Democracy is the best regime for economic growth – 04/02/2024 – Martin Wolf

Last week, I discussed the precarious state of democracy in an online meeting organized by an Indian media organization. After my presentation, an audience member asked why Indians should be interested in democracy. Wouldn’t it be a Western idea imposed on the rest of the world? Wouldn’t developing countries be better off with autocracies?

I was both disturbed and happy by this question — disturbed because it means something important when a member of India’s educated elite asks it in a public forum, but happy because I know that many are asking this question now, and not just in developing countries. The appeal of tyranny is growing.

“Freedom in the World 2024”, a report from the independent think-tank Freedom House, states that “global freedom has declined for the 18th consecutive year in 2023”. Over the past decade, major declines in political and civil rights have occurred in many developing countries. Under Narendra Modi, India is, unfortunately, one of those countries.

Are such declines perhaps a price worth paying for faster economic development? On a broader level, this seems quite unlikely. If we leave aside some countries rich in natural resources and Hong Kong and Singapore, all of the richest countries in the world are liberal democracies. Is this really a coincidence?

However, skeptics may still argue that democracy is not the best way for poor countries to become richer. They might point, for example, to China’s incredible growth record over the past 40 years. However, the evidence does not support this view. A 2019 paper, “Democracy Causes Growth,” by Daron Acemoglu and others, argues that “there is an economically and statistically significant positive effect of democracy on future GDP per capita.” Thus, “long-term GDP increases by about 20 to 25% in the 25 years following democratization.” Crucially, this also applies to countries in the early stages of development.

Probably much more important, as Carl Henrik Knutsen notes in a 2019 briefing note for the V-Dem Institute, the autocracy results show much greater variance. So when autocrats are good, they can indeed be very good, but when they are bad, they are horrible. Stalin, Hitler, Pol Pot and Mao Zedong killed people by the millions. This may have been because they wanted to or because they didn’t care. The point is that autocracy is government without accountability. Unresponsible governments can do anything.

In a brilliant recent article, historian Timothy Snyder argues that “strongman rule is a fantasy. Essential to it is the idea that a strongman will be your strongman. He will not. In a democracy, elected representatives voters listen. We take it for granted and imagine that a dictator owes us something. But the vote you cast for him affirms his irrelevance. The bottom line is that the strong man owes us nothing. We are abused and we get used to it. even worse than that. The potential tyrant is not a normal human being. He is almost always consumed by the desire for power. Once he has achieved what he seeks, how do you get rid of him if he turns out to be crazy? How to preserve integrity of central institutions against him?How to manage succession?

We know that a constitutional monarchy can work. We know that an autocrat can do well in a small country like Singapore if he recognizes that it requires the rule of law and secure property rights.

We know that in South Korea and Taiwan, autocrats oversaw the start of the countries’ rapid development. We also know that China had, in Deng Xiaoping, a leader who was not drunk with personal power. Therefore, as the Chinese say, one can have a “good emperor”. But what do you do if, as so often, you get a bad one instead?

Democracy prevents such disastrous outcomes because it has built-in methods of correction. Even if a democracy has inadequate civil, political and legal rights, as many do, elections can still make a difference. This proved true in Poland last year and now in Türkiye.

Elections are a constraint in India too. In parliamentary systems, members of parliament can also revolt, as they did in the UK against Boris Johnson and Liz Truss. The big argument for democracy is not that it will produce good government, but that it will prevent terrible government, which is the worst thing societies can have except for the absence of government—in other words, anarchy. The more complete the set of rights, the more powerful the restrictions will be: there will then also be open debate, freedom to protest, free media and independent institutions.

Democracy is always fragile. It’s fragile because some people want to be tyrants and many people want to trust them. This is also more likely if democracies fail to deliver the goods people want – a sense of belonging, of security, of being valued. As Yascha Mounk argues in The Identity Trap, democracies are more fragile in more unequal and more diverse societies, not least because potential tyrants will exploit such divisions.

Indeed, it is difficult to create liberal democracies in such societies in the first place, as Warwick’s Sharun Mukand and Harvard’s Dani Rodrik argue in The Political Economy of Liberal Democracy. My interlocutor was right: democracy is a recent innovation. But he was also wrong: just because democracy is new doesn’t mean it isn’t valuable. This is true even though democracies are imperfect and autocracies sometimes work for a while. Democracy offers accountability for governments and voice for citizens. This is much better for us than serving the whims of despots.

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