Is there a link between freedom and development?

(When you finish reading this article, ask yourself to sum up the article in a single word. To do so, please read the entire article (this is a relatively long article).

The answer to the question raised in the title of this article is not as trivial as belittling the question itself as a ‘bedtime story’ or it is not as mysterious as the ‘Riemann hypothesis’. The instrumental link between freedom and economic development has been a controversial issue for the good part of the twentieth century. There is no doubt that the relationship between democracy and development is a complex relationship, and there are few questions in comparative developmental studies that have generated as much debate and research work as examining the relationship between democracy and development. The positive correlation between high level of wealth and democracy was identified more than half a century ago, but regardless of how strong this correlation might be, there is no conclusive empirical evidence to depict a cause and effect relationship between democracy and development.

During the Cold War and after, a plethora of scientists and researchers spent half of their lives examining the cause & effect relationship between democracy and development. The conclusions so far are mixed. Many findings show positive relationship between democracy and development while several others show no relationship or negative relationship. However, after the ground breaking work of Amartya Sen; the methodology of examining the relationship between democracy and development has changed. Today, such a methodology highly depends on how one defines ‘development’. For example, if one adopts Amartya Sen’s definition of development as ‘freedom’, [a definition that integrates not only economic indicators but also freedoms like political rights, social opportunities, transparency guarantees and protective security], then according to this definition; democracy must be a precondition for development.

The focus of this paper is not to argue the advantage of democracy over autocracy in promoting economic development, or to prove the positive causal relationship between democracy and economic growth. The purpose of this paper is to prove that, the view that sees the link between development and democracy as a bedtime story is itself a “bedtime story” that must be told on ‘take your kids to work’ day. As a product of academia and as a person who loves reason and dialogs, I’m always open to opinions, ideas, and new findings. However, as much as I love scholarly works and scholars, I also do make distinction between great minds and armchair critics.

The twenty second World Economic Forum for Africa was held from May 9 to 11 in Addis Ababa, Ethiopia. The forum was packed by intellectuals, a cast of Africa’s young business leaders, and some political leaders like PM Meles Zenawi who used the forum to introduce his “new” economic theory on democracy and development, i.e., the” bedtime story”. The new theory or Zenawi’s melodrama on the international stage did not surprise me. Actually, what supersized me and made me hesitant of the forum itself was that, no one was judicious or brave enough to challenge Zenawi’s baseless statements. Specially, the complacency of Gordon Brown, a PHD and a onetime first class honors student at the University of Edinburgh is just beyond the pale. I wonder how ex-Prime Minister of the United Kingdom and a respected intellectual of Gordon Brown’s caliber, quietly sat when the role played by democracy in economic development was downplayed by one of Africa’s vicious dictators.

Before I present some study results that have critically examined the relationship between democracy and development, I want to slice and dice the following two statements made by PM Meles Zenawi.

1) My view is that there is no direct relationship between economic growth and democracy historically or theoretically.

In this statement, PM Zenawi tries to persuade the world that there is no direct relationship between development and democracy. Had the Prime Minister stopped after telling the forum his view, his view wouldn’t have been much of a concern as no one would take the Prime Minister serious at this level of knowledge. But, PM Zenawi pushes the envelope a little further and tries to argue his strange view in the context of history and economic theory. In fact, he keeps on saying that there has never been a link between democracy and economic growth historically or theoretically. Is PM Zenawi right? What do historical, empirical, and theoretical records show? Is there a demonstrable correlation between the attributes of democracy and development?

The relationship between democracy and development has been studied by many scientists for many years. As it has already been said elsewhere in this article, there result of the studies is mixed. There are many studies that support the case for direct relationship between democracy and development while there are many others who argue otherwise. Harvard University Professor of Economics and Philosophy, Amartya Sen, has used his economics and philosophy background to demonstrate the existence of positive relationship between democracy and development in his most celebrated book – “Development As Freedom”. In fact, Amartya Sen takes his refined argument to the next level by saying the following: Freedom is the primary end and the principal means of development. Professor Sen does not just make such an enormous claim and leave the reader in limbo like Zenawi. He substantiates his claim with rich and timely evidence. I strongly recommend readers to read his book, Development As Freedom.

2) Democracy may be the only viable option for keeping these diverse nations together. So we need to democratize but not in order to grow. We need to democratize in order to survive as united sane nations.

Prime Minister Meles Zenawi is a man who preaches something he himself hates to practice. For example, he was right on the money when he said – “we need to democratize in order to survive as united sane nations”. True, but isn’t “Kill democracy before it kills me” the endless slogan of Meles Zenawi? According to his own words, Ethiopia would not survive as a nation without democracy – which basically means that, non-democratic Ethiopia [even if it stays together], its existence as a nation would be insecure, loose, or unstable. I am sure as “smart” as his amigos would call him; PM Meles knows the strong relationship between political stability and economic growth. If Ethiopia cannot have political stability without adopting democracy [an assessment that PM Meles shares], and if political instability is identified as the cause of poor economic growth, then why would Mr. smart man insist that the link between democracy and development is a bedtime story? I urge the Prime Minister to substantiate his claim with supporting evidence rather than using childishly worded statements to refute the scientific work of many researchers.

During and before the Cold War, the notion that totalitarian regimes are better suited for faster economic development than democracies was a widely held conventional wisdom. In fact, many social scientists believed that a certain level of economic development was a prerequisite for democracy to flourish. However, after the third wave of democratization, this long held view faced a series of challenges.

One of the major challenges came from the research work of Morton Halperin, Joseph Siegle, and Michael Weinstein. The three researchers demonstrated that, when the countries of the world were examined as whole, democracies did perform better in terms of economic development than autocracies. The data collected and analyzed in their book clearly displayed that there has been no advantage for autocracies over democracies for the past 40 years in terms of development. In fact, the study of the above three researchers plainly showed that, not only democracies grew at a faster rate than autocracies, but democracies also outperformed autocracies in the consistency of their growth. The analysis also revealed that out of the 80 worst economic performers of the last 40 years, all but only three were autocracies. Furthermore, a good number of the studies have confirmed that democracies have performed noticeably better than autocracies [in some cases up to 50% better] in the social welfare dimension of development such as child mortality, literacy, life expectancy and protective security.

Evidently, Morton Halperin et al have played a visible role in creating a broad international consensus that, economic development is neither a necessary nor a sufficient condition for the emergence of democracy. However, beyond the broad consensus on the non-essentiality of economic development as a pre-condition to the emergence of democracy, the strength and direction of the relationship between democracy and economic growth is still a hotly contested issue. The study of the three researchers has shown the existence of relationship between democracy and development, i.e., democracies grew at a faster rate than autocracies, but the study did not establish causal relationship between the two.

Some scientists strongly argue and consider democracy as an important pre-requisite for development, while others argue that authoritarian regimes are better suited to the task of economic development. Yet, there are some who argue that democracy and economic growth are inversely related. Their views and arguments may vary, but these scientists are great thinkers and some of them have won the prestigious Nobel Prize in the process. As much as they sharply differ in their views of the relationship between democracy and economic growth, none of these scientists disrespect the work of the other and disparage the link between democracy and economic growth to a bedtime story. In fact, scientists never diminish ideas and arguments to bedtime stories; they leave such subjective judgments to little minds and armchair critics.

What is good for Ethiopia? Is it democracy or autocracy? It appears that the answer to this question is reasonably obvious. Democracy is good for any country because it ensures civic and political liberties and facilitates political participation of the masses. The next question worth asking is – does democracy facilitate economic development? Well, the answer to this question is not as obvious as the first because the empirical record for democracies is about as mixed as that of autocracies. Several studies support the causal relationship between democracy and development while many other studies support the positive role of autocratic regimes in economic growth. However, many empirical studies suggest that only democratic institutions can ensure development policies include the interests of the poor and only in democratic states can all citizens participate in economic and social decisions that affect their life. Therefore, for poor countries like Ethiopia, democracy is good not only for promoting economic growth [production], but also for sharing the benefit of the growth [distribution].

Democracy and Economic Growth – Deakin University, Australia

A conclusion drawn from a meta-regression analysis* of a population of 470 estimates derived from 81 papers on the democracy-growth association was mixed, but still supported the argument of positive relationship between democracy and development. The end result of the meta-regression analysis showed no evidence of democracy being detrimental to development. On the other hand, the same study clearly showed the association of democracy with higher human capital accumulation, lower inflation, lower political instability and higher economic freedom. The other interesting revelation of the meta- analysis was that, the evidence showed that the growth effect of democracy was much higher in Latin America than in Asia. The Deakin University study concluded that democracy has robust and significant indirect effects on development.

*Meta-regression or meta-analysis is method that contrasts and combines results from different studies, in order to identify patterns among study results
Development As Freedom – Amartya Sen

Nobel Prize winner Economist Amartya Sen has come with a clear departure from the past and has proposed a powerful new directive for understanding social and economic choices. Sen focuses on individual freedom as both the means and ends of development. In his book, “Development as Freedom”, Sen explores the relationship between freedom and development, and defines freedom as both a basic constituent of development in itself, and as an enabling key factor to other aspects. Sen does not use mathematical or econometric models; he does not even focus on income and wealth. He mixes his deep knowledge of philosophy with Economics and suggests a focus on substantive human freedoms. Sen argues for a broad view of freedom that embraces both processes and opportunities. According to Sen, Freedom is both constitutive of development and instrumental to it, and instrumental freedoms include political freedom, economic facilities, social opportunities, transparency, and security.

Sen’s systematic mix of freedom and development has broadened our understanding of how to do descriptive, positive, and normative analysis on economics, freedom, and development. Sen has also shown economists that development is not all about exchange, income, and wealth; but the product of an integrated and interdisciplinary approach of freedom, good governance, the rule of law, income, and market. In general, Amartya Sen’s view of development and democracy constantly reminds us that, democracy is not just an end in itself; it also plays an instrumental role in giving people a voice and a constructive role in shaping economic and social values.

Democracy and Economic Growth, A Historical Perspective- Gerring, Bond, Barndt and Moreno

The research paper of John Gerring et al starts posing the following question: does regime type affect economic performance? The answer to this question is mixed and usually slanted to the view that democracy has either a negative effect on GDP growth or no effect at all. The longstanding normative view is that authoritarian political countries are predicted to grow as rapidly as or perhaps even faster than democratic countries. Furthermore, Econometric evidences suggest that the positives effects of democracy are balanced by the negatives producing a net effect of negative or null.

In their article, titled “Democracy and Economic Growth” , the quartets dug deep into the past and exposed how the incredulous view of the relationship between democracy and development has influenced the outcome of research work on democracy and development – word to word, this is how they put their finding in the paper: “In this article, we show that the skeptical view of democracy and development rests on a questionable assumption in which democracy is treated as a more or less immediate cause”. The most convincing conclusion of John Gerring et el is that, the effects of democracy on economic growth should stem from a country’s regime history as well as its current status which means that Democracy must be considered as a stock, rather than level, variable. According to John Gerring et el, the impact of democracy in development must be measured in at least a decade, and it is unrealistic to view this year’s level of democracy to have a meaningful influence on economic growth of the following year.

To see the influences of democracy on economic development, democracy must be maintained for a long time. Democracy influences economic performance through physical capital, human capital, social capital, and political capital. The key here is political capital, and political capital refers to the opportunities that people have to determine who should govern and in what principles, and also includes the possibility to scrutinize and criticize authorities, to have freedom of political expression to uncensored press and to enjoy freedom to choose between different political parties. The core insight here is that, political capital has huge impact on economic and social institutions, and institutional effects unfold over time. Hence, the argument – “does democracy affect development” is quite plausible if regime type is considered through a historical lens. Therefore, the conclusion is: Democracy + time = economic development.

I’ve set the tone of this article from the very beginning. The purpose of the article is not to prove the existence of positive correlation between democracy and development. Yes, most of the evidences presented in the article do support the case for a positive relationship between democracy and development; but this is only an attempt to make sure that PM Zenawi understands that there are tens of thousands of scientists who use mathematical and statistical models to show causal relationship between democracy and development. On the other side, there are also as many scientists that use similar models to show inverse relationship or no relationship between democracy and development. After the Cold War, the democracy – development argument has shifted to the center in favor of democracy. Nevertheless, regardless of which side of the argument one stands, the democracy – development argument is not a simple argument to be trashed as a “bedtime story”, no matter how bad one hates or fears democracy.

The word democracy has many attributes, the rule of law and good governance are some, but just two of its attributes. There is a global consensus that the rule of law and good governance are among the most effective tools for managing the economic and social affairs of a country. A government that submits to the rule of law and known for its good governance is expected to deliver economic development, social security, and civil liberties all in one package. Many, if not all, of the world’s developed countries are democratic. Call it G8 or G20, except some three or four countries, all of the G20 countries are wealthy, democratic, and institutionally built countries. Most of these countries became rich under authoritarian regimes. Some weak and shallow people have used this conventional conclusion to justify that democracy is a luxury that should be pushed back until a country is wealthy. In fact, this is precisely the kind of argument PM Meles Zenawi argues, and this is why he called one of the most engaging arguments of all time – a bedtime story.

Meles Zenawi has been preaching democracy for the past 38 years, and he has been in power for 21 of those 38 years, but Zenawi has been far from democracy just as heaven is far from earth. Meles has a bad taste for democracy and he hates democracy; but, why? The answer is simple – he loves power! When Meles badmouthed that nonsense “bedtime story” last month in Addis Ababa, his focus was neither democracy nor development. It was all about power, yes power! Meles knows for sure that democracy is the only path for Ethiopia’s rapid economic growth, and most importantly, for its survival as a nation. But, if he builds democracy and allows the rule of law, freedom, and justice to flourish in Ethiopia, Meles knows that his days in power will be numbered, and Ethiopia will no more be a cash cow for his hidden empire building. So he has to tell his patrons [the US, UK etc.] that democracy has nothing to do with economic growth.

Basically, what he told them is: “Ethiopia is growing like it has never been . . . . Shut your mouth and don’t bother us with this alien word democracy”. I was lost, and what got me lost are not the pathetic words he said; such nonsense is his trade-mark. What threw me off is that, people like Gordon Brown were laughing and clapping their hands sitting right beside PM Meles at that disgraceful moment, and the habitual armors of dictators loved Zenawi’s hogwash like they always do.

Finally, the years 2001 to 2012 have been relatively peaceful years in Ethiopia. On the other hand, in these same 11 years, the current regime in Ethiopia has received twenty times more foreign aid than the previous two regimes combined, or more than any Sub-Saharan country for that matter. These evident factors may have facilitated economic growth in Ethiopia. However, the current growth rate will not sustain or may quickly regress unless Ethiopia is allowed to democratize. The popular resistance in Gambella, the ethnic liberations movements in Oromia, Ogaden, Sidama, and Benishangul-Gmuz and civil unrests elsewhere in the country are clear signs of imminent danger that have the potential to destabilize not only Ethiopia, but the entire Horn of Africa. This is not about who sits in Menelik Palace, or it is not even about the choice between food and freedom, this is about the survival of a nation. Ethiopia’s current economic growth can quickly regress and its survival will be in grave danger, if this large and diverse nation is not allowed to democratize.

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References

Amartya Sen: Development As Freedom

Andrew Reynolds (Edited by): The Architecture of Democracy- Constitutional Design, Conflict Management, and Democracy- Oxford University Press

Arend Lijphart: Democracy in Plural Societies –A Comparative Exploration

Benjamin Reilly: Democracy in Plural Societies- Electoral Engineering for Conflict Management

Daron Acemoglu, James A. Robinso: Why Nations Fail

Hristos Doucouliagos, Mehmet Ulubasoglu: Democracy and Economic Growth (Paper) Deakin University, Australia

John Gerring, Philip Bond, William T. Barndt, and Carola Moreno: Democracy and Economic Growth-A Historical Perspective (Paper)

Sirowy, Larry, and Alex Inkeles: The Effects of Democracy on Economic Growth and Inequality: A Review. Comparative International Development