Democracy and Economic Development

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Democracy and Economic Development*

Adam Przeworski Department of Politics New York University

I examine the mutual relation between political regimes and economic development. An analysis of regime dynamics shows that while the paths to democracy are varied, once established for whatever reasons, democracies survive in developed countries. Contrary to long-standing arguments, political regimes do not affect the rate of investment and of the growth of total income. But since population grows faster under dictatorships, per capita incomes increase more rapidly under democracies. In the end, there is not a single reason to sacrifice democracy at the altar of development.

* Published in Edward D. Mansfield and Richard Sisson (eds.), Political Science and the Public Interest (Columbus: Ohio State University Press). This is a revised version of a paper originally written for the United Nations Development Program, with whose permission it is published here.

Introduction I examine the mutual relation between political regimes and economic growth. Two questions are discussed: (1) Whether economic development affects the emergence and the survival of political regimes and (2) Whether political regimes affect economic performance. These two questions are inextricably connected. To determine whether political regimes affect economic performance, we must first ask how political regimes emerge and endure. Unless this question is posed first, we will be unable to distinguish the effect of the conditions under which political regimes find themselves from the effect of regimes. Suppose that you were to observe that in 1985 per capita income of Mali, dictatorship, grew at the rate of 5.35 percent. Would the rate of growth of Mali in 1985 b different een had it been a democracy? This is what we want to know when we ask about the impact of political regimes on growth. But we do not observe 1985-Mali as a democracy, only as a dictatorship. True, we could look for a case that was like 1985-Mali in every aspect other than its political regime. But what are we to do if we cannot find a democracy like Mali-in1985? As you probably already know, and will soon learn again, democracies are very rare in poor countries, such as Mali, which in 1985 had a per capita income of $532. 1 In turn, we may observe that 1985 France, which was a democracy and had per capita income of $12,206, grew at the rate of 1.43 percent. Was its growth slow because it was a democracy? Again, we may try to find a dictatorship that would look in all respects like France. But the wealthiest dictatorship we observed between 1951 and 1990, Singapore, had per capita income of $11,698. Hence, we will not find a single case of a dictatorship as wealthy as France during the same time span. Why does it matter? Suppose that poor countries in general grow slower than wealthy countries. Since most poor countries are dictatorships and all wealthy countries are democracies, we will conclude that economic growth is faster under democracies. But this will be an invalid conclusion: the difference will be due to conditions under which these regimes exist, not to anything they do. As another example, consider the possibility that democracies are vulnerable to economic crises, while dictatorships survive them. Again, if we were to just compare the growth rates observed under the two regimes, we would conclude that democracies grow faster. And, again, this conclusion would be erroneous: we will have observed this difference only because democracies died when they encountered bad economic conditions and became dictatorships capable of surviving survived under these conditions. Finally, consider the possibility that there is some factor which cannot be observed systematically and which affects both the political regime and the rate of growth. Enlightened leaders, for example, may opt for democracy and well manage the economy. If we rely on comparisons of the observed cases, we...
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