When system fails, people go for personality. Sometimes I think my country needs enlightened bigotry, though I realize the term is contraditio in terminis. Still, Guido Tabellini will be unforgiven--for his reminders on Democracy quoted almost intact below, from Democracy Comes Second.
"But how important is democracy for economic success? Not much, the empirical evidence suggests. This might appear surprising. After all, is it not true that virtually all rich countries have democratic forms of government, while the poorest countries (mainly in Africa) are non-democracies?"
"The positive correlation between income and democracy that one sees across countries could be due to reverse causation: democracy is more likely to persist as a country grows richer. It could also be due to special historical or cultural circumstances: some societies are just more successful than others, both in terms of economic development and with regard to their ability to develop and maintain democratic political institutions.
Whatever the reason for the observed positive cross-country correlation between income and democracy, it should not be confused with causality. Being democratic does not seem important in securing economic success."
This does not mean that democracy is unimportant. But the sequence of reforms is critical for successful economic development, with economic reforms coming first. When an open and well functioning market system is in place, democracy has a much better chance to lead to lasting prosperity.
An important reason for this is that, in order to create a successful market system, the state must respect basic individual rights: the rule of law, private property, and the enforcement of justice. These fundamental rights are part and parcel of democratic government. But when it comes to economic development, these fundamental rights are more important than other purely political aspects of democracy, such as universal suffrage and genuine political competition.
This is how the Western world became democratic in the nineteenth and twentieth centuries. Economic liberalism came first, political liberalism later. But today's young democracies have to do everything much faster. They don't have the luxury of restricting suffrage to property owners, or to more educated citizens.
Nevertheless, we should remember the lessons of history. Political reforms are more likely to be successful if they are preceded by economic reforms. We should insist that Egypt or Pakistan improve their market system, apply the rule of law, and open their economies to international trade and capital movements. Allowing free elections and true political competition is also critically important, but this should follow economic reforms, not precede them."
