Tuesday, August 08, 2006


Democracy and Economic Development

The other day amidst the usual India-China-which-model-is-better debate there was a thumping assertion. "A benovalent totalitarian govt is perferable to a democracy when a country is developing". That set me thinking and did some basic internet searching and tried to crystallize my thoughts.

After all, democracy and non-democracy are only forms of political organisation. So the macro question is - Is there a form of Govt (political organisation) which is intrinsically more efficient at economic development ? Alternatively "Does democracy help or hinder development?"

The world of sane polemicists (non-ideological) may be divided into two camps on this issue:

1. Pro-development - The essential premise here is that, democracy really should not be allowed to 'hinder' economic development. Democracy is no 'holy cow' which should be allowed to exist for it's own sake. Their point is that democracy has intrinsically too many built-in inefficiencies to be the best way to promote development. It takes too long to buid consensus to take the painful but necessary measures, the argument goes. (think 'subsidies' in the Indian context, the privatisation of PSUs) Vested interests by the sheer force of numbers can scuttle needed reforms (think indian communists, the reservation policy).

Another argument advanced by this camp is that political freedoms are a desirable long-term goal, but for poor countries and poor people it's an immediate luxury they can't afford, and don't want. Given a choice, this argument goes, a starving man is more interested in food than in the right to vote. Or a more dangerous consequence, the starving person will vote for a wrong entity who promises him bread on election day...And allow that entity to plunder the country till time for the next election comes.

The pro-democracy camp counters saying that since in a democracy power can be lost, it is in the interest of the rulers to care for the ruled (economic development). Some examples of this virtuous cycle are countries like Singapore which has the same party coming to power since 1959. However from a perverted, contrarian perspective, it is in the interest of the ruled to keep the country desparately poor which makes it easier to manipulate come election time. And over a period of time, it becomes the unsaid consensus of the entire policy, regardless of the party. In other words, the abject poverty ensures that the 'opportunity cost' of a short-term economically unsound practices (allurements on election day, promise of free power, free rice) overrides all other long-term considerations.

A stronger assertion of this school can be put as "Economic development may lead to democracy but democracy retards economic development." The point being that once citizens have their basic needs fulfilled, they will want more freedom, more choice (think about communism - the USSR)...

2. Pro-Democracy - This camp says 'should it really matter if democracy is more or less efficient at promoting development?' After all, what's the point of development? Ultimately to raise levels of prosperity, to increase people's choices and freedoms - including the freedom to have some say in their choice of leaders and policies. So if we want development, in order to have more democracy ultimately, then why not just have more democracy up front? If personal (political) freedom is an essential good we all want - and hardly anyone says it's something they don't want - then some inefficiency seems a small price to pay for it...The argument goes roughly like this - suppose we were all given the basic necessities, but ultimately we have little or no say about how we are goverened, people would'nt like it.

Also one of the biggest problems in this "development-before-democracy model" is the apprehension whether the non-democratic ruling entity is a benovalent one. And it will willingly surrender political power once the country is developed. As we all know "Absolute power tends to corrupt absolutely", there is a very real danger of the country sliding into a dictatorship. The risk of this is just not worth it.

On the empirical front, the jury is still out on the above debate. The causal relationships of democracy and development are still not clear. We simply dont know. Period. Speaking completely from a capitalistic perspective, there are even certain aspects of a democratic set-up markets dont like - Militant labour unions, populism based on voting numbers, unstable and a fractured polity on key issues. However, markets love some aspects often related to a democracy - free judiciary, media, rule of law etc...

So though we dont know conclusively, let me take a stab at it. I personally believe that the relationship between democracy and economic development is related to the state of development itself. At lower stages of economic development, democracy will be unfavourable to economic development while at the higher level, democracy will do a better job than non-democracy to spur economic development. A desparately poor country may be better-off without democracy. It is perhaps vunerable to manipulation by the polity, for whom there is ample incentive to keep status quo. Democracy may not exactly help where long-term painful structural adjustments may be required to get the economy on the right track. However once the wheels of development start turning, well people will start 'demanding' larger freedoms...

So though rationally, "A benovalent totalitarian govt is perferable to a democracy when a country is developing" however I am not personally very comfortable with it.

PS : This curiously takes me back to my favourite psychologist - Albert Maslow and his 'theory of needs'. At a very physiological our needs are basic - food, water, sleep, sex (not the need to vote)....however once we are assured of this, we are not content and want something more out of life - relationships, hobbies, leisure and the need to vote etc (and blog too eh ?)

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