Todays Topics Democratization and Economic Reform

1
Todays Topics Democratization and Economic
Reform

• Finishing group discussion on institutions.
• Dangers for democracy with economic reforms.
• Authoritarian advantage debate.
• Typical economic reform package stabilization
  and liberalization.

2
Small-Group Discussion Designing Institutions

• Iraq, South Africa, Russia groups.
• Would you have a presidential or parliamentary
  executive? Mechanisms for balancing powers?
• What would the electoral system be for electing
  legislative and executive leaders?
• What are your reasons for choosing these
  institutions?

3
Democratization Economic Reform
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Dangers for democratic regime

• Economic deterioration may erode peoples
  attachment to democracy.
• Extremist parties may gain power.
• Growth of voter apathy.
• Danger of coups.

5
Dangers for democratic regime

• Leaders may seek to ram through reforms to
  break political logjams.
• Strong presidency or multiparty parliament
  preferable?

6
Common issues of conflict and controversy

• Role of the state in economic development.
• Distributional consequences of reform (who gets
  what?).
• Government accountability.

7
Debate over regime type and reform

• Authoritarian advantage?

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Pro-Authoritarian Argument

• Democratic governments may lack capacity for
  quick action.
• Workers demands in democracy reduce profits and
  investment for growth.
• Democratic citizen demands for social programs
  divert monies from investment.

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Pro-Democracy Argument

• Authoritarian advantage depends on enlightened
  dictator.
• Why would dictator invest in country instead of
  squandering resources on self?

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Pro-Democracy Argument

• Democratic leaders face punishment at polls for
  failure.

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Pro-Democracy Argument

• Lack of rule of law in authoritarian regimes ?
  investors fear to commit.
• Danger of losing property rights at any time.

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Pro-Democracy Argument

• Political freedom generates better information
  for decisionmaking.

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Pro-Democracy Argument

• Democratic governments are risk-averse.
  (Przeworski Limongi)
• Tend not to invest in grandiose schemes.

14
Pro-Democracy Argument

• Democratic legitimacy can weather economic
  crisis. (Huntington)
• Not based on performance legitimacy.

15
The Historical Record

• Authoritarian advantage based on limited time
  period and regions. (Maravall)
• 1960s-70s Latin America
• 1980s-90s East Asian tigers

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The Historical Record

• No difference between dictatorships democracies
  in growth rates 1950-1990. (Przeworski Limongi)

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Typical reform package

• The Washington Consensus
• (roughly) John Williamson

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Typical Reform Package Step 1 Macroeconomic
stabilization

• Price liberalization.
• Cut government spending.
• Tighten up money supply (quit printing money).
• Convertible national currency.

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Typical Reform Package Step 2 Longer-term
Liberalization

• Reduce trade barriers.
• Remove foreign investment barriers.
• Privatization.
• Laws to protect property rights.
• Fight corruption.
• Reform social safety net.

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Now Washington Confusion?

• Growing disagreement about proper speed and
  degree of reforms