Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them. - Laurence J. Peter

Monday, February 13, 2006

Spreading Democracy


Policy review has an interesting article by Carles Boix on the necessary preconditions for democracy. The conventional wisdom is that, because democracy correlates with wealth, wealth is a precondition for democracy, or at least it helps. People are fond of pointing out that no democracy with a per capita GDP of over $7000 has ever collapsed.

This article looks deeper into the role that wealth plays in enabling democracy and singles out two factors - wealth inequality and asset mobility - as being crucial. For democracy to survive, everyone in society must be willing to live with an electoral outcome they don't want. If the stakes are too high (e.g. if you're a rich person and confiscatory taxes will ruin you) you will oppose democracy. Similarly, if your country is rich in natural resources, the despotic leaders will control them, and have a lot to lose by shifting to democracy where the wealth will be more equitably distributed. In order for democracy to succeed, a country should have an economy based on human-capital-intensive businesses, rather than wealth from oil or some other raw resource.

So read it.

This has implications for the project of democratizing Iraq and the rest of the tyrannies in the Middle East (and the world).

Reading it, I was reminded of something Milton Friedman (Nobel Prize-winning economist) said in a recent interview in response to a question about whether European countries like Germany and France should solve their economic problems by adapting the seemingly-successful policites of the Scandinavian countries:
Though it is not as true now as it used to be with the influx of immigration, the Scandinavian countries have a very small, homogeneous population. That enables them to get away with a good deal they couldn’t otherwise get away with.

What works for Sweden wouldn’t work for France or Germany or Italy. In a small state, you can reach outside for many of your activities. In a homogeneous culture, they are willing to pay higher taxes in order to achieve commonly held goals. But “common goals” are much harder to come by in larger, more heterogeneous populations.

The great virtue of a free market is that it enables people who hate each other, or who are from vastly different religious or ethnic backgrounds, to cooperate economically. Government intervention can’t do that. Politics exacerbates and magnifies differences.

Homogeneity of culture would help a democratic society accept its differences too. It's a pity Iraq is so torn ethnically and religiously.


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