Economic Development and the Stability of a Democracy

According to “What Makes Democracies Endure?” the best way to ensure a democracy in the future is to have democracy in the present. The authors go on to use statistical evidence to dispel rumors that non-democratic regimes tended to give way to democracy. In fact, “not a single transition to democracy can be predicted by the level of development alone” (Przeworski, Alvarez, Cheibub, & Limongi, 1996). However, affluence can be used as an indicator of the likelihood that a democracy will fail: the smaller the annual per-capita income, the more likely the democracy will fall in any given year. Regimes are more stable when they have noticeable (more than 5%) economic growth and moderate (6-30% per year) inflation. Democracies are more stable when they have declining income inequality, but there is no apparent relationship between stability and income inequality itself, only its change over time.

Essentially, people who have more to lose economically are less likely to be interested in overthrowing the current regime (democracy or dictatorship) and they will be more likely to put up with a frustrating political situation (a deadlocked democracy or a cruel, corrupt dictatorship) in order to try to keep their financial earnings. People living in poverty with very little capital at risk, however, are more likely to try to overthrow the current regime in order to try to get themselves a better future through whatever alternative regime they have in mind.

Paul Krugman’s New York Times opinion article, “Francs, Fear and Folly” discusses how Switzerland, a traditionally quite stable country, may undergo a regime change. Mid-January, the Swiss National Bank ended a policy put in place three years prior to prevent deflation. “A democratic regime has a 0.023 chance of dying and an expected life of 44 years when the annual inflation rate is under 6 percent,” so it is entirely reasonable for Krugman to question the stability of an otherwise successful regime facing negative inflation (Przeworski et al., 1996). This example reinforces the idea that moderate inflation is important for a successful regime. While no change of regime has happened yet in Switzerland, the economic instability that deflation has led to may hint at deflation’s effects on less stable regimes in the near future.

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4 thoughts on “Economic Development and the Stability of a Democracy

  1. I have to admit it does make a fair amount of success. People who have significantly less to lose are more willing to risk everything in the hope that something changes for the better while those who are succeeding in the current system, whether politically or economically, are more likely to support it or at the very least be resistant to change. It’s also interesting to consider the idea of having a democracy in the present as the best safeguard for future democracy, as historically there are examples of states going either way. I found it particularly interesting the notion of Switzerland, a state that has been neutral for decades and is one of the few states that still has elements of direct democracy, undergoing a regime change, regardless of how likely or unlikely it may be. I’m not sure if I entirely agree with the article saying that constant inflation is crucial for a democratic regime’s success, since in history there have been several examples of states undergoing considerable economic hardship and yet maintain their overall democratic regime, such as the United States or Great Britain during the Great Depression.

  2. It does make sense that Democratic states, especially ones that have developed economies, would have a lot to lose by undergoing a regime change. In today’s global economy, the developed economies are mostly from democratic states, and changing the political system would have huge economic costs in terms of trade and also political alliances, so I agree with the article’s conclusion that the best way to have democracy in the future is to have democracy at present. However, I disagree with the article when the author’s mention ‘Declining Inequality’ as another indicator of the strength of a Democratic regime. For example, if you look at the two biggest democracies in the world today, the US and India, both have high degrees of Income inequality, but both are considered to be strongly democratic.

  3. I am not sure that regime change is the correct word (remember our discussion of terms). But it is interesting that such stable democratic regimes are undergoing economic crisis. Do our authors say anything about this? What would they expect?

  4. I think institutional change would be more of a fitting term in this case rather than regime change. However, it is interesting to think about the success of democracy like this. Although there is no hard proof that connects democracy with economic growth. The authors argue that poorer countries with a parliamentary system is more economically stable while as countries who have adopted a presidential system is less likely to grow economically. Democracies under the presidential system is more fragile because of the fact that the military plays a significant role in politics, which history has proven to show especially in the Latin American countries. Although the authors provide us with statistical proof that a country with a parliamentary system is economically more stable, they don’t really explain why this is the case. This article argues that democratic stability does depend on economic development in countries as well as the institutes they decide to adopt while in the transition to democracy. They expect that poverty will be an issue when it comes to democratic stability. Despite their statement that poorer countries with a parliamentary system is more likely to grow economically, these countries choose to adopt the presidential system which doesn’t help them grow as much as they could. What I find interesting is that a complex idea of what democracy is and how countries attain is all depends on the simplicity of what institution they choose to adopt as well as the economy. I always thought it was so much more complex then the simple idea of having a democracy means having a democracy in the future. Granted I’m not saying that achieving democracy and keeping it is easy, but rather just the idea of where it comes from is a lot simpler than what (I think) others make it to be.

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