Photo credit: Ester Sorri/International IDEA

By Abdalla Hamdok

Economic growth without democracy leads to greater degrees of inequalities, argues Dr Abdalla Hamdok, Director for Africa and the Middle East at the International Institute for Democracy and Electoral Assistance (International IDEA). He is based in Tshwane, South Africa.

A powerful consensus is evolving across Africa about the centrality of democratic governance as an essential precondition for Africa to meet its daunting developmental challenges--daunting because Africa is the only region in the world where the Millennium Development Goals (MDGs) are unlikely to be achieved.

In the last decade, nearly all 53 African countries have been involved in some type of political and institutional changes. Many countries are boldly moving ahead with reforms, liberalizing their economies and improving management.

Democratic governance has become widely recognized as a prerequisite for sustained development.

It fosters transparency, accountability, the rule of law, respect for human rights, civic participation and civic inclusiveness--all of which are necessary for securing economic productivity, equitable distribution and state legitimacy in order to accelerate progress towards meeting the MDGs.

The New Partnership for Africa’s Development (NEPAD) represents the culmination of Africa’s commitment to democratic governance. The collective political will of African leaders to make democratic governance central stage in fostering Africa’s development can be seen in various aspects of NEPAD.

These include the pledge by African leaders to be accountable to one another and to their own peoples and the emphasis on Africa’s ownership of the development process. It can also be seen in the recognition that economic/corporate, political governance, peace and security are all necessary preconditions for Africa’s development strategy.

The creation of a peer review mechanism for monitoring compliance to the goals of the initiative also demonstrates political will.

The nexus between good governance and democracy-poverty can easily be observed in the fact that economic growth without democracy leads to greater degrees of inequalities.

An economy cannot function well in the absence of good governance and functioning institutions. Resources will not be allocated to their most efficient uses; people will engage in directly unproductive activities such as rent-seeking, bribery and corrupt practices.

Productivity will be undermined. Fewer jobs will be created and household incomes and welfare will decline.

In democratic systems a greater proportion of people participate in political institutions, which means they can influence the economic system. The poor have at least the chance to try and bring about economic changes that can lead to the reduction of poverty and inequalities.

Political participation of the poor is what makes democracy delivers to its citizens. Democracy therefore enables the alleviation of poverty.

Contemporary history has shown that countries with democratic governance are best equipped to respond to the challenges of development. Three aspects of democratic governance have proved to be crucial to long-term economic and social development.

First, a stable democratic system is the best guarantor of political stability, which is essential for long-term economic growth.

Second, democratic practices such as transparency and accountability are essential for effective and responsive government and for efficient and prosperous economic activity. The financial crises in Asia and Russia experienced in the late 1990s are cases in point.

Third, sound legal and regulatory codes backed by the rule of law must exist for business to thrive in a well-run economy. Experiences of the 1980s and 1990s demonstrate that failure to incorporate democratic governance as part of economic reform seriously jeopardizes the reform agenda.

For much of the last 20 years it was fashionable to speak of the Washington Consensus, a reform programme based on macroeconomic stabilization, fiscal reform and other adjustments to economic policy.

Recent developments in especially Eastern and Central Europe, Indonesia and Argentina, but also Africa’s own experience, demonstrate the limits of this approach. Equal attention must be paid to the key institutions in society and to the process through which government decisions are made.

Building democracy and economy has to begin by making sure that the rules of the system are open and fair to all. The intellectual foundations for efforts to build a broader and more comprehensive democratic reform agenda stem from the field of New Institutional Economics.

The institutional approach simply says that rules are important in conditioning outcomes. Put more elegantly, the success or failure of any effort to achieve a long-lasting transition to democratic systems depends on the design and functioning of the institutional framework.

These institutions of governance, coupled with visionary political leadership, are critical to economic sustainability and poverty reduction. This is demonstrated in countries such as Botswana and Mauritius where the links between democratic governance, long term stability and effective and efficient management of the economies are strong.

In recognizing the key role of the state in democratic governance and poverty alleviation, it is therefore important to work towards the creation of a capable and effective state.

It should be a state in which the public service, the legislature, the judiciary and statutory bodies are empowered to provide an enabling environment for the private sector and civil society to play their respective roles in a mutually reinforcing manner.

Countries that succeed in addressing these central challenges also succeed in fulfilling the aspirations of their people and in creating economic opportunities essential for human growth and poverty reduction.

Conversely, those that fail to establish a democratic system of governance find that progress is halting, and they will not be able to take advantage of the many opportunities that globalization provides.

Democracy offers the best prospect for reconstructing the social contract between rulers and the ruled. It is the only way to subject the mandate to govern to periodic renewal and make continued stay in office dependent on a degree of performance.

Democratic rotation of office is the only way for the African politician to understand the fact that there are high stakes attached to getting and retaining power.

Moreover, democracy and its central principles--such as decentralization of power, federalism, protected minorities and respect for human rights--may be the most effective means by which the inevitable conflicts in multi-ethnic, multi-cultural, multi-class African societies can be meaningfully and sustainably managed.

Abdalla Hamdok is the Director for Africa and the Middle East at the International Institute for Democracy and Electoral Assistance (International IDEA). He is based in Tshwane, South Africa.