Do Democracies Grow Faster?

Meeting of the Chinese Communist Party

Meeting of the Chinese Communist Party

In the 1980s, there was considerable debate about whether authoritarian or democratic governments were better for economic development. The discussion centered on the economic performance of authoritarian states in the developing world, including countries like South Korea and Argentina, which seemed to experience a far faster pace of economic growth than democratic counterparts like India. Indeed, this observation led some to conclude that rapid economic development necessitated authoritarianism, as democratic governments lacked the popular independence necessary to enact dramatic economic reforms. 

The debate over authoritarian development re-entered the spotlight yesterday, when Dani Rodrik posted an article questioning the link in Russia. According to Rodik, Vladimir Putin’s policies in Russia undermine prospects for economic growth. Rodrik observers that, contrary to the literature that emerged in the 1980s,

Democracies not only out-perform dictatorships when it comes to long-term economic growth, but also outdo them in several other important respects. They provide much greater economic stability, measured by the ups and downs of the business cycle. They are better at adjusting to external economic shocks (such as terms-of-trade declines or sudden stops in capital inflows). They generate more investment in human capital – health and education. And they produce more equitable societies.

Authoritarian regimes, by contrast, ultimately produce economies that are as fragile as their political systems. Their economic potency, when it exists, rests on the strength of individual leaders, or on favorable but temporary circumstances. They cannot aspire to continued economic innovation or to global economic leadership.”

But the prospects of rapid economic growth—a la the Chinese model—are often hard to ignore. Still, it is possible to envision different paths. The story of Kerala State in India represents one such alternative. In Kerala, a strong emphasis on the provision of basic needs has led to a prolonged period of economic stagnation, but has also led to dramatic improvements in literacy, nutrition, health care access, and declining child mortality. More recently, according to Duncan Green, Venezuela has successfully reduced inequality, While Rodrik may be correct to conclude that democratic developers like Brazil, South Africa, and India are likely to outpace authoritarian developers like China and Russia, the political benefits of calling on people to sacrifice a little freedom for a little prosperity are clear, if not just.

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