Chapter 6 The Economic Determinants of Democracy and Dictatorship

The Economic Determinants of Democracy and Dictatorship

Introduction to Economic Influences on Democracy

• Economic development plays a key role in influencing the democratization process.

Overview of Modernization Theory

• Modernization theory posits that all societies undergo uniform historical stages of economic development, leading to political changes:

  • Different stages of development are characterized by the size of various economic sectors (agriculture, industry, services).

  • The transition from underdeveloped to developed countries is marked by:

  • Reduction in agricultural sector size.

  • Growth in industrial and service sectors.

  • Shift from dictatorship to democracy.

Dictatorship and Democracy in Different Economic Contexts

• Dictatorial rule is prevalent in agrarian societies,

• Economic development changes the power dynamics between rulers and citizens:

  • As people achieve economic mobility, their power to negotiate with rulers increases.

  • Bargaining for consent becomes necessary for rulers to maintain power.

The Role of Bargaining in Democracy

• Economic development causes a transformation that necessitates rulers to seek citizens' consent.

• Political power becomes more inclusive as more citizens gain economic mobility and exit options.

• Institutions (like assemblies) arise to facilitate information sharing and negotiation between citizens and rulers.

Conditions for Democracy to Emerge from Economic Development

• Economic development does not guarantee democracy; two essential conditions must be satisfied:

  1. Rulers must be dependent on the citizens for governance.

  2. Development must enhance citizens’ exit options, compelling rulers to seek their consent.

Relationship Between Income and Democracy

• Modernization theory suggests a strong direct link between economic development and democracy, primarily measured by GDP per capita.

• Statistical Data:

  • Graphs showing the percentage of democratic country-years per income from 1950-2019.

• Important income thresholds identified:

  • Democracies with incomes above $15,869 (2017 PPP) have never collapsed into dictatorship.

  • No dictatorship above $28,233 has ever transitioned to democracy.

Income's Role in Democratic Survival

• Evidence suggests that higher incomes bolster the survival of democracies over time.

• Income influences the risk of transitioning to dictatorship vs. democracy:

  • Higher income yields lower probabilities of democratic collapse.

Analysis of Rising Income and Its Impact

• The empirical patterns support the view that rising income may primarily promote democratic survival rather than emergence.

• Income influences perceptions of risk between autocracy and democracy differently based on personal wealth status.

Structural Changes and Accountability in Modern Democracies

• Modernization alters socioeconomic structures, increasing the number of citizens with mobile assets and reducing the rulers’ capacity to monopolize economic activity.

• Historical examples include:

  • The shift from agriculture to manufacturing in early modern Europe influencing the formation of representative government in England.

  • The Glorious Revolution of 1688 as a case of economic elites negotiating for state constraints.

Assemblies and Political Negotiation

• Assemblies function as platforms for airing grievances and are crucial for gathering governmental insights regarding public sentiment.

• They help solve commitment problems between rulers and citizens by enhancing accountability.

Exit, Voice, and Loyalty Game

• Parliamentarians faced choices between exit, voice, or loyalty as state constraints evolve.

• The English Crown’s dependence on economic elites resulted in negotiated limits to their authority.

Economic Development's Relationship with State Power

• Depending on the robustness of state institutions, economic development influences the negotiation balance:

  • Strong states may resist pressure from citizens as they maintain control over economic activities.

  • Weaker states face greater demands for citizen input.

• Dictatorial strategies may emerge as a means of preventing citizen pushback.

Natural Resources, Foreign Aid, and Democracy

• Natural resources often lead to poor governance and hinder democratization due to reduced government accountability.

• Foreign aid impacts democratization:

  • Aid can either support or undermine democratic efforts based on the dependency and intentions behind the aid.

• Conditions for aid to promote democracy include:

  1. Recipient’s dependency on the aid.

  2. Donor’s genuine intent to support democratic reforms.

Economic Inequality and Its Effects

• Economic inequality typically undermines democratic processes, fostering elite resistance to democratization.

• There's weak empirical support for the idea that wealth gaps alone hinder democracy; instead, the potential for exit threats from wealthy elites shifts the dynamics.

• Structural inequalities influence the political landscape differently concerning land and income disparities.

• Activists often face slow democratization processes if economic structure changes are prerequisites for political reforms.