Here's a great column from one of my favorite economics columnists -- Martin Wolf at The Financial Times (UK).

Enjoy,

oohi
ashu

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Democracy and the future
By Martin Wolf
Published: January 24 2006 20:21

Autocracies have been disappearing across the globe over the past two decades. Yet the collapse of dictatorships has frequently led not to democracy, but to chaos (see charts). Thomas Hobbes, author of Leviathan, thought the absence of any government worse than the presence of a bad one. Life, he declared, is then “nasty, brutish and short”. Government by psychopath may well be still worse than anarchy. But run-of-the-mill autocracy is not.


What political fate, then, is likely to befall Iraq, Russia, Lebanon, Ukraine, Chile, Tanzania or any of the multitude of countries that have moved towards democracy in recent decades? To answer these questions, we need to explain not only why democracy emerges, but what determines its subsequent stability.

These are questions about political institutions, a subject to which economists have, at last, started to pay the attention it deserves. Among the scholars in this burgeoning field are Daron Acemoglu of the Massachusetts Institute of Technology and James Robinson of Harvard University. They have written a brilliant and exasperating book: brilliant in its parsimony of means and power of explanation; exasperating in the incorporation of a mathematical apparatus bound to terrify most potential readers.

[ The book = "Economic Origins of Dictatorship and Democracy (Cambridge University Press, 2006]*

Conflict over resources is inherent in political life. The difference between regimes lies in how such conflicts are handled – by repression under autocracy, by civil war under anarchy and by agreed rules under democracy. Democracy is civilised political struggle. That is what makes it both so attractive and so fragile.

Why do the “haves” ever concede a political role to the “have-nots”? Once they have done so, why do they not seize it back as soon as possible? The answer, suggest professors Acemoglu and Robinson, lies in the costs and benefits for both sides. Repression is costly: often it is more attractive to the elite to concede a share in power than fight.

Equally, revolution is costly: often it is more attractive for the masses to accept shared power than eliminate the elite. The reason, however, that the majority demands institutional change rather than alterations in policy is that democracy embodies a long-term commitment by the elite.

Democracy is more likely to emerge when there is substantial unrest that the elite finds too costly to repress. Unrest is likely to be high if civil society is well-developed, inequality is substantial and the people find it easy to organise. Equally, repression is likely to be attractive when the elite has more to lose, their assets are more easily seized or taxed and the democracy is more likely to be populist than constitutionally limited.

Democracy is far more likely to emerge in an industrial or post-industrial society than an agrarian one. In the latter, elites favour repression and invite revolution. Politicians can seize land at less cost to the economy than physical capital. Income from land ownership often depends on coerced labour, which democracy will (rightly) end. But it is virtually impossible to seize the fruits of human capital, while its owners also lose if civil strife breaks out.

A developed civil society is better able to push for democracy and defend it. An admirable paper from Freedom House illustrates the success of the non-violent movements that have been such an encouraging feature of recent history.**

Where democracy entrenches property rights or, in other ways, diffuses the power of majorities, elites are more likely to accept it. That was the argument surrounding the birth of the US constitution.

Again, economic inequality makes democracy repugnant to elites and attractive to the masses. It is a recipe for civil conflict and unstable democracies. But a sizeable middle class is conducive to democracy: civil society is stronger, while the dangers of unbridled populism are reduced.

Similarly, globalisation reduces the elites’ fear of populism, since it reduces the ability to tax them. Countries with a comparative advantage in labour-intensive goods and services find globalisation conducive to democratisation, while those dependent on unequally owned natural resources find the opposite.

Armed with this analysis, the authors can explain why full democracy became consolidated in the UK, has been fragile in Latin America, never emerged in Singapore and took so long to break through in South Africa. In the UK, the combination of inequality with industrialisation and the rise of the middle classes made democracy tolerable to the elite and desirable to the masses.

In Latin America, high inequality and the dominance of resource wealth made democracy fragile, as was also true of pre-revolutionary Russia. In Singapore, equality has made full democracy less attractive to the masses. In South Africa, high inequality and natural resources made repression attractive, until the economy developed and so the costs of repression became prohibitive.

Overall, economic developments now favour democracy. The optimists can be at least reasonably confident that it is the wave of the future. But there are two important exceptions.

First, huge natural resource rents cement autocracies, particularly when in the hands of the state. Elites have much to lose from equal sharing of the wealth, while the masses can impose few costs upon them. It is not the efforts of the people of Saudi Arabia who make their elite rich, but oil. Russia is in the same sad situation. Iraq is unlikely to emerge as a stable democracy, not because of ethnic and religious divisions, but because of oil wealth.

Second, sub-Saharan Africa’s natural resources and lack of development are big obstacles to the emergence of stable democracies. The greatest danger is wars over resources among predatory elites. The movement is more likely to be from autocracy to instability than from autocracy to stable democracy.

In the world as a whole, however, the conditions for stable democracies are spreading. Another three decades of development are likely to lead to democratisation even in China. But the emergence of a stable democracy is never a simple process. It is foolish to imagine it can be easily imposed from outside, by force. Yet economic development is at least pushing the world in the right direction.

* Economic Origins of Dictatorship and Democracy (Cambridge University Press, 2006); **Adrian Karatnycky and Peter Ackerman, How Freedom is Won, 2005, www.freedomhouse.org.