Chapter 2Setting the Record RightKurumi Ishida and Itz Keihan

Which model is more suitable to..,

Propel economic growth in low-income societies?

Propel Socio-economic progress in low income societies?

Authoritarian government to propel economic growth

Authoritarian regime was better suited to mobilizing the nations’ limited financial and human resources

Authoritarian governments are better equipped to overcome cultural and legal obstacles

POST-COLD WAR

Movements toward democracy by developing countries

However democracy was still thought to hinder economic development

Why?

1. Macro-economic populism

2. Politicians vulnerability to the influences of wealthy individuals

3. Slowness to act due to check and balance system

4. Tendency to precipitate political instability

Should the international community support democratization in

developing countries?

1960-2005

Democracies versus autocracies (low income)

Low income = per capita income below $2,000

⇒Democracies, have on average out-performed autocracies in levels of economic growth

Median Growth Rates for Low-IncomeDemocracies and Autocracies

Median GDP/Capita GrowthDemocracies and Autocracies

0.76

2.04

Growth rates Democracy Autocracy Gap

-$500 2.43 0.47 1.96

-$1000 2.31 0.45 1.86

-$2000 2.04 0.76 1.28

(1) Median Growth Rates for Low-Income Democracies and Autocracies

•　 Relative stability, less volatility in growth rates•　 5/100 worst performers (per capita economic growth rates)

(2) Median Growth Rates for Low-Income Democracies and Autocracies Outside of

East Asia

Coefficient of Variation for Democracies and AutocraciesGDP per Capita

Democracy Autocracy

$0-$500 2.29 25.2$0-$1,000 3.17 14.2$1-$2,000 4.45 3.4$2-$5,000 2.43 16.4$5,000+ 1.40 5.8

•Probability of experiencing economic disaster is 1% against 3.4% of autocracy.•Its volatility is regardless of income level

Socio-economic ProgressSocial Indicators (1)

Median Levels of Life Expectancy

Median levels of Secondary School Enrollment

School EnrollmentIndia: 60%Cameron: 40% (25% higher per capita)

Averaged life expectancy rates

8-12 years higher

Socio-economic ProgressSocial Indicators (2)

Median Levels of Childhood Mortality

Per capita income (US$)

Childhood deaths per 1000

Kazakhstan 1,978 73Philippines 1,129 33

Median Levels of Cereal Yields

Per capita income (US$)

Cereal Yields(Kg)

Kenya $442 1,322KgAngola $937 597Kg

Median Levels of Various Social Welfare Indices by Political Category

Median Levels of Human Development Index

(1975-2005)

Growing gap phenomena

Decrease in the number of autocratic government

Widespread market-based economic performance

Increase in accessibility of telecommunications, transport, and air travel

⇒Democratic governments are more competetive in absorbing and adapting new information

Social Welfare Expenditure

1990s, low-income democracies spent 0.5% of GDP per capita more on primary scvhool children

1 2 3 4 50

1

2

3

4

5

6

Budget Deficit (% of GDP)

DemAutoc

1990s 2000s Overall0

0.51

1.52

2.53

3.5

2.47 3.3 2.791.88 1.93 1.89

Public Spending on Health (% of GDP)

DemAutoc

Is Democracy an Advantage for economic prosperity?

pairs of countries with similar, economic and geographic origins, but under different political system.

Which one is better off economically? 1. East Germany vs. west Germany2. North Korea Vs. South Korea 3. Haiti Vs. The Dominican Republic 4. China Vs. Hong Kong and TaiwanStates that were/are relatively open and democratic, have developed more rapidly than those of authoritarian authoritarian counterparts.

Democratic Advantages #1

Shared Power

I. Vertical Accountability: citizens, mass media and civil society hold leaders accountable for their action.

Therefore, in democracy

Government Serve the public interest among other Alternatives

Democratic system act accordance to the political center of society=> Majority population.

Whereas,

In Authoritarianism, it is other way around

Democratic Advantages #2

Shared Power II. Horizontal Accountability: Government power is shared

between Parliament, Judiciary, executive branch

Therefore, in Democracy, Self-reinforcing mechanism for curtailing Abuse of power. Radical and devastating policy could be avoid. Whereas, in Authoritarianism, frequently Abuse of power by chief executive Uncheck policiese.g. Feminine of 1990s in North Korea which had killed 10% of its population.

“Amartya sen emphasize “contemporary democracies with a free press have never experiences a major famine”

Democratic Advantages #3

Shared Power

III. Great Allocation of opportunities: Separation of government and economic opportunities (free market economy)

Therefore, in Democracy Government Adherence to the rules of law Creation of private property rights Economic productive and asset creationWhereas, in Authoritarianism The rules of law could be violated often Creation of private property rights need political affiliation.

Democratic Advantages #4

Openness

I. Information Access: Free flow of information to public, freedom of speech and expression.

Therefore, in Democracy: the policy of government is face with public and civil

scrutiny Counterproposal and opinion are taking into

consideration (journalist, scholars, business leaders…etc)

the quality of analysis of the policy is highWhereas, in Authoritarianism: The right of giving counterproposal are taken away. Lack of public observation of policies. Low quality of policies

Democratic Advantages #5

Openness II. Greater transparency: openness contribute to greater levels of

transparency

Therefore, in Democracy:

Decrease the level of corruption (late 1990s on average level of corruption in democratic states were nearly half those autocracies)

Emergence of corporate-government

Whereas, in Authoritarianism:

Great concentration of power and increase the level of corruption

Economic monopolies hamper economic development.

Democratic Advantages #5

Adaptability II. Political Stability: an established mechanism for current and

future peace and stability of the countries.

Therefore, in Democracy:

Legitimate mechanism for succession process (through constitution).

Periodic election and peaceful replacement of ineffective leaders.

Whereas, in Authoritarianism:

Absence of transition mechanism, and the succession process must be reinvented every time

As Mancure Oslon Argue “the stability of even durable autocrats is limited to a single lifetime”.

Democratic Advantages #6

Adaptability II. Democracy as Learning Organization: Self Surveillance and adaption => govern through trail and errors. Successful policy are expanded and ineffective are discarded. “Democratic governance does not guarantee coming up with the ‘right’ policy, it does guarantee the option of changing a

policy if it is ‘Wrong’”.

Superiority of democracies over authoritarian state during East Asian Financial crisis.

1) South Korea Election of 1997 promised the structural reform. Reform-minded Kim Dae Jung won election and significant poilicy reforms were undtaken Followed by the revitalization of economy.

2) Indonesia Crisis expose structural weakness of authoritarian government Leading to the collapse of Suharto regime Has not yet recovered from the crisis (check book publication date)

East Asian exceptional miracles #1 South Korea, Taiwan, Indonesia, singapore,And china

have all realized rapid economic growth under autocratic system.

It present conceptual and empirical challenge to the notion of superiority of democracies.

While states such as: Philippine(Marcos’s regime), Combodia, Burma and North Korea under authoritarian rules remained with very low economic growth.

Therefore, authoritarian-runs economic daynamo is not necessarily the outcome of political system, But some exceptional factors such as: following Slides

East Asian exceptional miracles #2

I. Good Economic policies.

Market oriented policies . E.g Uphold property right => vibrant private sectior

Macroeconomic stability. (Fiscal surplus, stable exchange rate, discipline monetary policies and inflation under control,…)

Agriculture sector as an engine of economic grow at early stages =>60-90% of pupulation engaged in Agriculure sector.

Investment in Agriculture Technology => Increased in production of Rubber, Palm oil, silk, rice,…etc

II. Chinese businessmen. Taking advantage from the synergy of extensive regional dynamism.

Particularly Expertise and capital mobility of ethnic chines

Taking Advantage of neighboring markets.

East Asian exceptional miracles #3

III. Japanese Capital. Benefit from availability of Japanese capital.

Japanese bank invested heavy in east asian emerging markets. by mid 1990s, 40% asset liability were Japanese banks.

IV. Access to Market. Pursued of aggressive export-oriented growth strategies.

Opening of market while West maintain large trade deficit.

Meanwhile, East Asian dynamos benefited largely from closeness to China.

V. Collective interests. High level of income-equality at early stage of development.

Access to health care and education as they grew economically

Improvement of human capital and their higher level of contribution to ecomomic productivity and investment.

East Asian exceptional miracles #4 VI. Capital Mobilization.High rate of investment.Higher labor participationTransfer of labor from Agriculture to manufacture.VII. External Influence. Geopolitical development.United States containment policy.US and UK helped in shaping legal and economic institution in South Korea, Taiwan, Singapore, Hong Kong, Thailand, And Malaysia. (Property rights laws, land reforms, financila institions)VIII. Strong intuitions. Development through competent and efficient civil structures I. Information flow. Free expression within the scope of government regulation. e.g. toleration of student protest in South Korea during 1960s-70s Press freedom since three decades=> increased effficienty of finanical transactions and spurring economic development.

Chapter 3Sustaining New DemocraciesHaruka Yoshitome

Main Contents

Which countries qualify as Democratizers?

What is Democratic Backtracking?

Relations of Economic Decline and the Erosion of Support for Democratization

Distinguishing characteristics of democratic backtrackers

Which Countries Qualify as Democratizers?

Having Elections…? –Mubarak, Hu Jintao, Kim Jung Il..

Shifting away from authoritarian rule…?–Belarus, Turkmenistan, Uzbekistan..

　　　　　　　　　　　　 83 countries categorized as Democratizers

60% under $2,000 75% under $4,000 (Polity IV democracy index)

Contemporary Democratization is a developing country phenomenon

Phony Democratizers

Successful Democritizers seem to have better income levels, do they?→Income level does NOT determine the extent of democratization

Proximity and exposure to successful democracies Joining the EU

Economic vitality

Natural resource dependence

Duration of democratization

Regional effects

stronger influences on outcome

What is Democratic Backtracking? Definition:

countries having once started down the democratic path, they experienced a decline or a point more in their Polity-democracy score 49 countries have experience

→ 30 countries have experienced “democratic collapse” happens within the first five years of a transition (usually)

Why causes it?1. Economic Hardships2. Parliamentary System

Within the 49 countries that backtrack, 39 have made a full or partial recovery…why?

Democratic Resilience Collapse is not the end of democratization, but a step

for political maturity Democracy puts down deeper roots, enabling it to

withstand economic storms that last for years (not in all cases, and not forever) Despite a three year period of stalled growth, no

backtracking happened –ex) Brazil, Mexico, Senegal

However...

Once a democratizer has reached a middle income, regression is rare

Should policy makers hold off pushing democracy in the developing world until the country achieves a “take-off” stage in prosperity? -ex) Zakaria $6,000 threshold

By controlling other factors, income level does not emerge as a defining factor explaining backtracking in countries experiencing economic stagnation.●Rate of Economic Growth●Inflation●Strength of the Private Sector ●Extent of Dependence on Natural Resources

Geography is a distinguishing factor in identifying backtrackers.ex) Africa, Latin America, former Soviet Union West Africa, Andean Region, Caucasus -greater Black Sea Region “the neighborhood effects” works in reverse, accelerating backtracking

NO!

Economic Decline and the Erosion of Support for Democratization

1. Unmet Expectations●Underestimation of challenges●Demand for immediate fix

2. Governing Coalitions●Ideological, economic, regional, ethnic, religious groups need to have the same understanding -ex) Belarus

3. Crime and Corruption●reliance on attitudes of public-spiritedness and willingness to compromise●realization of unfair distribution of wealth

4. Opening to Authoritarians●any change better than current situation?

Characteristics of Democratic Backtrackers

Economic characteristics of recession related backtracker 1. Higher Inflation

Peru, Germany2. Constrained Private Sector

Lower private sector access to credit Smaller share of capital managed

3. Elevated debt –service levels Latin America and Africa

●Former Soviet Union -Reliance on natural resource●Latin America -Exploitation and growing inequality●Africa -Size of fiscal deficit

1. Development of independent financial institutions Diversifies power within society

2. Control of inflation Protects the power of the low, middle income

households that might otherwise strain new democratic institutions

3. Lower debt-service levels Increases flexibility a democratic government has for

fixing hardships from economic reform

Key Factors for

fighting backtracking

Thank You for Listening!