and the English Declaration of Rights of 1689 long preceded English democracy, and when the U.S. Bill of Rights (the first ten amendments to the Constitution of 1787) was enacted in 1789 the Constitution provided a limited role for voting. Apart from limitations on who could vote, the only federal officials for whom the people could vote directly were the members of the House of Representatives. All other federal officials were either elected indirectly (Senators and the President and Vice President) or appointed (judges and executive branch officials).
Democracy without liberty—the ancient Athenian formula—is highly risky, since it is easy for the first elected officials to refuse to allow (or to rig) the next election. The rarity of such polities suggests that such a democracy is not an equilibrium. More important, while a country need not be wealthy to be democratic, democracy without liberty is an unsatisfactory form of government because of the instability to which it conduces that I've just mentioned. But liberty is expensive, so how realistic is it to suppose that a poor country can be effectively democratic? India is the principal exception (and its democracy was suspended during the 1975-1977 "state of emergency" rule by Indira Gandhi), but a misleading one, in light of India's very long and successful colonial occupation by Great Britain that preceded independence, though democracy has been a flop in other former British dependencies, notably Pakistan, formerly a part of British India. Latin America has a long history of unstable democracy.
The normal evolution is from autocracy to democracy with liberty the intermediate stage. This has been the pattern (though not an unvarying pattern) not only in Europe, but also in East Asia. Yet liberty and democracy sometimes arrive at the same time, as they did in the former Soviet sphere. It will be interesting to see whether this happens in any of the North African and Middle Eastern countries in which people are rebelling against autocratic governments, or whether there will be an intermediate stage of non- or semi-democratic government combined with enlarged personal liberty. Although these countries (with the exception of the small oil-rich countries) are poor by Western standards, they are not so poor (as many African countries are) that they cannot afford to provide their citizens with liberty, the precondition to stable, functioning democracy.
Can Poor Countries Afford Democracy? Becker
"Poor countries cannot afford democracy" is a common refrain suggesting that poor countries need strong and authoritarian leaders to overcome the various forces that kept them poor for centuries. In apparent support for this claim is the fact that the great majority of rich countries are mainly democratic. Yet, while the effects of democracy on economic performance are controversial, democracies can have some economic advantages for poor as well as rich countries.
The actual effects of democracy on the economy and other aspects of life should be compared not with an ideal form of government, but with various governments that do not have a free press, do not allow open competition for political office, do not have widespread suffrage, and lack the other institutions and freedoms that define democracies. As Winston Churchill famously said, ""No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government, except for all those other forms that have been tried from time to time." This is from a House of Commons speech on Nov. 11, 1947 that was delivered about two years after he was defeated in an early post- World War II election.
Many studies have tried to isolate the effects of democracy compared to authoritarian systems of government on economic development, inequality, education, and many other factors. Since it is very hard to separate the effects of democracy from that of many other variables, these studies fail to reach conclusive results. The tendency, however, is to find that once other suitable factors are taken into account, there seems to be only a weak relation between long-term average rates of growth in GDP and whether countries are democratic. Democracies do appear to encourage broader investments in education, and education does help promote faster economic growth.
While some authoritarian leaders greatly improve their economies, they are not the rule. For every example of a dictator like Pinochet and Chiang Kai Shek (in Taiwan) who produced fast economic growth, there is a Stalin or Idi Amin in Uganda with dismal economic policies. Similarly, not every democracy handles the economy well. India, for example, has been a vibrant democracy since its independence in 1947. This democracy during its first 40 years produced slow growth under a socialist government, and then India transited to much faster economic growth after the government shifted toward more market-friendly economic policies.
While average rate of growth do not appear to differ much between democracies and authoritarian regimes, the variability in performance does differ more among authoritarian governments. China has had remarkable growth since the 1980s, but the prolonged devastation and hardship produced by China's "great leap forward" (when millions of farmers starved to death) and its Cultural Revolution would unlikely have occurred in a democratic country like say India. Nor is it likely that say Cuba and many African nations would have suffered so long with such terrible economic policies if they had reasonably democratic institutions.
One reason why persistent economic distress is less likely in democracies is that a free press would publicly report the distress and severely criticize the economic policies causing it. Similarly, political candidates would openly attack policies that lead to prolonged economic crises, and they would often be voted into office with a mandate to change the policies.
Some economic commentators use the strong correlation at any moment in time between wealth of countries and democratic governments to argue that democracy causes greater wealth. To be sure, many long-term democracies, such as the United States and Great Britain, grew very wealthy. So too, however, did countries like Taiwan and South Korea that started to grow rapidly under dictatorships, but became democracies, some rather quickly, when they became richer.
The sociologist Seymour Martin Lipset many years ago concluded from an examination of historical evidence that growing wealth mainly encourages democracy, rather than visa versa. I believe he had basically the right interpretation of the data correlating wealth with democracy. Especially in the modern world, as people get richer they travel more, learn more through newspapers, television, and the Internet about what is going on in their own and in other countries, and communicate by phone, email, texting, and in other way. People in wealthier countries want freedom not only in economic choices, but also in social and political life. These aspirations are not compatible with governments that censor what people read and hear, that try to suppress open discussions on politically sensitive subjects, and suppress challenges from political candidates outside of the officially recognized parties.
So yes, poor countries can afford democracy, as long as they use their democratic government to promote economic freedoms. Unfortunately, many poor countries, including democracies, fail to do this.