Thursday, 18 August 2011

Economic Development and Democracy



Source: Ministry of Economy and Finance, Cambodia (2011)

Economic development is the major issue for all countries which are always in their political agendas and is also a promise of the government to their people in order to promote socio-economic well-being and whole prosperity of the nation. Democratic and non-democratic countries have a common task, economic development, to keep them survive and prosper both within the national and international context. With economic prosperity, a nation and its people are better-off and receive spontaneous political and social changes in response to new social and economic settings produced by economic development such as the effect of globalization and information technology, and international trade.
Since the end of World War II, democracy and economic development has been two mutually reinforced matters that have happened simultaneously in most countries. This movement has been observed by the fact that economic developments in some countries have assisted the establishment of democracy such as Germany and Japan. So, the relationship between economic development and democracy have been observed and analyzed by some political scientists and scholars such as Lipset, Diamond, Prezeworski et al, and Dietrich Rueschemeyer.  Does the establishment of democracy are driven by economic development or by other factors, such as political history, cultural traditions, political institutions, or the international political climate?
II. Literature Review
1.      Seymour Martin Lipset, “ Political Man”

Seymour Martin Lipset has argued that democracy is related to the state of economic development. The more well-to-do a nation, the greater chances that it will sustain democracy. A society which has divided between a large impoverished mass and a small favored elite results either in oligarchy or in tyranny. To give these two political forms modern labels, tyranny are presently viewed as communism while oligarchy appears in the traditionalist dictatorships found in parts of Latin America, Thailand, Spain, or Portugal. To test this hypothesis concretely, he have used various indices of economic development - wealth, industrialization, urbanization, and education – and computed averages (means) for the countries which have been classified as democratic in the Anglo-Saxon world and Europe, and in Latin America. In each case, the average wealth (per capita income), degree of industrialization and urbanization, and level of education is much higher for the more democratic countries. Although the evidence has been presented separately, all of the various aspects of economic development  - industrialization, urbanization, wealth, and education – are so closely interrelated as to form one major factor which has political correlate of democracy.
           A.    Economic Development and the Class Struggle

Economic development, producing increased income, greater economic security, and widespread higher education, largely determines the form of the “class struggle,” by permitting those in the lower strata to develop longer time perspectives and more complex and gradualist views of politics. Striking evidence for this thesis may be found in the relationship between the patterns of working-class political action in different countries and the national income, a correlation that is almost startling in view of the many other cultural, historical, and judicial factors which affect the political life of nations. He found that increased wealth and education also serve democracy by increasing the lower classes’ exposure to cross-pressure which reduces their commitment to given ideologies and make them less receptive to extremist ones. For example, the United States and Canada, not only communist parties almost nonexistent but socialist parties have never been able to establish themselves as major forces.     
           B.     The politics of Rapid Economic Development

The association between economic development and democracy has led many Western leaders and political commentators to conclude that the basic political problem of our day is produced by the pressure for rapid industrialization. He cited the study of Engels that in 1884 socialist labor movements had developed in Europe during the periods of rapid industrial growth, and that these movements declined sharply during the later periods of slower change. To illustrate this point, he indicated the pattern of leftist politics in northern Europe in the first half of the twentieth century in countries whose socialist and trade-union movements are now relatively moderate and conservative. Whenever industrialization occurred rapidly, introducing sharp discontinuities between the pre-industrial and industrial situation, more extremist working-class movement emerged.   
2.      Larry Diamond, “ Economic Development and Democracy Reconsidered”

Much of Diamond’s work is to reevaluate Lipset’s thesis on the relationship between socioeconomic development and democracy more than 30 years after its formulation. He found some weakness of Lipset’s argument that it only establishes correlation, not causality, but it does assume and infer that democracy is the consequence of these various developmental factors. Its shows the correlation of democracy with a wide range of developmental variables, but it does not present a truly multivariate analysis in which the independent causal weight or correlational significance of each variable is established by controlling for the other variables. After reviewing this accumulation of quantitative evidence over three decades of social science research, the following generalizations appear warranted:
i.      There is a strong positive relationship between democracy and socioeconomic development (as indicated by both per capita and measures of physical well-being).

ii.      This relationship is causal in at least one direction: Higher level of socioeconomic development generates a significantly higher probability of democratic government.

iii.      It also appears to be the case that high levels of socioeconomic development are associated with not only the presence but the stability of democracy.

iv.      The causal relationship between development and democracy may not be stable across time but it might vary across periods or waves in world history.

v.      The level of socioeconomic development is the most important variable in determining the chance of democracy, but it is far from completely determinative.

vi.      Although per capita national income appears to be the one independent variable that has most reliably and consistently predicted the level of democracy, this is likely a surrogate for a broader measure of average human development and well-being that is in fact even more closely associated with democracy. Thus, Lipset’s thesis may be slightly reformulated: The more well-to-do the people of a country, on average, the more likely they will favor, achieve, and maintain a democratic system for their country.
After discussion, he came up with five conclusions and some obvious policy implications. First, socioeconomic development promotes democracy in two senses. Where democracy already exists, sustained development contributes significantly to its legitimacy and stability, especially in the early life of the regime. Where democracy does not exist, it leads to the eventually successful establishment of democracy. Second, socioeconomic development presents the authoritarian regimes with an inescapable dilemma. If authoritarian regimes do not perform, they lose legitimacy because performance is their only justification for holding power. However, if they do perform in delivering socioeconomic progress, they tend to refocus popular aspirations around political goals for voice and participation that they cannot satisfy without terminating their existence. Third, it is not economic development itself and certainly not mere economic growth that is the most important developmental factor in promoting democracy. Rather, it is the dense cluster of social changes and improvements broadly distributed among population. Fourth, economic development produces or facilitates democracy only to the extent that it alters favorably four crucial intervening variables: political culture, class structure, state-society relations, and civil society.  Finally, it is important to emphasize as well that democracy can occur at low levels of development if the crucial mediating variables are present. Economic development is not a prerequisite of democracy, meaning that it is essential but does not necessarily have to exist in advance. For example, India is a poor country, but democracy survives as it inherited or developed political cultures that emphasize tolerance, inclusion, participation, and accommodation. To formalize slightly Lipset’s argument about “premature” democracies, poor countries can maintain democracy but only if they deliver broad and sustained (not necessarily rapid) socioeconomic development, especially “human development.”
Therefore, he came up with two policy implications. First, giving priority to basic human needs is not only sensible from the standpoint of economic development policy, but it is also likely promote or sustain democracy than more capital-intensive strategies. Second, in no country should democracy absolutely be ruled out as possibility.
3.      Adam Przeworski et al, “ Development and Democracy”

He begins with the observation that the incidence of democracy is undoubtedly related to the level of economic development. The relationship between the level of economic development and the incidence of democratic regimes is strong and tight. However, what remains controversial is the relative importance of the level of development as compared with other factors, such as the political legacy of a country, its past history, its social structure, its cultural traditions, the specific institutional framework, and the international political climate. In short, 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 the observable conditions indicate they should not; and there are others democracies flourish in spite of all the odds.
             A.    Regime Dynamics

In order to explain the regime dynamics, he first explained the “modernization” theory. The basic assumption of this theory is that there is one general process, of which the democratization is final facet. Modernization consists of a gradual differentiation and specialization of social structures culminating in a separation of the political from other structures, and making democracy possible. The specific causal chains consist in sequences of industrialization, urbanization, education, communication, mobilization and political incorporation which is a progressive accumulation of social changes that make a society ready to proceed to the final one, democratization. So, modernization may be one reason that the incidence of democracy is related to economic development.
B.     Level of Economic Development and Regime Dynamics
The transitions to democracy should be more likely when authoritarian regimes reach higher levels of development. Furthermore, transitions to democracy are less likely in poor countries and in rich ones, but they are more likely at the intermediate income levels. In short, Democracies are much more likely to endure in more highly developed countries.
C.     Economic Growth and Regime Dynamics
Democracies appear to be more sensitive to growth performance. The longer the economic crisis, the more likely it is that democracy will fall. However, there are some things we do know. He also found that democracy in poorer countries are more likely to die when they experience economic crises that when their economic grow.
D.    Income Inequality
The factor that matters for regime stability is also the distribution of income among different groups. Under dictatorships, high income inequality may stimulate movements attracted by the egalitarian promise of democracy. However, there is no evidence that egalitarian pressures threaten the survival of democracy. Indeed, it appears that democracies are less stable in societies that are more unequal. In turn, dictatorships, particularly in poorer countries, are much more vulnerable when the functional distribution of income is more unequal.
E.     Democratic Institutions and the Sustainability of Democracy
Institutional arrangements such as system of representation, divisions of powers, legal doctrines, and the bundle of rights and obligations associated with citizenship, may have an impact on the sustainability of democracy. So, democracy is sustainable when its institutional framework promotes desirable and politically desired objectives, but also when these institutions are adept at handling crises that occur when such objectives are not being fulfilled. The institutional distinction that appears particularly important is that between presidential and parliamentary systems. He asserts that presidential democracies are less durable than parliamentary ones.   
4.      Dietrich Rueschemeyer, “ The Quality of Democracy”

Equality points to the one of the critical dimensions along which the quality of democracy varies. What is important is political equality, not equality in all areas of social life. Yet the structures of social and economic inequality are intertwined with political equality, and shape it in profound ways both directly and indirectly. If these effects of social and economic inequality are not substantially contained, political equality will be extremely limited.
A.    Wealth Distribution and Cultural Hegemony
There can be little doubt that differences in the distribution of income and wealth across countries and over time within countries make for significant variations in political equality. It is on the issue of direct political action to reduce income and wealth differentials that the claims of an inherent contradiction between equality and freedom have concentrated.  The other major issue is cultural hegemony. It is clear that the views of better educated and of people in high-status occupations have a disproportionate influence on the production of culture as well as on its diffusion through education and mass communications.
Policy responses to issues of cultural hegemony are complex. Most rich democracies have policies hindering if not obstructing the trend toward concentrated ownership of newspapers, broadcasting networks, etc.
B.     Differential  Power Resources
Coercive power is a fundamental resource that is inherently distributed unequally. Most states strive to monopolize coercion, even though with uneven success. Of course, force or threats of force can easily compromise democratic rule. If state succeeds in monopolizing coercive power, democratic equality is protected only if the use of that power is regulated by law and if equality before the law is sufficiently realized to rule out political advantage from differential intimidation.
III. Conclusion


Lipset have made an interesting and questionable thesis on the relationship between economic development and democracy “The more well-to-do a nation, the greater chances that it will sustain democracy” which have encouraged some researchers to question and reevaluate his idea. He is the first scholar who opened discussion on economic development and democracy based on four economic indicators, namely wealth, urbanization, industrialization, and education. However, much of his work is based on quantitative analysis which has found only the correlation between economic development and democracy. Still, no causative analysis was made. He has not made any qualitative analysis on why, how, and process of economic development toward the establishment of democracy.


Diamond has made a re-evaluation research based on the study of Lipset to see whether Lipset’s thesis is still true or not after a period of 30 years after it was published. He has added on the Lipset’s work by conducting a multi-variate analysis. He has found that the relationship is causal in at least one direction: higher level of socioeconomic development generates a significantly higher probability of democratic government. More substantively, by arguing in a broader perspective that human development and well-being is more closely related to democracy, he has reformulated Lipset’s thesis that “The more well-to-do the people of a country, on average, the more likely they will favor, achieve, and maintain a democratic system for their country.”  In addition, besides the four variables used by Lipset, Diamond have used four intervening variables (political culture, class structure, state-society relations, and civil society) to draw an important policy implication that economic development produces or facilitates democracy only to the extent that it alters favorably those four crucial intervening variables. However, Diamond’s reformulated thesis which gives only importance to human development does not hold true for some countries such as China and Singapore.

Adam Przeworski has looked for other reasons, besides economic development, for the emergence of democracy such as political legacy of a country, its past history, its social structure, its cultural traditions, the specific institutional framework, and the international political climate.  However, he acknowledges that the level of economic development, as measured by per capita income, is the best predictor of political regime. In addition, he used modernization theory to explain the regime dynamic, economic development, and economic growth to see how it interact each other. Lesson learned from his finding is that democracies are much more likely to survive in affluent societies. Yet, he has acknowledged his weakness that his finding is dealing with chances and probability, not certainty. No clear-cut explanation, either quantitative or qualitative, on the emergence of democracy as he only explained for just the relationship between economic development and the survival of democracy. Though he has used modernization theory, he did not indicate the transition path to democracy when a country reaches some level of economic development.   The most important lesson he have founded is that wealthy countries tend to be democratic not because democracies emerge as a consequence of economic development under dictatorship, but because democracies are much more likely to survive in affluent societies. He also found that survival of democracies is quite easily predictable and per capita income is the best predictor of the survival of democracies. He also reminds that his finding is dealing with chances and probability, not certainty.

Rueschemeyer has made a practical contribution on the relationship between social and economic inequality with political equality.  Unlike the previous scholars, he has focused on addressing political inequality by considering on the wealth distribution, cultural dominance, and allocation of power resource. His argument on “to deepen democracy in the direction of greater political equality requires systematic and strong policies promoting social and economic equality” provides the idea of how to consolidate democracy in poor countries.  Yet, his analysis is narrowly focused only on existing, but fragile, democracies, and general socio-economic issues. His work is quite practical, but does not give theory-based prediction on the evolution of democracy.     

Democratic equality is a critical dimension of the quality of any system of any democratic rule. Since the structured inequality can never be eliminated and politically decision making can never be entirely free on the inequality in power resources, democratic equality is a goal that can only be approximated at a considerable distance. To deepen democracy in the direction of greater political equality requires systematic and strong policies, promoting social and economic equality. Then, the quality of democracy depends on social democracy on long-sustained policies of social protection and solidarity.

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