The Relationship between Democracy and Development:

Implications for Policy

Council on Foreign Relations

What We Know:

The causal link between democracy and development is a controversial

issue. For most of the twentieth century, conventional wisdom has held that
autocracies are better able to marshal the resources necessary to promote
economic development than are democracies, and that a certain level of
economic development is necessary for democracy to take hold and flourish
in a country. That view deserves a new examination in the post-Cold War
world. Morton H. Halperin, Joseph Siegle, and Michael Weinstein make such
an examination in their upcoming book on the subject, and their results
present some interesting implications.

When the countries of the world are examined as a whole, democracies do

perform better in terms of economic development than do autocracies or
mixed polities. The debate concerns developing countries specifically, can
democracies develop as low income countries; can poor countries
democratize; and does democracy among low income countries make any
difference for their development success?

According to data collected and analyzed for the book, there has been no
advantage for autocracies over democracies for the past 40 years in terms of
development. Both developing country democracies and non-democracies
have grown at approximately 1.5% of GDP per capita per year during that
time. When East Asia is removed from that sample, democracies have
actually performed better growing at 0.5% per capita per year faster than
autocracies and mixed polities. What is more, there is no data on about 25%
of autocracies countries such as North Korea, Iraq, Afghanistan (for most of
its rule), and Cuba so actual growth figures for autocracies would likely be
substantially lower if the performance of these additional countries were
included.

More than simply growing at a faster rate, democracies have outperformed

autocracies in the consistency of their growth. An analysis of the 80 worst
economic performers of the last 40 years reveals that all but three have
been autocracies. In addition, democracies have performed substantially
better than autocracies in the social welfare dimension of development (life
expectancy, child mortality, literacy, etc.) in some cases up to 50% better.

It is important to note that there has been a variety of development

experiences among democracies. This can be attributed to the differing
success with which any country can develop institutions of accountability
checks on the chief executive, separation of politics from the civil service,
independence of the judiciary, freedom of the press, and independence of
the private sector, for example which are the foundations of democratic
systems of governance. Both autocracies and democracies that have
developed these institutions have had better rates of economic development
than countries without well established institutions of accountability. For this
reason, there are some autocracies that have performed better than some
democracies; the East Asian "tigers" fall into this category.

Despite the overall positive performance of democracies over autocracies in

development, there has been no preference given to democracies over the
past 40 years in the dispersal of development assistance. The same has
been true with debt relief, even though new democracies countries that
have recently transitioned from autocratic rule have often inherited debt
that is as high as 23% of GDP, a figure higher than that for most low income
countries. This problem is compounded by the fact that the lack of a
"democracy dividend" can undercut popular support for democracy. Indeed,
70% of countries which experienced democratic backtracking over the past
20 years faced periods of economic stagnancy before backsliding.
 Some important considerations:

It may be imprudent to alter development assistance priorities so as to

reduce U.S. involvement in non-democracies like China and Vietnam
countries in which there is a large number of poor people, and in which
Western assistance has resulted in positive developments in human rights
and liberalization.

The international financial institutions (IFIs), often criticized for their neglect
of democracy as a factor in decision-making, have actually provided a useful
insulation of the assistance process from politics and member countries'
specific geopolitical agendas. This has resulted in more assistance being
provided more effectively to a broad range of countries over time. In
addition, over the last ten years, the largest portion of international
assistance for governance issues has come from the IFIs.

What Are the Next Steps; What Should Be Done and by Whom?

To improve development performance and to increase incentives for

democratization:

Donors should consider giving preference to democracies in

development assistance;
Donors should consider giving preference to democracies particularly
new democracies in debt relief;
Donors should consider greater flexibility in their aid programs to new
democracies to take into account the internal coalition-building process that
must take place in democracies negotiating development assistance
programs;
Donors should consider amending the charters of the IFIs to cite
democracy as one of the objectives of IFI efforts;
 Donors and IFIs should consider requiring Democracy Impact
Statements with their activities to take account of the implications a
development policy can have for a country's democracy;
Donors should consider broadening the channels through which they
program development assistance from just a recipient country's national
government (the current practice) to development NGOs, local governments,
and the private sector. Such action could help increase government
accountability for development assistance spending by providing domestic
competition for development assistance funds; and
Donors and IFIs should consider expanding the mechanisms by which
development policy is decided beyond treasury departments (the current
practice) to foreign ministries and national aid agencies (for example,
USAID).