Democracy and economic growth - Wikipedia
This study investigates the relationship between economic growth and democracy by estimating a nation's production function specified as static and dynamic. The nexus between democracy and development in Africa has been one . of economic development while evading any pressure to relax their. First of all, your example of India is wrong. India has exploded in economic development in the 21st century, fueled largely by economic.
When I say economic decisions, I mean what products are produced, how much are produced, and what their prices are. Except in comparatively limited regulatory acts, the government does not make those decisions in a free market economy. If it did, it would by definition not be a free market economy. Free market economies are generally a feature of democracies.
Is there a relationship between democracy and economic growth?
They are generally not a feature of dictatorships. Generally in politics we distinguish between public and private activities. Producing, selling, and purchasing goods are "private" - they are the domain of the individual or firm rather than the state. If you are interested in states where the government handles all the affairs of daily life i. Modernization theory was the dominant view in comparative political science for most of the last century.
Although it has since been dethroned, it is still incredibly common in research. The basic notion is that economic development causes democratization although at some point the claim was softened to just that they are strongly correlated.
A Note About Generalization What we are talking about here is a generalization of how the world works. Like commenters and other answers have pointed out - you can always find examples where it doesn't seem to apply perfectly.
This is entirely normal. It just means there are things yet to be explained in the world. The Theory Basically, the theory is just that as an economy develops it also tends to become more democratic. He uses some indicators of economic development and shows that the countries with high levels of economic development are also the ones that are democracies.
Is there a relationship between democracy and economic growth? - CNBC Africa
Cutright goes a lot further as did a lot of other modernization theorists: Similarly, if a democratic country's economy slipped it would eventually become less democratic.
What does a developed economy look like? Of course, this research will very highly depend on how you measure the state of an economy.
A developed economy should be higher in urbanization. This does tend to happen as an economy develops agricultural workers move to urban areas to take jobs in manufacturing, and eventually the manufacturing jobs are lost to service jobs. Back in the hey-day of modernization theory, this was measured as the number of telephones per 1, people. Not only can a developed nation afford telephones, communication lines are valuable for economic growth. Effects of democracy on economic growth[ edit ] Democratization of a country from a non-democratic regime is usually preceded by a fall in GDPand a volatile but expected growth in the long run, While on the other hand authoritarian regimes experience significant growth at the beginning and decline in the long run.
One of the main reasons for this is that society, i. This is primarily true in countries with a higher level of education.
So it ties the development level of a country as one of the decisive factors to undergo positive democratic changes and reforms. Thus, countries that embark in democratization at higher levels of education are more likely than not to continue their development under democracy.
As for each such case, there is a failure. There is never a single formula for democracy. The processes in associations with peace, social stability and rapid socioeconomic development are not yet fully understood, which may be the reason for a widespread opinion and many hypothesis.
However, it has strong and significant indirect effects which contribute to growth. Democracy is associated with higher human capital accumulation, lower inflationlower political instability, and higher economic freedom.
Democracy is closely tied with economic sources of growth, like education levels and lifespan through improvement of educative institutions as well as healthcare.
Similarly, poor democracies are half likely as nondemocracies to experience a 10 percent decline in GDP per capita over the course of a single year. Some disappear in the midst of an economic crises, while other after a long period of prosperity, some after the founding dictator dies or some as a result of defeat in foreign wars.
However, observing the conditions and predicting a transition to democracy is so difficult, because the conditions only lay the ground-works for the possibility that it may occur.
But it is actions of people under these conditions that shape the outcome. Many dissertations have been written on the history of different transitions, and the opinions are divided into two main categories. One party proclaims that it boils down to the creation of civil society, which comes to fruition almost of itself. A process fostered by transformations of the social structure. However, others proclaim that it is those that start with play the "strategic game" and reach a bargain under conditions taken as a datum.
The literature pits "sociological" against "strategic" perspectives, yet we can say that both of them are needed for a transition, and they are not mutually exclusive. Survival of democracies[ edit ] The conditions for their origins may be hard to determine, but the factors on which its survival depends are easily identifiable, and are tightly connected to economic growth, that is the level of development measured as per capita income.
Another factor would be the education of the labor force. Specifically the years of schooling of an average citizen. This greatly elevates the probability that a democracy will survive. However, even though income and education are highly correlated, their impact seems to be to some extent independent, with the impact of per capita income being much stronger.
Empirical patterns show that a democracy is more fragile in countries where per capita income stagnates or declines, but the causality is not clear. The fact that economic growth is tightly connected to democracies does not come as a surprise, since democracies are more frequent among the economically developed countries, and are rarer among poor ones.
Effects of economic development on democracy[ edit ] The notion of economic growth having a greater influence on democracy was a very popular opinion in the s. The most important work on the subject has been done by Lipset  where he states that economic development is one of the prerequisites for democracy. However, this is not true. Both concepts are of equal importance and there are many cases where one acts as a prerequisite for the other, i.
Economic development may influence democracy in many ways. By tightening the revolution constraint, creating rising inequality or simply increasing the level of income in the society.
This means that as an economic structure transforms, and since it is related to capital intensity, capital itself becomes more important than land, which is one of the reasons that states with a higher income per capita would generally perform better. As mentioned, the causality of economic development and democracy is inconclusive. However, if we consider that democracy should be supported by some preconditions, it is economic growth that creates these conditions for democracy: Work done by Lipset is best well-known on this topic.
By his comparative studies Lipset shows a strjong statistical association between GNP per capita and the level of democracy, to finally conclude that "the more well-to-do a nation, the greater the chance that it will sustain democracy". It is especially relevant in just shaping democracies, even though they may survive in poorer conditions.
As democracies require certain political institutions, it is quite interesting that they do not have a high impact on economic growth.