Waylaid Dialectic

May 6, 2014

Democracy and Economic Development

Does democratic governance deliver economic dividends? Even if it didn’t we might still have cause to think democracy was worth it. After all, it seems fair to let people have a say in shaping the rules that govern their lives, and there is some evidence to suggest that democracy delivers important non-economic benefits. Nevertheless, the question of democracy’s impact on economic growth is an important one; at least up to a point wealth is an important component of welfare. And until recently the most influential studies in economics suggested that democratic governance has not been growth enhancing. In particular, sophisticated econometric work by conservative economist Robert Barro showed, or appeared to show, democracy having a small average negative effect on growth, everything else being equal. Barro’s work wasn’t the final word on the matter. Empirical work by political scientist John Gerring and co-authors found that in the long run democracy was probably growth enhancing, and at least one, more recent, econometric study suggests democratisation improves subsequent economic performance. Yet, for the most part, empirical work post-Barro has failed to find a positive causal relationship between democracy and growth. And this, coupled with the recent spectacular economic performance of China, has been enough to suggest to many observers that, however nice it may be, democracy is no better, and maybe even worse, than autocracy in generating growth.

All this might be about to change though…click here to read the rest of this post on Devpolicy.

April 8, 2013

A&R on the Middle Class and Democracy

Filed under: Random Musings — terence @ 7:29 pm
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Acemoglu and Robinson dispute the old argument that having a middle class is necessary for democracy by pointing to the example of democratically elected Berber chiefs in the Atlas mountains. I doubt this is the only example they could have used — many communities in Solomon Islands had non-hereditary selected leaders, for example, and I think careful examination would find, many small scale societies making use of something akin to democracy’s checks on power. However, the trouble is these examples, including that of the Berber, are still vastly different from the modern nation state. They are small enough and egalitarian enough societies to render large inequalities of wealth and power impossible. And it is the hollowing out of society associated with inequality that I imagine theorists of democracy hope a middle class can counter. Or, to put it another way, in small scale societies like those of the Berber and in Solomon Islands, most everyone *was* middle class, in the sense that they had about as much power and wealth as everyone else.

To be clear, I don’t know whether middle-class theories of democracy are correct but I don’t think the Berber can be used as evidence that they aren’t.

November 19, 2010

The Long Run Impacts of Democracy on Growth

Filed under: Governance — terence @ 10:48 am
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An interesting looking paper…

Democracy and Growth: A Historical Perspective

Gerring, John; Bond, Phillip J.; Barndt, William T.; Moreno, Carola.

World Politics, Volume 57, Number 3, April 2005, pp. 323-364 (Article)

The predominant finding of recent empirical work is that democracy has either a negative effect on growth or no overall effect. In this essay, we disagree. Existing work assumes that the causal effect of democracy on growth should be immediate. But if democracy matters to growth it is more reasonable to assume that this effect is registered over a period of years, rather than instantaneously. Indeed, many of the arguments for democracy as an engine of growth are more plausible when applied to established democracies than when applied to transitional democracies. If we do not take this into account we risk losing the main causal effect of democracy on growth. Therefore we choose to operationalize democracy as a “stock,” rather than a “level,” variable. That is, we measure democracy as the number of years a country has been democratic, in addition to the degree of democracy experienced at any given time. We use regression analysis of time-series cross-sectional data (all countries in the world, 1950-2000) to test the hypothesis that that democracy – understood as a stock variable – is good for economic growth. We find that democracy has a robust, positive impact on growth during this time period.

Gated version here. Possibly un-gated conference paper here.

August 5, 2010

Complacency in Democracy

Filed under: Governance — terence @ 8:15 pm
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Just been to hear David Runciman speak on democratic confidence and over confidence.

I’m not sure if I got or missed the point (not Runciman’s fault – he was a clear and engaging speaker – but rather me fading at the end of the day) anyhow, I think the key idea was this…

1. Are democracies up to the task of tackling complex challenges such as climate change?

and

2. Should we be optimistic or pessimistic about the ability of democratic societies to produce solutions to such challenges?

and

3. Which of the answers to these two questions is dependent on which?

Surely, you’d think the answer to question 2 is dependent on question 1. If democracies are up to the task then be optimistic; if they’re not – hello pessimism.

Except that to Runciman the causal arrow between these two questions runs both ways. If people (be it intellectuals, political or economic elites, or voters) are overconfident of democracy’s ability to produce the right answers to the hard questions then they may become complacent. On the other hand, if they’re overly pessimistic they may lapse into disengaged cynicism. At either of the extremes people may fail to tackle the issue at hand. You could I, think, call this an issue of endogenity between reality and belief.

Runciman’s solution to the issue – and he, I think, thought it was a real issue – was for political scientists (or maybe, more generally, thinking men and women) to correct, where appropriate, unfounded over or under-confidence in democracy.

Interesting, but are over and under-confidence really issues for democracy? I’m not sure but I don’t think so. If you were to ask me what the big contributing factors were to whether democracies met the challenges they faced, I’d say: their underlying political economies; the fit between formal and informal institutions; the power of ideas and their communication and how this plays out in discourses (and this wouldn’t include ideas about democracies).

Nevertheless, an interesting talk.

July 29, 2010

The Consequences of Democracy

Filed under: Governance — terence @ 5:45 pm
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There’s an intrinsic appeal to democracy – it seems only fair that people should have some sort of say in collective decisions that impact on their lives. Within small communities this may well be achieved through informal means, but once you get to the level of a nation-state, some sort of formal system of voting will be necessary to recognise this ideal. And so democracy. It’s only fair.

But idealised fairness is only one criteria on which democracy needs to evaluated. Another is consequence. I instinctively support democracy because it appeals to my sense of fairness but if you could show me that democracies were more violent, less healthy, worse performing economically, and less happy, my support would be seriously shaken*.

Fortunately though, as best I can tell, the bulk of the evidence suggests that democracies do generate better outcomes for people living in them.

First, in the economic sphere…

A common perception is that democracies don’t do a good job of generating strong economic growth, particularly in developing countries. It’s a perception informed by the relative economic success of non-democratic nations such as China and Vietnam, along with a belief that democracies simply aren’t capable of making the hard choices necessary for economic liftoff. And at first glance it seems plausible. However, in development arguments based on what seems plausible or what or on selected countries often don’t stand up to more detailed analysis. Which is precisely the case for the ‘democracies grow slower’ argument. A meta-review, for example, by Hristos Doucouliagos and Mehmet Ulubasoglu [PDF] using cross country data finds no evidence to show that, on average, democracies grow slower than authoritarian states. What’s more there’s some good evidence to show that on average countries that successfully transition to democracy grow faster than their authoritarian counterparts eventually. Also, while there is little evidence to suggest a strong short-term cross-country relationship between democracy and growth, there is some evidence to suggest that democracies perform better economically in the long-run.

So if we use GDP per capita growth as our yardstick of success, we certainly can’t say that democracies perform worse than alternatives – and indeed, if anything, the evidence suggests they perform better.

Second, in distribution…

In his book One Economics Many Recipes Dani Rodrik provides evidence that democracies tend to have more egalitarian distributions of wealth and pay higher wages to workers in the manufacturing sector (p180-182). In other words, for any given level of wealth democracies will do a better job at reducing inequality and poverty.

Third, in famines and shocks…

As far as consequences go, famines are about as bad as it gets. And so Amartya Sen’s famous finding that (Post WW2 IIRC) no democratic country with a free press had experienced a significant famine is further evidence in favour of democracy, particularly when you consider the welfare impacts of the massive famines in countries such as China. Sen’s finding is from a while ago now, and I’m not familiar enough with famines to know whether or not subsequent famines have occurred in democracies, but even if they have, the simple fact that democracies experience fewer famines is still good evidence in favour of democracy.

While they’re not as awful as famines, large negative economic shocks also have significant welfare consequences. And there’s a good theoretical reason to think that the same feedback mechanisms which cause democracies to experience fewer famines would also generate fewer negative shocks in democracies. And, indeed, that’s what the evidence suggests, with Rodrik (ibid, p175-77) finding democracies significantly less prone to such shocks.

Fourth in war…

The consequences of war are, of course, awful. So – to the extent that it holds (and it is certainly contested, although there is convincing evidence that it holds in part, see here, for example) – the Democratic Peace Theory which suggests that democracies are less likely to go to war with each other and which is backed by some evidence at least is another reason for consequentialists to favour democracy.

Fifth in human rights…

Respect for human rights is clearly linked with better welfare (torture, like war and famine is about as horrific thing as can be afflicted on a person or people). And as you’d expect, systematic studies find that democracies have better human rights records (although the relationship is not always simple). Examples of evidence on this can be found here and here.

And finally, in social services…

Peter Lindert in his book ‘Growing Public‘ provides good evidence to suggest that democratisation in Europe was a key driver of state provision of social services. Public health care and education are essential components of well being, so once again we have good reason to suggest that the consequences of democracy for the people who live within democracies are on the whole positive.

So, in other words, the consequentialist case for democracy is pretty good, I think.

[Update: Democracies are more likely to provide free schooling in Africa according to this article; and more likely to engage in re-distributive spending (generally) although not more likely to be less unequal in the new Acemoglu Naidu et al paper]

[Update: See this, which looks potentially like very strong evidence democracy does lead to better economic performance on average.]

*Actually, technically it would be toast – as a Utilitarian (albeit a conflicted one) consequence is my ultimate metric of evaluation.

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