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Political Science

Regimes that spur growth

Studies reveal that there is a relationship between economic development and the sustainability of democracies

disseminationChange of command in the Brazilian military regime: study overturns myth on the country’s prosperitydissemination

Democracy is a luxury article. While the majority of poor countries live under dictatorships, a major part of the rich countries is governed by democracies. According to the book Democracy and Development – Political Institutions and Well-Being in The World, 1950-1990 (Cambridge University Press, United States), this phenomenon occurs because there is an association between the maintenance of democracy and the level of economic development. “We found that it is very difficult to see democracies with bad economic performances, because these regimes tend to turn to dictatorship when this happens”, is the analysis of Fernando Limongi, one of the authors of the book. A professor of Political Science at the University of São Paulo (USP) and the coordinator of the Brazilian Center of Analysis and Planning (Cebrap), Limongi was supported by FAPESP to develop this work in the United States, written with Adam Przeworski (New York University), José Antonio Cheibub (Yale University) and Michael E. Alvarez (DePaul University).

According to the research, the survival of a democracy is related to the country’s level of per capita income. That is to say, the higher the income, the more stable the system of government is. When it is over US$ 6,000, it can be seen that the democratic system is assured forever, come rain or shine in the economy. Then between US$ 4,000 and US$ 6,000, there is a probability that the political system will last for roughly a hundred years. “When a country is rich and has adopted the democratic system of government, this constitutes a situation of equilibrium and of permanence of the structure”, Limongi explains.

If, however, a nation has a per capita income below US$ 1,000, the possibility of the democratic system resisting becomes fragile. The figures show that the system is to last just 8.2 years. Below the threshold of US$ 4,000 in per capita income, a democracy runs the risk of remaining in force in the country for only 33 years. This happens because economic crisis in poor democracies tend to terminate the democratic system of the political game – and economic crisis in countries that are poor and authoritarian lead to the preservation of the dictatorship.

These indicators were gathered from a statistical analysis about the survival and the death of political systems in 135 countries between 1950 and 1990. In the course of this period, 224 governments were analyzed, of which 101 were democratic and 123 authoritarian. Also identified were 400 transitions to dictatorship and 50 to democracy. According to the survey, a democratic country is one where the opposition party has some chance of winning an official election.

Using this data, the authors identified that the survival of democracy in poor countries is connected with the ability ofthe government to promote economic growth with moderate inflation. They also concluded that the chances of a democratic system being preserved are even greater when the economy grows at over 5% a year. But it is much less if negative growth is shown. A democratic country with per capita income of less than US$ 1,000, but with economic growth, has more possibilities of maintaining the system than the democracy of a country with a per capita income of between US$ 1,000 and US$ 4,000, but with negative growth.

Red light
Argentina, for example, is in its third year in a row of negative growth. But, according to Limongi, the next elections are guaranteed. This is so because the country has a per capita income above of what is regarded as the danger line. Whereas the red light is flashing for Venezuela. The country is below the indicator for democracy to be sustained. “It used to be a rich country, it went into a crisis, and its economy dwindled”, says Limongi. “It wouldn’t be a surprise if it turned into a dictatorship.” According to Przeworski, transitions from one system to another are typically preceded by economic crisis, but it is possible to determine what is cause and what is effect. “An economic crisis can generate a political crisis. Once there is a political crisis, the economic crisis gets deeper”, he says.

The explanation for the stability of democracy in countries with per capital income above the threshold is the political game. According to Limongi, the change of system is carried out by means of a coup d’état, which always brings problems. “What you can gain by being a dictator in a rich country may be less than what you will gain if you wait for the next election”, explains Limongi. “Dictatorships are repressive, and people are afraid of physical pressures. The moment that countries become richer, life is too good to be put at risk”, observes Professor Przeworski.

The book’s premise is to look into an ideology that was predominant until the 80’s, which pointed to dictatorship as an essential element for spurring economic growth in poor countries. And once these countries conquered their economic development, democracy would be adopted immediately. The results of the study, though, throw cold water on these suppositions. Firstly, because it was identified that if a country became rich and it is authoritarian, there will not be any direct and immediate transformation for that reason. “Economic growth does not lead directly to democracy”, reckons Limongi. Some countries, like Taiwan, Spain and South Korea, got rich under dictatorships, and for this reason did not pass on to democracy. “It is not an endogenous process”, he warns.

Other factors
For the professor, external elements are needed for this to happen, and the responses are not susceptible to statistics. In Spain, for example, there was the death of the dictator Franco in 1975. The absence of a leader weakened the possibility of the dictatorship continuing. In Taiwan, there was the break with the authoritarian regime because of a strategy of foreign policy. The government of the country reckoned that it was better to be a democratic nation, in order to get international support for its quest of independence from China. “But when the change of regime is to attain democracy, its continuation under this system is easier to happen”, claims Limongi.

The second pointer that runs counter to the dictatorship for development thesis lies in the strong evidence that being a democratic or dictatorial regime does not have a direct influence on economic growth. Of the authoritarian countries with a per capita income of less than US$ 1,000 on the first time they were observed, 56 had not achieved economic development in 1990, 18 had reached an income of US$ 1,000, six grabbed an income of US$ 2,000, and three of over US$ 3,000. South Korea and Taiwan, however, had extraordinary success: they are the only two dictatorial regimes that appeared in 1950 with an income below US$ 1,000, and in 1990 surpassed US$ 5,000.

Demography and dictatorship
“What we learned is that political systems – whether dictatorships or democracies – do not affect the rate of growth of the GDP. But we also discovered, to our surprise, that the population grows more quickly under dictatorships”, says Przeworski. “At the same time, we identified that per capita income grows more quickly in democracies. That is to say, it seems that the political system has more impact on demography than on the economy.”But the study indicates that, up to the level of a per capita income of US$ 3,000, the composition of the rate of growth depends on the same factors in an authoritarian regime as in a democratic one.

When, however, this amount is exceeded, the two systems show the same rate of growth, but with a different formula. “They arrive at the same results, but the function of production shows that democracy is based on one kind of factor and authoritarianism on another”, explains Limongi. “Democracy pays the workers better and has greater technological development. With authoritarianism, the workers are exploited more.”

The explanation may lie in the open political process in democracies, which allows the workers’ demands to be more accepted. Democracies tend to be closer to social democracy, with a better distribution of income and greater participation of the workers in production”, Fernando Limongi reckons. “Authoritarian regimes have a greater tendency towards the process seen in Singapore, Korea, Taiwan and Thailand, models in which the labor force is used intensively, without it being very productive.”

There are, however, other features that favored the extraordinary growth of the Asian Tigers, besides the political system. “These countries were able to protect their markets and to adopt export policies”, says Limongi. “The United States did not close its market to them. This happened for strategic reasons. South Korea was half communist and half not. The United States let this country develop itself, to gain strength against the Soviet bloc. The same happened with Taiwan.”

In the 70’s, Brazil ranked alongside South Korea and Mexico as a New Industrialized Country (NIC). However, it left this category because it had difficulties in continuing to go into the American market. “The United States wanted reciprocity in opening up, but Brazil did not open its market”, he says. The difference, though, is that Korea was able to continue closed and, at the same time, to export to the United States. “It has nothing to do with authoritarianism. It has to do with the strategic policy of the world’s largest hegemony”.

Many of the theories drawn up under the dictatorship for development point of view were influenced by what was believed to be the success of the former Soviet Union: an extremely closed system, with all its resources mobilized for investment. In the 60’s, at the height of the Cold War, right wing politicians in the United States considered that they were losing the international struggle because of the heights to which the Soviet bloc was flying. For them, the great enemy, the extinct Soviet Union, had a model for the development of underdeveloped countries.

Immersed in this concern, the United States began to support authoritarian regimes around the world. The 1964 military coup in Brazil was fruit of this ideology. It was the most prosperous period for the economy. But, in the 80’s, the pace of growth fell startlingly. Some people thought that the fall in growth was the fruit of the country’ return to democracy. “In the fifties, sixties and seventies, Brazil kept pace with South Korea. In the 80’s, Brazil halted and Korea went on”, Limongi points out. According to Przeworski, there is no relation between Brazil’s structure for development and its political system. The country’s problem, according to him, lies in the difficulty in collecting taxes from the richer and using them to increase social investment, whether under an authoritarian regime or a democratic one.