Class structure. Model. I: Recap Przeworski et al. Conclusions Ch2. The consequences of democracy. Table 2.1 p.82. I. Recap:

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1 Class structure The consequences of democracy For economic growth, human development, & peace I. Recap: Does economic development promote democracy? Przeworski et al. Ch 2 II. Consequences of democracy for 1. Economic growth? - Przeworski et al. Ch 3 & 4 2. Human development - Siegle et al. 3. Peace - Mesquita et al. III. Discussion: Policy implications? I: Recap Przeworski et al Model 1. Are democracies more likely to emerge as countries develop economically? (The endogenous or modernization thesis) Industrialization, urbanization, education, communication, mobilization democratization 2. 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 Affluent Poor Dictatorship Regime change Regime change Dictatorship Dictatorship Table 2.1 p.82 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. 1

2 Impact of democracy on human development II: Consequences of democracy for growth, development, and peace Sources: Przeworski et al 2. & Development Joseph T. Siegle, Michael Weinstein and Morton Halperin. 24. Why democracies excel Foreign Affairs 83(5): Morton H. Halperin, Joseph T. Siegle, and Michael W. Weinstein. 25. The Advantage Routledge 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 Discussion What is the impact of democracy on economic growth? Reasons why democracy may harm growth? Reasons why democracy may benefit growth? Change in democracy and economic development & 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 (199), Barro (199), 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 2

3 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 (dictatorship v. democracy) 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,), the two regimes are almost identical in their: Investment shares Growth of capital stock Growth of labor force Output per worker Product wages need not be sacrificed to economic development Yet important distinction between rich and poor nations Przeworksi et al. Przeworski et al. conclusions 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 is fragile in poor nations so most have dictatorships More affluent nations ($25-3+) 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 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? Potential criticisms of Przeworski 1. Definition/classification of regime types? 2. Focus on economic, but not human, development 3. Limited period of analysis: post-199 developments? 4. Under-specified model Limited institutional controls? Limited cultural controls? 5. Outliers to the model eg Singapore, Saudi Arabia? Classification of nations Compare all nation states 196 to 21 Low-income nations (per capita less than $2) Contrast low-income autocracies and democracies Classification by Polity IV Ref: 3

4 Concepts : 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 Use Polity IV index Rates 161 states every year since 18-1 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 1 Intermediary states: 3 to 7 Autocracies: score to 2 Economic Growth Among all countries, democracies have realized consistently higher levels of economic growth from (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 Economic indicators PerCap GDP Growth GNP Annual Growth Note: Poor nations only (GDP/cap under $2) Polity DEMOC: 35 Autocracies, 25, 16 Democracies East 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) 4

5 Social Indicators Social Indicators Aids/1 InfantMortality ChildMortality LifeExp Educ enroll 22 Illiteracy Water Gender (GDI) Note: Poor nations only (GDP/cap under $2) Note: Poor nations only (GDP/cap under $2) Polity DEMOC 35 Autocracies, 25, 16 Democracies Polity DEMOC 35 Autocracies, 25, 16 Democracies Social indicators Government expenditure 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) Central Govnt Educ Military Aid rec'd Spending & aid as % GDP. Poor nations only (GDP/cap under $2) Polity DEMOC 35 Autocracies, 25, 16 Democracies A democratic peace? Democratic peace Autocracies more stable?, poverty and conflict are related. Democracies are less likely to engage g 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) 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. 23. The Logic of Political Survival MIT Press 5

6 Policy implications? Multilateral agencies should prioritize democracies by 1. Use democratic selectivity when allocating aid Eg MCA 2. Revise charters WB, IMF & regional banks to favor democratic regimes 3. Use democracy-impact statements 4. Separate security aid from development aid 5. Develop cohesive Development Policy coordination Council (Sec State, Treasury, MCA, USAID) III: Discussion exercise Ford Foundation Discussion Exercise and Development, 24 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. Poor democracies You are employed as Senior Program Managers for the Ford Foundation. The Foundation has decided to invest $5m 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,). What are your recommendations, and why? Use information from your experience, from Przeworski, and from the data to support your conclusions. Rich autocracies Next class:institutions 6