My Dear Friend of Democracy,
Today, I would like to explore a simple question: Does the democratization of a country make the people better off?
The simple question has a simple answer: Yes.
The (at least among economists) famous economist Daron Acemoğlu has, with other scientists, published a paper some years ago called “Democracy Does Cause Growth”, where he examined that matter. Acemoğlu concluded:
“We provide evidence that democracy has a positive effect on GDP per capita* ... Our baseline results show that democratizations increase GDP per capita by about 20 per cent in the long run.”
*GDP per Capita is the sum of gross value added by all resident producers in the economy divided by mid-year population.
Of course, that does not mean authoritarian states cannot also be economically successful. China, and in some ways, Russia, shows that this is possible.
What is the explanation? Why are democracies, on average, more economically successful?
The most obvious explanation is that in democracies, politics is in constant competition. If a government fails with its program, it is voted out. Then, the political competitor comes to power and can try to do better.
Authoritarian governments, on the other hand, use (almost) all means to defend themselves against being voted out. Much (also financial) effort is being put into staying in power, and better alternatives are not getting into office. This prevents better politics and, thus, also better economic policy.
✊ Authoritarian regimes generally perform worse when it comes to prosperity. Democracies, on the other hand, create better economic results due to the political competition that takes place. – Not the worst reason to support democracy.
See you in Europe,
Johannes