WHY DEMOCRACY? EIGHTH ADVANTAGE

The eighth advantage of democracy: prosperity. Democracies are prosperous countries and prosperous countries are democracies. In Europe, the progress in prosperity under democratic stewardship after the Second World War was simply monumental and beyond anything anyone could have imagined at the beginning of the period. No similar progress occurred for any population on the other side of the Iron Curtain. More recently, democratisation has been followed by increasing prosperity in Spain, Portugal, Greece, and in the countries of Central Europe.

China is sometimes thought of as the great economic success story of our time. But that is a myth. China’s economy is very big and China therefore has much clout, but that bigness is blinding and tends to be confused for performance. China’s economic growth has been typical and not exceptional by the standards of East Asia and its modernisation all considered, including in social and political terms, has fallen way short of that of neighbouring Japan, South Korea and Taiwan.

Are democratic countries prosperous because of democracy? We cannot say for certain, but there are good reasons to think that democracy is conducive to prosperity. In some cases, the time sequence is in favour of this hypothesis. The new democracies in Europe have grown to prosperity after they became democracies. South Korea and Taiwan took off in development under autocratic regimes but went on to grow economically to the level of high-income after having transformed politically to democracy, possibly avoiding “the middle income trap” thanks to the good luck of modernising politically in time. That is a strong hypothesis because democracy makes for a society of open information and exchange, which again is the fuel of entrepreneurship and productivity.

Some of the reasons we should expect democracy to encourage prosperity are the following: Citizens are more likely to feel secure under regimes of protection and predictability and therefore more confident in enterprise. They have freedom of movement and can follow the productivity in labour markets, and, again, free access to information and deliberation. They are more likely to have the protection of safety-nets to fall back on and therefore more able to take on economic risk. There is rule of law, including property and employment law, and therefore more security in job and enterprise and less susceptibility to corruption and gangster rule. Governance is more likely to be effective and therefore more likely to deliver infrastructural and other forms of support. Democratic polities co-exist with market economies and market economies have proved to be more efficient than command or monopolistic economies.

For more detailed analysis, see How Democracies Live.

On China’s economy, see The Perfect Dictatorship.

On South Korea’s transition to democracy and prosperity, see The Korean State and Social Policy.

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