Democracy, the argument goes, gives a greater percentage of the population access to the political decision-making process, and this in turn ensures contract enforcement through an independent judiciary. Not only will democracy protect you, but it will also help you better yourself. Democracy promises that businesses, however small, will be protected under the democratic rule of law. Democracy also offers the poor and disadvantaged the opportunity to redress any unfair distribution via the state. It is after all under democratic governments, the American economist and social scientist Mancur Olson posited, that the protection of property rights and the security of contracts, crucial for stimulating economic activity, were more likely. In essence, democracy engenders a peace dividend, introduces a form of political stability that makes it a precursor for economic growth. In Olson’s world, democratic regimes engage in activities that assist private production in two ways: either by maintaining a framework (regulatory, legal, etc.) for private activity or by directly supplying inputs which are not efficiently delivered by the market (for example, a road connecting a small remote village to a larger trading town). By their very nature, democracies have an incentive to provide public goods which benefit each and everyone, and wealth creation is more likely under democratic regimes than non-democracies, such as, say, autocratic or dictatorial regimes. Under this sky, democracy is seen as Africa’s economic salvation: erasing corruption, economic cronyism, and anticompetitive and inefficient practices, and removing once and for all the ability for a sitting incumbent to capriciously seize wealth. Democracies pursue more equitable and transparent economic policies, the types of policies that are conducive to sustainable economic growth in the long run. Moreover, the Nobel Laureate Amartya Sen argues that because democratically elected policymakers run the risk of losing political office, they are more vigilant about averting economic disasters. Among mainly developing economies another study found that democratically accountable governments met the basic needs of their citizens by ‘as much as 70 per cent more’ than non-democratic states. But, perhaps most of all, donors are convinced that across the political spectrum democracy (and only democracy) is positively correlated to economic growth. Although the potential positive aspects of democracy have dominated discourse (and aid policy), Western donors and policymakers have essentially chosen to ignore the protests of those who argue that democracy, at the early stages of development, is irrelevant, and may even be harmful. In an aid-dependent environment such views are easy to envisage. Aid-funded democracy does not guard against a government bent on altering property rights for its own benefit. Of course, this lowers the incentive for investment and chokes off growth. The uncomfortable truth is that far from being a prerequisite for economic growth, democracy can hamper development as democratic regimes find it difficult to push through economically beneficial legislation amid rival parties and jockeying interests. In a perfect world, what poor countries at the lowest rungs of economic development need is not a multi-party democracy, but in fact a decisive benevolent dictator to push through the reforms required to get the economy moving (unfortunately, too often countries end up with more dictator and less benevolence). The Western mindset erroneously equates a political system of multi-party democracy with high-quality institutions (for example, effective rule of law, respected property rights and an independent judiciary, etc.). But the two are not synonymous. One only has to look to the history of Asian economies (China, Indonesia, Korea, Malaysia, Singapore, Taiwan and Thailand) to see how this is borne out. And even beyond Asia, Pinochet’s Chile and Fujimori’s Peru are examples of economic success in lands bereft of democracy. The reason for this ‘anomaly’ is that each of these dictators, whatever their faults (and there were many), was able to ensure some semblance of property rights, functioning institutions, growth-promoting economic policies (for example, in fiscal and monetary management) and an investment climate that buttressed growth – the things that democracy promises to do. This is not to say that Pinochet’s Chile was a great place to live; it does, however, demonstrate that democracy is not the only route to economic triumph. (Thanks to its economic success Chile has matured into a fully fledged democratic state, with the added accolade of, in 2006, installing South America’s first woman President – Michelle Bachelet.)
Follow-up from the previous passage. It gets taken for granted that democracy is positively correlated with economic growth and hence it must be a prerequisite for growth. Obviously, for most of us whom have grown in Asian Economies, it doesn’t necessarily hold true.
Strong leadership appears to be crucial in getting a country in the early stage of development to band together and develop. However, it can be a double-edged sword. You’ll never know whether you’ll be getting a benevolent dictatorship or one whom be using the power to enrich themselves and their cronies. Even with a well intentioned leader, right intentions doesn’t necessarily lead to right results.
I’ve always felt that the more developed a country is, the risk of of lack of accountability in a leadership eventually becomes higher than the risk of having weak leadership. Nevertheless, I’m going on a tangent here and lets get back to the books message.
Ultimately, the key message from this passage is that forcing democracy in developing nations might actually backfire and cause more infighting and hinder growth. Tying democratic reforms to aid might actually promote infighting within the country for access to the aid. The situation is always far more nuanced and complex than we can expect, and complex situations deserve more than simple ideological answers.
On a random note, when hiring, never trust the person who always has ‘the right answer’.
