The Duck of Minerva

Does Democracy hinder economic growth?

8 June 2010

Riz Khan from Al Jazeera is asking the question today. This is always a question that triggers enormous debate among my students. Many tend to jump on the “look at China” or “look at Chile under Pinochet” bandwagon as evidence that autocratic governments are better at imposing the level of discipline necessary to trigger and sustain economic growth. Michael McFaul’s new book Advancing Democracy Abroad: Why We should and How We Can has an extensive overview of the literature on the question. Notwithstanding the loaded title, McFaul does concede that there is much we still don’t understand in the relationship between regime type and economic development. He also acknowledges that China’s average annual growth rate is historically unprecedented and that no democracy has ever come close to matching China’s growth over the past twenty-five years.

Nonetheless, the book is a defense of democracy and he argues that democracies are better situated to promote stable and sustained growth: 1) democracies often protect societies from the worst forms of economic disasters — the same can not be said for autocratic regimes such as Stalin’s disaster in the 1930s in the USSR or Mao’s catastrophic famine and deprivations of the Cultural Revolution. Amartya Sen has often made the same point that no democracy has experienced a famine. 2) On average, democracies might not perform as well as the strongest growing autocratic regimes, but for every China there is also a number of Zaires, Burmas, or North Koreas. For all the faults, democratic regimes often have higher levels of accountability and policy recalibration. They also tend to have more liberalized trade policies, abilities to accumulate human capital, and incentives for innovation and entrepreneurialism — all of which facilitate development and growth.