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Monday, 22 September 2014

Notes from "The Economic Determinants of Democracy and Dictatorship"

Chapter 6 of Principles of Comparative Politics (William Roberts Clark, Matt Golder and Sona Nadenichek Golder)+ some extra essays.

- Income and democracy are correlated.
- "Classic modernisation theory argues that countries are more likely both to become democratic and to stay democratic as they develop economically."


- Acemoglu, Johnson and Robinson, "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution":
Examines the reversal of fortune- why some countries were very rich before and poor now, and vice versa. Finds that a) it's linked to colonialism (extractive institutions in previously rich, crowded areas and institutions of private property in previously poor, sparsely populated areas) and b) the geography hypothesis (geographic, climatic, ecological factors) is wrong, the most important factors are economic and political institutions.
We see rich and democratic countries, and poor and autocratic countries, but that doesn't necessarily mean a causal relationship, but rather that they both result from the same thing- institutions.

- Various views:
+ Lipset:
For modernisation theory.
Extremism and polarisation are factors that work against democracy.
Education mitigates extremism.
Industrialisation and urbanisation help society open up for different influences=> tolerance and broad-mindedness.
Economic inequality and poverty lead to social conflicts and antagonism between the classes.
The middle class in a modern society is a moderating influence that works in favour of democracy.
When a country's richer, it has larger chances to sustain democracy.
(Criticism: Different paths to modernity.
Authoritarianism in rich, industrialised countries.
The middle class's fear of industrial workers' power may make them want to call for a strong hand).
Rapid growth's bad for democracy.

+ Przeworski and Limongi, "Modernization: Theory and Facts":
Against modernisation theory (endogenous view).
Instead, survival theory: economic development helps survival (exogenous view) but doesn't cause democratisation.

Simple explanation for survival theory: in a democracy, you all get a share; in a dictatorship, you win everything or lose everything. If you're rich in a democracy, you'd like to stay in a democracy, because even though you have a chance to be richer, there's also a possibility of losing everything. If you're poor, there's nothing to fear, and you have a chance to become rich when switching to a dictatorship.
Growth isn't destabilising for democracy. Crisis is, but only for poor democracies. But it's destabilising for dictatorships, both rich and poor.

+ Boix and Stokes, "Endogenous Democratization":
Criticises Przeworski's and Limongi's use of data.
Omits Soviet countries (USSR pressure) and oil countries. The tables show that economic development both sustains and causes democracy.

+ Kennedy, "The Contradiction of Modernization: A Conditional Model of Endogenous Democratization":
Higher income reduces probability of change and stabilises all kinds of regimes, but if a change takes place then the richer a country, the higher chances it ends in democracy.
High short-term growth=> low probability of democratisation. 

+ A variant of modernisation theory:
It isn't income per se that encourages democratisation but rather the institutional changes that accompany economic development.
Incorporates the predatory view of the state.
Linked to the commitment problem. People are unwilling to give loans to the state if there's no guarantee that the state will pay back the money, and this may do harm to the economy unless there are institutional changes- this is often said to "explain the institutional reforms that led to the establishment of modern parliamentary democracy in Britain during the Glorious Revolution".
Note the concept of quasi-rent, which is the difference between an asset's value and its short-run opportunity cost. There are 2 kinds of asset: A fixed asset, such as a copper mine, has large quasi-rents because if it doesn't produce copper, there isn't much you can do with it, which means that fixed asset holders don't have credible exit options, therefore the state can choose to be unresponsive. A liquid asset is flexible (can be turned into other types of assets), the state depends on liquid asset holders for investment and resources and is more likely to accept limits on their predatory behaviour. This explains the resource curse- countries that are abundant in natural resources, such as oil, tend to be dictatorships, though there are also other factors (revenue from natural resources allows the state to buy off citizens by lowering taxation, reward the military, use control over national companies such as oil companies to hide its finances, etc).

- North and Weingast, "Constitutions and Commitment: The Evolution of Institution Governing Public Choice in 17th Century England":
Fearing of not getting loans in the future doesn't necessarily prevent reneging. Consider the time of war, survival is at stake and the sovereign would discount the future.
The role of the Bank of England.  
"Successful economic performance [...] must be accompanied by institutions that limit economic intervention and allow private rights and markets to prevail in large segments of the economy".
The commitment by the government to honour its financial agreement is part of a larger commitment to secure private rights.

- Providing foreign aid for dictatorships may inhibit the emergence of democracy, help dictators hold onto power and prolong the suffering the people because it reduces the dependence of the state on the citizens as well as the incentive to have good economic performance.

- Inequality (these theories draw on the premise that democracy's expected to cause/increase redistribution): 
+ Boix and Stokes:
Inequality harms both democratisation and consolidation.
Increased income=> reduced inequality=> democratisation (this is, of course, debatable). 
Low inequality=> the elites have less to lose and don't want to risk revolution=> they democratise. 
Unequal authoritarian regimes are less likely to become democratic because the elites fear redistribution (the lower classes can't credibly promise to tax lightly when they gain power). 

+ Acemoglu and Robinson:
Inequality inhibits consolidation but relates to democratisation through an inverted U-shaped curve: 

  • Low inequality=> the elites can commit to redistribution (less costly)=> the lower classes have less incentive to fight for a regime change. 
  • Intermediate level of inequality=> redistribution is relatively inexpensive (they do have much to lose, but revolution and Marxist regime are worse) => the elites are unwilling to use repression=> they democratise. 
  • Higher level of inequality=> the cost of redistribution surpasses that of repressing revolts=> the elites repress the population=> no democratisation. 

+ Houle, "Inequality and Democracy": 
2 opposite effects: on the 1 hand, inequality makes democracy costly for the elites, who fear redistribution; on the other hand, inequality increases people's demand for regime change.
Acemoglu and Robinson forget a) all authoritarian regimes require some repression, b) revolts aren't equally costly and c) inequality doesn't necessarily lead to revolts because people may fear imprisonment or death, therefore "the elites have no incentive to respond to changes in inequality by adopting democracy".
The 2 transitions processes (democracy=> dictatorship, dictatorship=> democracy) are asymmetric.
Egalitarian democracies are more stable: low inequality=> less to gain for the elites from conducting a coup. 
Inequality harms consolidation but doesn't affect democratisation (no empirical evidence). 


=> Conclusion: 
Short-term growth and oil=> good for survival of authoritarian regimes. 
Income level?=> depends. 

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