How Democracies Die and Economies Grow

Jun 11 2018 - There are two prominent themes of contemporary development discourses, both lacking a consensus, as reflected in academic research and in their popular versions in bestseller books. One of these is about finding the reasons for the decline of democracies since the late 1980s and the early 1990s when the erstwhile military rule and dictatorships gave way to democratically elected regimes in many developing countries. A representative book on this is Competitive Authoritarianism: Hybrid Regimes After the Cold War by Steven Levitsky and Lucan A Way. Levitsky has also recently co-authored another bestseller, How Democracies Die, with his Harvard University colleague Daniel Ziblatt. The second theme is about how the quality of governance could explain why some countries economically prosper and others do not. On this, one of the best-known books is Why Nations Fail: The Origins of Power, Prosperity, and Poverty, co-authored by two well-known political economy experts, Daron Acemoglu and James Robinson. The two themes, though interrelated, are quite distinct, and much confusion is created by not recognising these as such.

At the time of the so-called new wave of democratisation across the developing countries, it was believed that these countries would pass through an initial transition phase for building and consolidating their democratic institutions. In reality, only a few followed this path of gradual deepening of democracy; Indonesia or Botswana are often cited as examples. Some others degenerated into unstable and fragile states and returned to authoritarianism or worse. But in most cases, the transition phase did not lead to more democracy, but resulted in a new kind of stable hybrid regimes—authoritarianism mixed with democratic institutions in various degrees.

The initial democratic aspirations in most of the countries did not materialise for various reasons. In some cases, such as in South Africa, Singapore or the erstwhile Malaysia under Mahathir’s rule, the dominance and popularity of a single party left little room for multi-party democratic competition. Sometimes, charismatic leaders like Hugo Chavez of Venezuela who themselves did not believe in democracy but enjoyed popular support, came to power through genuinely contested elections. More often, however, democracy was gradually weakened at the hands of democratically elected leaders faced with fading popularity.

In the latter case, democracy is diminished slowly, in barely visible steps, unlike in an abrupt fashion of a military coup. The nominally democratic institutions remain in place and these steps are taken “legally”, in the sense that these are approved by the legislature and accepted by the courts; yet democracy is subverted by more subtle means, by gradually eroding the credibility of state institutions including higher judiciary, capturing the business bodies, bullying the media, curtailing the space for civic activism, and rewriting the rules of politics to tilt the playing fields against the opponents. A former president of Kenya, Daniel arap Moi, once famously remarked: Politics is not a football game that you need a level playing field. Ironically, thus, democracy may ultimately die at the hands of those leaders who got elected with a popular mandate to strengthen democracy.

When it comes to the economic performance of these hybrid regimes, it will depend on how they are advantaged or disadvantaged by the democratic and authoritarian characteristics that they simultaneously embody. We now know that developing countries can achieve high economic performance both under democracy—as in India—and under authoritarian regimes—as in contemporary China and the erstwhile East Asian countries. The common element shared between these contrasting governance systems seems to be “accountability”, which lies behind the more proximate preconditions for good economic management such as efficiency and the primacy of public good over private gains through rent-seeking.

The way accountability in policymaking is ensured in a well-functioning democracy is too well-known to need elaboration, but the issue is more complex in the case of the successful authoritarian regimes. In the case of the erstwhile authoritarian regimes in East Asia, the key to ensuring accountability lay in their quality of economic bureaucracies which were “technically insulated” from patronage politics and whose policies were subject to performance-based scrutiny. In China, the governance reforms introduced in the wake of economic liberalisation have put in place a hierarchical system of strict accountability within the communist party’s bureaucracy regarding achieving economic targets. As one commentator on China has aptly brought out the contrast in the structure of performance incentives under democratic and authoritarian regimes: in democracy, politics is interesting while bureaucracy is boring; in China, the reverse is true.

The new breed of authoritarian democracies may try to deliberately pursue an approach of “technical insulation” of economic policymaking, as Malaysia did under Mahathir’s previous regime; but these regimes generally lack the kind of governance effectiveness or party cohesion that is needed for mimicking the purely authoritarian mechanisms of accountability. At the same time, the regimes have the advantage of having some of the democratic accountability mechanisms. Even poorly functioning democratic institutions can help. How?

So long as the ruling regimes face periodic well-participated elections, they are aware of the risk that even flawed or rigged elections may be lost; this may happen if the extent of corruption in high places and the excesses of patronage politics cross certain thresholds of public tolerance. The voice of the opposition party even in a weakly functioning parliament of elected representatives may sensitise public opinion against excesses committed by the ruling regime. In case of rigged elections and non-functional parliaments, the watchdog bodies and the judiciary can act as a fallback, even when the integrity of these state institutions is compromised to an extent. Beyond these institutional mechanisms of accountability, the media and civic activism can be another fallback. And lastly, the ruling regime knows that its survival ultimately lies in its legitimacy in the eye of the common people, unless it increasingly resorts to coercive measures to stay in power. In a hybrid regime, that legitimacy can be maintained only by compensating the democratic deficits by delivering visible, rapid economic progress.

Herein lies a potential for both a virtuous and a vicious cycle in the new hybrid authoritarian democracies. Strengthening the democratic institutions of accountability may contribute to creating an environment for better economic performance that may in turn enhance the legitimacy of the regime, thus creating incentives for the regime to further loosen its authoritarian grip on those institutions. The opposite is a downward spiral of lesser accountability leading to poorer economic performance and even further curtailing of the democratic accountability mechanisms in the face of declining regime legitimacy. Only countries with exceptionally strong growth drivers that can withstand poor economic governance can escape such a vicious cycle, at least for some time.

At one point or another, many of the new democracies may thus find themselves to have arrived at such a crossroads. Whether a country will choose the right direction at such a time will depend on a range of factors like the prevailing norms of political behaviour, aspirations of the people, and the vision and statesmanship of the political leadership. These factors are mostly country-specific, so that academic generalisations based on stylised facts are not of much help in making predictions.

Wahiduddin Mahmudis a former professor of economics at the University of Dhaka and is currently on the Board of Global Development Network.

This story was originally published by The Daily Star, Bangladesh

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