Determinants of Democracy

Sem-6(H)
Paper-CC14
 Democracy
• In a democracy, the majority of the population is allowed to vote and
express their preferences about policies, and the government is
supposed to represent the preferences of the whole population.
• “Democracy is the government by the people for the people.”
 Determinants of Democracy
1. Civil Society
2. Shocks and Crises
3. Sources of Income and Composition of Wealth
4. Political Institutions
5. The Role of Inter-Group Inequality
6. The Middle Class
7. Globalization
 Civil Society

Democratization
• A relatively effective threat of revolution from the citizens is
important for democratization.
• When the citizens are not well organized, the system will not be
challenged and transition to democracy will be delayed indefinitely.
• Similarly, when civil society is relatively developed and the majority is
organized, repression may be more difficult.
• Therefore, some degree of development in civil society is also
necessary for democratization
 Civil Society

Consolidation
• The strength and nature of civil society is as important for the
consolidation of democracy as it is for its creation in the first place.
• Not only is a well-organized civil society necessary to push for
democracy, it is also necessary to protect it.
• When civil society is better organized, coups are easier to resist, more
costly to undertake, and less likely to succeed.
• Hence, democracy is more likely to be consolidated.
 Shocks and Crises
Democratization
• In our theory, democratizations occur because of the transitory nature of de facto
political power.
• In some situations, the collective-action problem is easier to solve, opponents to
the regime are easier to coordinate, and revolutions are easier and less costly to
carry out.
• These are typically times of crises – for example, harvest failures, economic
depressions, international financial or debt crises, and even wars.
• Such crises and macroeconomic shocks are intrinsically transitory and lead to short-
term fluctuations in de facto political power.
• Our theory, therefore, predicts that democratizations are more likely to arise in a
situation of economic or political crisis.
 Shocks and Crises
Consolidation
• Just as opponents of dictatorship can gain temporary de facto power
when there are political or economic crises, so can opponents of
democracy.
• Our analysis suggests that, as with democratizations, coups are more
likely to arise in situations of crisis.
• An illustrative example is the coup against Allende in Chile in 1973,
which came during the first big rise in oil prices and a large economic
depression.
 Sources of Income and Composition of
Wealth
Democratization
• Another important determinant of the trade-off between democracy and repression is the source
of income for the elites.
• In some societies, the elites are heavily invested in land, whereas in others, the elites are those
with investments in physical and human capital.
• There are likely to be three major differences in the attitudes of landowners and (physical and
human) capital owners toward democracy and nondemocracy.
• First, land is easier to tax than physical and human capital. Therefore, landowners have more to
fear from democracy than nondemocracy, which makes them more averse to democracy.
• Second, social and political turbulence may be more damaging to physical and human capital
owners who have to rely on cooperation in the workplace and in the trading process, which makes
landowners more willing to use force to preserve the regime they prefer.
• Third, different sets of economic institutions are feasible in a predominantly agrarian economy,
which influence the relative intensity of elites’ and citizens’ preferences over different regimes.
Sources of Income and Composition of
Wealth
• For instance, labor-repressive institutions, such as slavery, are relatively
more efficient with agricultural technology than in industry .
• This implies that democracy is worse for elites because the changes in
collective choices that it brings undermine their preferred set of
economic institutions.
• All three considerations imply that democratization is more likely in a
more industrialized society where the elite own significant physical and
human capital than a more agricultural society where the elites are
mainly invested in land.
• Stated differently, democracy is more likely when the elites are
industrialists rather than landowners.
Sources of Income and Composition of
Wealth
Consolidation
• The source of income for the elites also impacts the decision of whether to
mount a coup.
• If the elites are heavily invested in land, then coups may tend to be less costly.
• More important, democracy is relatively worse for such individuals given that
land can be taxed at higher rates than capital, and also that economic
institutions under democracy are further from those preferred by the elites.
• In contrast, when the elites’ wealth is mostly in the form of physical and human
capital, coups are more expensive for them and democracy is less threatening.
• As a result, democracy is less likely to consolidate when the elites are
landowners than when they are capitalists
 Political Institutions
Democratization
• It is suggested that the nature of democratic political institutions may be crucial for explaining
why some societies democratize but others do not.
• In particular, when the elites can use repression to avoid democratizing, they do so because they
anticipate that democracy will be harmful for their interests.
• So far, our characterization of democracy as the rule of the majority has been overly stylized in
order to communicate the main elements of our analysis.
• In reality, one person’s vote may be worth more than another’s and, in particular, the elites may
be able to exercise more or less influence over what happens in a democracy – even though their
influence is relatively less than it is in a dictatorship.
• One way they can do this is through the design of democratic institutions. In his 1913 book, An
Economic Interpretation of the U.S. Constitution, Beard argued that the constitution was written
by rich property holders with an eye to maintaining the worth of their assets (including, one
should add, their slaves) in the face of likely radical democratic pressures.
 Political Institutions

• Even the notion of representative democracy, as opposed to

participatory or direct democracy, can be seen as an attempt to dilute
populist pressures and undermine the power of the majority.
• Clearly, then, democratic political institutions can be structured to
limit the power of the majority.
 Political Institutions
Consolidation
• Just as the structure of democratic institutions influences democratization in the
first place, so it helps to determine whether democracy consolidates.
• In particular, institutions that place limits on pro-majoritarian policies in
democracy are likely to help consolidation.
• In fact, the elites may be quite influential in democracy because they control a
strong upper house, like the Prussian Junkers in nineteenth century Germany, or
the British aristocracy in the House of Lords, or because they control the party
system.
• Knowing that in democracy they will be able to insure against the most
excessively majoritarian policies, the elites will be less willing to undertake action
against democracy.
 Political Institutions
• Another example of the connection between political institutions and
democratic consolidation is the claim that presidential democracies may
be more unstable than parliamentary democracies and more prone to
coups.
• This idea makes sense in our framework because, whereas in a
legislature checks and balances and lobbying may allow the elites to
block radical policy proposals, a directly elected president is more likely
to represent the preferences of the majority in society and, therefore,
to be more populist.
• Hence, presidential systems may be more threatening to the interests
of the elites and thus induce more coups.
 The Role of Inter-Group Inequality
Democratization
• Everything else being equal, greater inter-group inequality makes revolution more attractive for the citizens:
with revolution, they get a chance to share the entire income of the economy (minus what is destroyed in
revolution), whereas in nondemocracy, they obtain only a small fraction of these resources.
• Because an effective threat of revolution is the spark that ignites the democratization process, greater inter-
group inequality should be associated with a greater likelihood of democratization.
• There is also another reason why inter-group inequality might contribute to democratization.
• Recall that democratization occurs as a credible commitment to future redistribution, when the promise of
redistribution is not sufficient to stave off the threat of revolution.
• The stronger the threat of revolution, the more likely it is that this promise will be insufficient and that the elite
will be forced to create democracy.
• Because greater inter-group inequality contributes to the strength of the threat of revolution, it makes
democratization more likely via this channel as well.
• This discussion of the role of inter-group inequality is one-sided, however. It highlights how greater inequality
increases the threat of revolution and thus the demand for democracy by the citizens. However, inter-group
inequality may also affect the aversion that the elites have to democracy.
• Thus, instead of democracy, a highly unequal society is likely to result in a repressive nondemocracy – or,
sometimes when repression is not enough, perhaps even experience a revolution
 The Role of Inter-Group Inequality
Consolidation
• Inequality also critically influences the propensity of a democracy to
consolidate.
• Because the main threat against democracy comes from its
redistributive nature, the greater redistribution away from the elites
the more likely they are to find it in their interest to mount a coup
against it.
• Therefore, greater inequality is likely to destabilize democracy
because, as observed previously, the burden of democracy on the
elites is increasing in the income gap between them and the citizens.
 The Role of Inter-Group Inequality
• Combining the effects of inequality on democratization and coups, we can see that equal
societies never democratize in the first place.
• This helps to account for Singapore’s path of political development.
• Higher but still relatively low levels of inter-group inequality lead societies to democratize
and, once created, democracy is consolidated because it is not so costly for the elites that a
coup is desirable.
• This may capture Britain’s path of political development.
• Even higher levels of inequality still lead to democratization, but democracy does not
consolidate because coups are attractive.
• As a result, the outcome is unconsolidated democracy, which is the path that Argentina
followed in the twentieth century.
• Finally, at the highest levels of inequality, democracy is so threatening for the elites that they
use repression to avoid it, a situation that characterized South Africa until 1994.
 The Middle Class
Democratization
• The first role that the middle class can play in the emergence of
democracy is as the driver of the process.
• The middle class can be the driver in this process by playing a key role
in the revolutionary movement or by fuelling and maintaining it.
• Almost all revolutionary movements were led by middle-class actors
and, more important, a number of the major challenges to the
existing regime.
 The Middle Class
• Perhaps the more important role of the middle class is that of a buffer in the conflict
between the elites and the citizens.
• Recall that when the elites expect democracy to adopt policies highly unfavorable to
them, they prefer repression to democratization.
• The presence of a large and relatively affluent middle class ensures that they play an
important role in democratic politics and, because they are more prosperous than the
citizens, they will typically support policies much closer to those that the elites prefer.
• Therefore, by limiting the amount of policy change induced by democracy, a large and
affluent middle class may act like a buffer between the elites and the citizens in
democracy.
• It does this by simultaneously making democratization more attractive for the elites
than repression and changing policy enough that the citizens are content not to revolt.
 The Middle Class
Consolidation
• The middle class may play an important role in consolidating democracy
by limiting redistribution.
• A society with a large and affluent middle class will engage only in
limited redistribution away from the elites toward the citizens and,
therefore, provide a much smaller threat to the interests of the elites.
• This might be useful in understanding why many Western European and
some Latin American societies, like Costa Rica and Colombia, with
comparatively large middle classes have also had relatively stable
democracies, whereas El Salvador and Guatemala, which lack such a
middle-class buffer, have had difficulty consolidating democracy.
 Globalization
• There is no doubt that there are stronger economic links between
nations today than forty years ago.
• Countries are more closely linked internationally today, with
economic organizations such as the European Union, NAFTA,
Mercosur, and Asean; there are much larger volumes of goods and
services being traded, and much larger cross-border financial
transactions.
• Globalization might contribute to democratization in a number of
distinct ways.
 Globalization
Democratization
• First, international financial integration means that capital owners, the elites, can more easily take their money
out of a given country.
• This makes it more difficult to tax the elites and reduces the extent to which democracy can pursue populist and
highly majoritarian policies.
• International financial integration, therefore, makes the elites feel more secure about democratic politics and
discourages them from using repression to prevent a transition from nondemocracy to democracy.
• Second, international trade affects factor prices and, via this channel, modifies redistributive politics. Countries
differ in their factor endowments, and the relative abundance of factors of production determines patterns of
specialization and the impact of trade on relative prices.
• One implication of increased international trade is an increase in the rewards to the relatively abundant factor in
each country. In the case of less developed nations – which are typically those still in nondemocracy today and,
therefore, the main candidates for democratization – this means an increase in the rewards to labor.
• Intuitively, before the advent of significant trade flows, less developed countries had an excess of labor and a
shortage of capital, depressing the rewards to labor and increasing those to capital.
• Trade opening will pull these rewards toward those prevailing in the rest of the world, thus increasing the
rewards to labor and potentially reducing the return to capital.
• Trade opening will, therefore, reduce the gap between the incomes of labor and capital, thus changing the
extent of inequality between capital owners and labor owne
 Globalization
• Third, increased international trade also means that disruption of
economic activity may become more costly for many less developed
nations that are now integrated into the world economy and,
therefore, repression may now be much more costly for the elites,
again favoring democracy.
• Finally, increased political integration and the end of the Cold War (if
not hijacked by the war against terrorism) might imply that countries
that repress their citizens can perhaps expect stronger sanctions and
reactions from the democratic world. This effectively increases the
costs of repression, promoting democracy.
 Globalization
Consolidation
• Just as globalization can induce democratization, so it can aid
democratic consolidation.
• Indeed, all of the mechanisms listed that link increased globalization
to democratization also imply that coups will be less likely.
• This is either because coups become more costly in a more integrated
world or because globalization implies that democracy is less
threatening to the elites.