Study by MIT, Columbia, Boston University and University of Chicago researchers shows that democracy outscores China’s authoritarian capitalism.
New Delhi: A country that becomes a democracy from a non-democracy achieves around 20 per cent higher GDP per capita in the next 25 years than a country which remains a non-democracy, a new study has found.
The study, titled ‘Democracy Does Cause Growth’, is a joint effort of researchers from MIT, Columbia University, Boston University and the University of Chicago.
At a time when China’s rise has made authoritarian capitalism seem like a much better alternative, the study is a shot in the arm for proponents of democracy.
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The study found that for a country that transitions to democracy, GDP per capita increases by around 20 per cent in the next 25 years. The study also observed that a country’s GDP declines if it reverts to a non-democratic structure.
Through this, the study refuted concerns that the positive correlation between democracy and GDP might just be a correlation between any regime change and GDP growth.
The study countered the claim that democracy constrains economic growth for countries with low levels of development. However, it did find evidence that the positive effects of democracy are more pronounced for countries which have higher levels of secondary schooling.
It also speculated that this probably happens because enhanced human capital reduces distributional conflicts in society, thereby making democracy more stable.
Also read: India to regain world’s fastest growing economy tag with 7.3% GDP growth this year: IMF
The study also highlighted the channels through which democracy affects GDP. These include increased investment, encouragement of economic reforms, improvements in education and health care, and reduction of social unrest.
Even though non-democracies can take similar measures, the likelihood of that happening is much lower, said the study.
The study took a sample of 175 countries for the period between 1960 to 2010. During this period, it identified 122 democratisations and 71 reversals.
To measure democracy, the researchers developed a consolidated index that captured information from popular datasets like Freedom House (classifies countries as ‘free’, ‘partly free’, and ‘not free’), Polity IV (assigns a continuous score from -10 to +10), and a few others.
The democratic features that counted included free and competitive elections, checks on executive power, and an inclusive political process that permits various groups to be represented politically. To a lesser extent, it also incorporated expansion of civil rights.
The GDP per capita was measured in year-2000 dollars, based upon World Bank Development Indicators.
What is democracy?!
Elections every few years
But between two elections electeds act to their whims, aided by selected burocrats
It is burocrats who are continuity between changes who define the governance
On China they do have representatives of local people to party
They decide on leadership
A democracy like in India where elected wins more by division than popularity is far worse than China
China’s rise for the first thirty years or so after 1978 may have been either due to its authoritarianism or despite it. One suspects the motive force was the freeing up of the creative energies of a billion people, supported by state intervention in the form of creating world class infrastructure and creating an environment conducive to large scale investment, with exports as a major focus. In such a large, underdeveloped country, a dose of authoritarianism may have outweighed the costs associated with a lack of personal freedoms. However, as China has crossed that threshold after eliminating mass poverty, the absence of democracy is becoming a drag on the economy. It is creating universities that figure in the list of the world’s best, spending a quarter of a trillion dollars annually on R & D, the composition of its manufactures and exports is moving swiftly up the value chain, but to impartial observers it seems that the state is becoming more of a hindrance than a facilitator of its continued rise. Instead of a gradual opening up of freedoms, the government is moving to a hard stance. President Xi’s decision to relax term limits is a move in the wrong direction. The new Cold War with the United States could not have come at a worse time for China.
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