[Civsoc-mw] Democ and African Economic Growth. per van de Walle and Masaki

[Diana Cammack]

 <http://blogs.die-gdi.de/> 

 <http://blogs.die-gdi.de/> International Development Blog

 <http://blogs.die-gdi.de/> German Development Institute / Deutsches
Institut für Entwicklungspolitik (DIE)

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 <http://blogs.die-gdi.de/2017/02/14/africas-democracy-is-good-for-growth/>
Africa’s Democracy is Good for Growth

Posted on
<http://blogs.die-gdi.de/2017/02/14/africas-democracy-is-good-for-growth/>
14. Februar 2017 by  <http://blogs.die-gdi.de/author/nicolas-van-de-walle/>
Nicolas van de Walleund <http://blogs.die-gdi.de/author/takaaki-masaki/>
Takaaki Masaki 

Democracy promotes economic growth 

Does democracy promote economic growth? An immense body of literature
already exists on this topic but there is, as yet, no hard consensus among
scholars and policymakers alike about the general link between democracy and
growth. This question is particularly relevant to sub-Saharan Africa—a
region where two broad trends of fast economic growth and democratization
concurrently happened over the past two decades.

 

Figure 1 shows the average GDP growth rate and Polity IV scores of democracy
over the period between 1980 and 2015. The end of the Cold War ushered in a
wave of democratization that swept across the entire region, as indicated by
a positive increase in the average score of Polity IV in the early 90s, and
also coincided with the beginning of a two-decades-long episode of hastened
economic growth.

Figure 1: Average GDP growth and Polity IV scores of democracy in
sub-Saharan Africa, 1980-2015



In
<https://www.wider.unu.edu/publication/impact-democracy-economic-growth-sub-
saharan-africa-1982-2012> our UNU-WIDER working paper, we revisited an
ongoing academic debate over the relationship between democracy and growth
with a particular regional focus on sub-Saharan Africa. We argue that
democracy promotes growth, especially the longer a democratic regime is
sustained. Democracies are said to facilitate economic growth by encouraging
more responsible government spending (Baum and Lake 2003; Stasavage 2005),
promoting property rights (van de Walle 2001; Przeworski and Limongi), and
allowing popular votes to throw out corrupt leaders (Schedler et al. 1999).
However, on the other hand, periods of democratic transitions are often
accompanied with a great deal of uncertainty and, at times, social unrest
and political violence, which probably all contribute to slower economic
growth. It is important, therefore, to make a distinction between
democratization and democratic consolidation as these two political
phenomena have different implications for economic growth.

Our analysis of cross-sectional time series data that include up to 43 SSA
countries for the period of 1982-2012 reveals that the positive effect of
democracy on growth increases as a democratic system persists for longer
years. Figure 2 shows the estimated effect of democracy (as measured by
Polity IV) on growth (as measured by annual GDP per capita growth taken from
the World Bank’s World Development Indicators) and how it varies based on
different lengths of democracy (See more details in Masaki and van de Walle
(2014)). In addition, we code regime type as a continuous variable and find
that even incremental gains in civil and political freedoms that fall
well-short of full-fledged democracy still have an economic benefit.

As clearly depicted in Figure 2, the marginal positive effect of democracy
on growth is greater for those countries that manage to remain democratic
for longer years (although its effect eventually becomes indistinguishable
from zero when democracy duration exceeds roughly 25 years). The magnitude
of democratic dividends is not-negligible. Just to illustrate this point,
for countries like Ghana, Benin, Botswana, Zambia, and South Africa, which
have managed to remain democratic for more than fifteen consecutive years, a
one-unit increase in Polity IV scores is expected to increase GDP per capita
growth by 0.54 per cent with a standard error of ±0.13 per Cent.

Figure 2: The marginal effect of democracy on growth at different lengths of
democracy Duration



Source: Authors’ own construction. The figure is based on the baseline model
in Masaki and van de Walle (2014), which controls for various socio-economic
variables including, but not limited to, inflation rate, inflows of foreign
direct investment, terms of trade, and government spending.

Notes: The solid black line represents the marginal effect of democracy,
while the dashed black lines around it show the 95 percent confidence
intervals. The dashed, grey line shows the number of observations across
different lengths of democracy Duration.

We believe that this empirical evidence has several policy implications for
Western diplomacy and foreign aid.

First, more foreign aid should be directed to fledgling low-income
democracies. This aid will be more likely to promote economic development
than aid that is directed at most non-democratic regimes. In addition,
donors need to recognize that these countries have often been destabilized
by the democratic transitions from which they have only recently emerged. In
the early years of democratic rule, they still suffer from the economic
stagnation in which they were typically mired because of the end of the
authoritarian era and the traumatic events of the transition. There may be
political actors that still wish to undermine the new democratic order. The
scholarly literature has made clear that economic growth is very important
to the survival of democratic rule, particularly at low-income levels
(Cheibub et al, 1996). In sum, economic support to young low-income
democracies is likely to constitute a good investment, both literally in
economic terms, but also figuratively in political Terms.

Second, our empirical analysis suggests positive economic effects of even
imperfect democracy in Africa, where, indeed, many multi-party electoral
systems fall well short of the democratic ideal. Typically, in these
countries, relatively competitive elections and limited political rights
combine with substantial abuses of executive power, and a sharp imbalance of
power between the executive and the other branches of government. Thus, we
recommend that more aid be given to the institutions that promote vertical
and horizontal accountability of the executive, in particular the judiciary,
the legislative, as well as civil society. At present, relatively too little
aid goes to strengthening these institutions.

Third, while the average African authoritarian government underperforms the
average democratic government in economic growth and poverty alleviation, it
must be recognized that a minority of authoritarian states are very good at
it. These countries pose a quandary for donors, since political and economic
objectives may be contradictory. Still our research suggests that
authoritarian governments typically do not sustain their initial growth
spurts, and will eventually decline. Thus, donors may view partnerships with
such regimes as pragmatic vehicles with which to promote poverty
alleviation, but they should continue to push for democratization.



 <http://blogs.die-gdi.de/tag/nicolas-van%20de%20walle/> Nicolas van de
Walle

Nicolas van de Walle is a professor in the department of government at the
Cornell University, Ithaca, New York. His primary field is comparative
politics. 

*	 <http://blogs.die-gdi.de/tag/nicolas-van%20de%20walle/> More Posts



 <http://blogs.die-gdi.de/tag/takaaki-masaki/> Takaaki Masaki

Takaaki Masaki is a Postdoctoral Fellow at the College of William and Mary.
He specializes in international development and African politics.

*	 

© 2016-2017 <http://www.die-gdi.de/>   Deutsches Institut für
Entwicklungspolitik (DIE), Bonn

 

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