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The Relationship between Democracy and Development: Implications for Policy

March 19, 2003
Council on Foreign Relations

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[Note: A transcript of this meeting is unavailable. The discussion is summarized below.]

What We Know:

The causal link between democracy and development is a controversial issue. For most of the twentieth century, conventional wisdom has held that autocracies are better able to marshal the resources necessary to promote economic development than are democracies, and that a certain level of economic development is necessary for democracy to take hold and flourish in a country. That view deserves a new examination in the post-Cold War world. Morton H. Halperin, Joseph Siegle, and Michael Weinstein make such an examination in their upcoming book on the subject, and their results present some interesting implications.

When the countries of the world are examined as a whole, democracies do perform better in terms of economic development than do autocracies or mixed polities. The debate concerns developing countries – specifically, can democracies develop as low income countries; can poor countries democratize; and does democracy among low income countries make any difference for their development success?

According to data collected and analyzed for the book, there has been no advantage for autocracies over democracies for the past 40 years in terms of development. Both developing country democracies and non-democracies have grown at approximately 1.5% of GDP per capita per year during that time. When East Asia is removed from that sample, democracies have actually performed better – growing at 0.5% per capita per year faster than autocracies and mixed polities. What is more, there is no data on about 25% of autocracies – countries such as North Korea, Iraq, Afghanistan (for most of its rule), and Cuba – so actual growth figures for autocracies would likely be substantially lower if the performance of these additional countries were included.

More than simply growing at a faster rate, democracies have outperformed autocracies in the consistency of their growth. An analysis of the 80 worst economic performers of the last 40 years reveals that all but three have been autocracies. In addition, democracies have performed substantially better than autocracies in the social welfare dimension of development (life expectancy, child mortality, literacy, etc.) – in some cases up to 50% better.

It is important to note that there has been a variety of development experiences among democracies. This can be attributed to the differing success with which any country can develop institutions of accountability – checks on the chief executive, separation of politics from the civil service, independence of the judiciary, freedom of the press, and independence of the private sector, for example – which are the foundations of democratic systems of governance. Both autocracies and democracies that have developed these institutions have had better rates of economic development than countries without well established institutions of accountability. For this reason, there are some autocracies that have performed better than some democracies; the East Asian “tigers” fall into this category.

Despite the overall positive performance of democracies over autocracies in development, there has been no preference given to democracies over the past 40 years in the dispersal of development assistance. The same has been true with debt relief, even though new democracies – countries that have recently transitioned from autocratic rule – have often inherited debt that is as high as 23% of GDP, a figure higher than that for most low income countries. This problem is compounded by the fact that the lack of a “democracy dividend” can undercut popular support for democracy. Indeed, 70% of countries which experienced democratic backtracking over the past 20 years faced periods of economic stagnancy before backsliding.

Some important considerations:

It may be imprudent to alter development assistance priorities so as to reduce U.S. involvement in non-democracies like China and Vietnam – countries in which there is a large number of poor people, and in which Western assistance has resulted in positive developments in human rights and liberalization.

The international financial institutions (IFIs), often criticized for their neglect of democracy as a factor in decision-making, have actually provided a useful insulation of the assistance process from politics and member countries’ specific geopolitical agendas. This has resulted in more assistance being provided more effectively to a broad range of countries over time. In addition, over the last ten years, the largest portion of international assistance for governance issues has come from the IFIs.

What Are the Next Steps; What Should Be Done and by Whom?

To improve development performance and to increase incentives for democratization:

  • Donors should consider giving preference to democracies in development assistance;

  • Donors should consider giving preference to democracies – particularly new democracies – in debt relief;

  • Donors should consider greater flexibility in their aid programs to new democracies to take into account the internal coalition-building process that must take place in democracies negotiating development assistance programs;

  • Donors should consider amending the charters of the IFIs to cite democracy as one of the objectives of IFI efforts;

  • Donors and IFIs should consider requiring Democracy Impact Statements with their activities to take account of the implications a development policy can have for a country’s democracy;

  • Donors should consider broadening the channels through which they program development assistance from just a recipient country’s national government (the current practice) to development NGOs, local governments, and the private sector. Such action could help increase government accountability for development assistance spending by providing domestic competition for development assistance funds; and

  • Donors and IFIs should consider expanding the mechanisms by which development policy is decided beyond treasury departments (the current practice) to foreign ministries and national aid agencies (for example, USAID).