By Francis Fukuyama
Widespread agreement exists today within the international community that both economic development and liberal democracy are desirable goals. Argument continues, however, over the sequencing of those political and economic goals—a debate that has intensified as a result of the perceived failure of the George W. Bush administration’s efforts to bring democracy to the Middle East.
The position that democracy is bad for economic growth and should be put off until a country has reached middle-income status or higher has a long history. Democracies have not always had a great record with respect to development. Some, like Juan Perón’s Argentina, or Andean countries such as Venezuela and Argentina today, pursued populist policies that distributed social benefits to favored political supporters, laying the groundwork for fiscal deficits and economic crisis. Others, such as Thailand and Bangladesh prior to the military coups that took place in 2006 and 2007, were mired in corruption and widespread patronage.
Economist Paul Collier’s studies have shown that democracies overall have a worse record with regard to the distribution of resource rents precisely because their political systems are more open to powerful interest groups. Political scientist Jack Snyder has argued that voting actually stimulates nationalist conflict and therefore destabilizes countries moving away from autocracy.
Samuel Huntington made the case for the so-called “authoritarian transition” almost 40 years ago in his book, Political Order in Changing Societies. This line of thought has been taken up in recent years by Huntington’s student, Fareed Zakaria, in The Future of Freedom, where he argues that it is liberal rule of law and not democratic elections that promotes growth and order. Everyone is aware of states such as Singapore, South Korea and Taiwan that modernized with extraordinary rapidity under authoritarian regimes, as the People’s Republic of China is doing today. Since the correlation between economic development and democracy is much clearer than that between democracy and economic development, a number of observers naturally put growth ahead of elections.
But these polemics over sequencing miss the mark because they assume the performance of democratic institutions averaged over a large number of countries somehow will give us guidance as to how democracy will affect development in any specific case. The real debate, only now emerging, concerns not whether democracy is good or bad for economic growth but exactly how elections and other democratic institutions need to be structured to promote developmental ends.
Elections and Improved Economic Outcomes
As a general strategy, the authoritarian transition has some important weaknesses. There are indeed cases where premature voting leads to bad outcomes, but these are primarily in post-conflict situations such as those in Angola or Cambodia, where militias and other extremist parties contest elections before more moderate democratic forces have had time to mobilize. As Thomas Carothers (see his article in this issue) recently argued in the Journal of Democracy, the biggest problem with sequencing is the lack of “good” dictators: For every authoritarian ruler such as Lee Kwan Yew of Singapore, who presided over an economic miracle, there are many more like Mobutu sese Seko of Zaire, Ferdinand Marcos in the Philippines or the military junta in Argentina, who were either corrupt, destabilizing to their regions or incompetent in formulating economic policies.
It is worth noting that virtually all cases of developmentally oriented au-thoritarians have come from East Asia, which suggests there may be a cultural basis for success along this trajectory. Relatively few authoritarian rulers are willing to constrain their own freedom of action by imposing a liberal rule of law on themselves; conversely, their pro-democracy opponents tend to push for both rule of law and democracy. In most countries, choosing to do the first but not the second is simply not possible.
It is not democracy per se any more than it is authoritarianism that determines a country’s developmental path, but rather the policies that democratic regimes put into place. For many years, democratic India was contrasted unfavorably to authoritarian China for its “Hindu rate of growth,” but that same democratic India has raised its growth rate substantially since the 1980s by liberalizing its economic policies.
Democratic legitimacy is, in fact, an important asset when times are bad. During the Asian financial crisis of 1997–98, both Indonesia and South Korea underwent major economic crises. But Indonesia’s was far more severe than Korea’s, due at least in part to the fact that Indonesia’s authoritarian regime was perceived as
illegitimate. Its collapse added political to financial uncertainty and deepened the economic setback.
Indeed, if one considers only the universe of cases where countries are ruled by incompetent or corrupt rulers, elections and other forms of democratic accountability actually may be the only realistic mechanisms for improving governance, and thereby economic outcomes. The theory is simple. Weak institutions, corruption, patronage and bad governance are huge obstacles to economic growth, as much of the recent development literature has shown. Bad governance comes about due to what economists call agency problems: Citizens (the principals) elect politicians (their agents) who have interests different from theirs. Democratic accountability simply means having a mechanism for disciplining the agents when they aren’t acting on behalf of principals—for example, when they accept bribes or distribute money to their cronies—by getting rid of them or otherwise forcing them back into line.
When democracy works well, constituents punish elected leaders for incompetence, corruption or failed policies. The problem is that the feedback links often get broken. Sometimes, the problem is one of information: Electorates don’t know about corruption scandals or negligence because there is no free press or civil society, or the media isn’t doing its job well. In many developing countries, voters are not aware that politicians are channeling public money back to narrow groups of supporters; in others, they believe that is what politics is all about. In yet other cases, the aggregated nature of voting makes it hard to send the right signals. Suppose you liked everything about George W. Bush except for his handling of the Iraq War; how do you send that message at the ballot box?
Increasing Short-Route Accountability
If democracy is to support development, the mechanisms of accountability may have to change in order to hold politicians accountable and force them to use public money for truly public purposes. The World Bank in recent years has been distinguishing between what it calls long-route and short-route accountability. Electing a president every four years, or a senator every six, is the long route, with relatively few opportunities for sending signals to the politician, a low signal-to-noise ratio in the message and a long delay before any kind of message is received. Short-route accountability is something like having an elected school board or public comments at a local board of supervisors meeting, where feedback is quick, qualitative and focused on narrow issues. An active civil society and an independent press are both necessary to increase the flow of information about the behavior of government if either form of accountability is going to work.
Short-route accountability has been increased in many countries in recent years by efforts to decentralize democratic decision-making down to a local level. Many striking examples of improved accountability come from Latin America. Bolivia in 1994 passed a Law of Popular Participation, which created a myriad of small authorities and shifted a significant amount of public spending from big cities and the middle classes to rural areas and the poor. Brazil’s federal system permits local experimentation; among the outcomes was Porto Alegre’s participatory budgeting initiative, which opened up municipal spending to greater public scrutiny and reduced the amount wasted in patronage. Elected mayors in cities in Colombia have had much more authority to deal with municipal problems and have launched successful programs to go after gangs and clean up cities.
Short-route accountability is not a panacea; many poorly designed decentralization plans in recent years created more problems than they solved. Too much short-route accountability can lead to excessive politicization of administrative issues and can undermine the legitimacy of the long-route path. In the end, increased accountability of governments depends on education and changes in public attitudes as much as on the formal design of institutions. Brazil, for example, is a country famous for both corruption and patronage politics. But in recent years, voters in many state elections have actually punished politicians who used public money for patronage rather than public goods.
It is time for people interested in both democracy and economic growth to stop arguing on an abstract level about sequencing and how democracies perform on average, and to start looking instead at concrete ways that democratic institutions might be better structured to support developmental ends. Democracy is of course an end in itself, but it is also a means to other socially desirable ends, such as growth and order. If its procedures do not deliver these other goods, democracy itself will come under attack.
And those organizations and groups in the international community seeking to promote democracy might put more thought and effort into not just the initial breakthrough to democratic government but also the continuous improvement of democratic institutions so that the gains might be made irreversible.
Francis Fukuyama is the Bernard L. Schwartz Professor of International Political Economy and director of the International Development Program.
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