Democracy and Development: Do Political Regimes Matter?

The relationship between democracy and development is far
more contentious. The question
whether political regimes affect
economic growth was raised many
years and remains unanswered.
The idea that autocratic regimes
have an advantage in economic
development, although no longer
taken seriously, was once quite
fashionable.

The advantages of
autocratic regimes, to be sure, were not intrinsically derived. Rather, these regimes were supposed to have an edge in development mainly because they were said to lack the same disadvantages often associated with democracy.

More specifically, these disadvantages.include (1) insecure property rights
of the wealthy (as a result of the
enfranchisement of the poor, who
are expected to use their voting
power to redistribute wealth), (2)
high propensity to consume (as a
result of electoral politics and
meeting voters? short-term
demands), (3) rent-seeking by
special interest groups that
penetrate the open political process and use their influence to produce socially inefficient policies.

As a theory, autocracy-good-for-
development was thus extremely
weak. While open political
processes under democracy may
lead to the above-described
problems, there is nothing intrinsic
to autocracy that would convince us that the same problems would not exist under autocratic rule.

Property rights are by no means
secure in an autocracy whose rulers are immune from institutional constraints (such as an independent
judiciary or parliamentary
competition) and have the capacity to impose confiscatory rates of taxation and refuse to honor their financial obligations.

Similarly, autocrats have, historically, been
known to plunder their societies for personal gains (such predatory
behavior is partly motivated by the
very insecurity of the autocrats
themselves; such insecurity greatly reduces the time-horizon of
autocrats). The vice of rent-seeking exists in autocracies, as well. Even
the most absolutist rulers must rely
on supporters to keep themselves in
power. These rulers must constantly
reward their constituents with
favors to maintain their support.
Such favors take the form of
monopolies, subsidies, tax
privileges, and licenses that greatly
reduce economic efficiency.
The case that democracy promotes development rests on the central idea that the political institutions
critical to economic development
are more likely to exist and
function effectively under
democratic rule.

These institutions include the rule of law which protects property rights, individual liberties which foster creativity and entrepreneurship, the freedom of expression which ensures the
production and unimpeded flow of
information, and institutional
checks and balances that prevent
massive theft of public wealth often observed in autocracies. One
statistical study, of growth data for 115 countries from 1960 to 1980 claims that countries with high
degrees of political openness
achieved an average annual real
per capita growth rate of 2.53
percent, compared with 1.41
percent in more closed political
systems. This implies that more
democratic countries may grow 80
percent faster than less democratic
countries.

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