Economic Growth and Development

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current institutions. Countries that experienced an extractive type of colonial-
ism were years later likely to be poorer and less democratic than those with a
legacy of settler type colonialism.


Development causes democracy


One longstanding argument sees democracy as emerging from sustained
economic growth. Democracy is here seen as another aspect of a modern soci-
ety, along with economic aspects such as industrialization, and social aspects
such as the rise of achievement (rather than factors based on birth such as caste
or kin) as the basis for personal advancement. The exact mechanism by which
development gives rise to democracy is less clear. Milton Friedman, the Nobel
prize-winning economist, in his 1962 book Capitalism and Freedomargued
that it was not growth per sebut specifically economic growth in a capitalist
economic system that paved the way for democracy. Capitalism, he argued,
was based on voluntary exchange so the spread of the free market would
permit economic diversity and the dispersal of economic power, making it an
ideal basis for a flourishing democracy. The most influential statistical repre-
sentation of this relationship was by the political sociologist Seymour Lipset in



  1. The Lipset hypothesis states that various social and economic changes
    associated with economic growth create the conditions necessary to sustain
    democracy. Rising incomes give people the disposable income to invest time
    and effort participating in political debate and practice. Rising literacy enables
    people to read democratic debates in newspapers. Improved communications
    and concentration of the population in urban areas makes political mobiliza-
    tion and campaigning easier. The diversity that becomes commonplace with
    urbanization and market-based economic exchange will increase the tolerance
    and acceptability of free speech.
    Rueschemeyer et al.(1992) argued the process was not as general as
    suggested by Lipset but the establishment and consolidation of democracy
    depended on the emerging balance of power among different classes.
    Economic growth that weakens the economic power of agriculture, hence of
    landlords,the most consistently anti-democratic class, is a crucial pre-condi-
    tion for democratization. Landlords depend for their livelihoods on a large
    supply of cheap labour. Democracy that equalizes the right to vote (a landlord
    can always be out-voted by a more numerous peasantry) is a threat to their
    political and economic position. Economic development that weakens the
    economic power of landlords is a crucial pre-condition for democratization,
    argue Rueschemeyer et al.The working class and peasantry are the classes
    most in favour of democracy as the vote provides the promise of protection by
    large numbers against minority classes of capitalists and landlords. The middle
    classes, according to Rueschemeyer et al., have a more ambiguous role.
    Sometimes middle classes have supported democracy to protect free speech
    and civil liberties (for example, South Korea in the 1980s) and sometimes they
    have supported dictatorship to protect their property and privilege against


208 Patterns and Determinants of Economic Growth

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