Democracy versus Growth?

Is democracy dying?

This question seems to be back on the mind of economists this week. I live in the world’s largest democracy but it often confounds me. It confounds me when I see people voting for leaders who don’t do justice to their roles. It distresses me when politicians make policies that are in conflict with basic economic reasoning, but they do because they want votes from certain sections of voters. I get worried when, in the name of democracy, parties appease certain sections of people with regressive, anti-development policies. I have said enough but economists have been arguing for long if democracy is good for development, development being a difficult word here and much debated as well on its intent and purpose. Anyway, let us focus on democracy and growth for today, which seems to be the focus on this February 2019 publication by  Acemoglu, Naidu, Restrepo, and Robinson in which they argue that there is substantial evidence that democracy impacts GDP per capita positively with as much as 20% increase in GDP per capita of democratizing nations.  They add that the positive effects are driven by greater investments in capital, schooling, and health.

Yet, in his critique Alex Tabarrok argues that the academic literature has at best weakly established the causal effects of democracy on growth. Examples beyond academics to question Acemoglu et al’s research exist and the biggest one is non-democratic China’s rise as an economic superpower. Tabarrok argues the recent research’s contention of 20% growth may not be attractive enough for non-democracies to want to switch to demoracies and that there must be something more to democracy than the GDP per capita link. Read more of his thoughts here.

However, for the first time in three years, the decline of democracy stopped in 2018 according to The Economist’s Democracy Index. According to this index, Norway, Iceland, Sweden, New Zealand, and Denmark are the top five democratic countries in the world, whereas Chad, Central African Republic, Dem. Republic of Congo, Syria and North Korea are the bottom five. India is on number 45. Hmm!

Here is another interesting piece which talks about the queer contradiction that even as freedom the world over is in decline, the appeal of democracy endures! Yet, a conflicting report from Freedom House suggests otherwise primarily because of the rise of autocratic leaders such as Donald Trump.