Forms of Democracy and Development - Economic Research Forum (ERF)

Forms of Democracy and Development

This blog is written by Ahmed Goher (Economic Research Forum)

The Economic Research Forum (ERF) held its second plenary session on ‘Forms of Democracy and Development’ on March 21, in the context of the 21st Annual Conference being held in Tunisia.1The session joined Tarek Masoud, associate professor of public policy at Harvard University‘s John F. Kennedy School of Government, Mustapha Kamel Nabli, a Tunisian economist and the former Governor of the Central Bank of Tunisia, and Gérard Roland, E. Morris Cox professor of economics and professor of political science at the University of California Berkeley.

The three speakers broadly explored the many forms of democracy and their different results in terms of growth and development. More specifically, they looked at the way in which institutions impact economic outcomes, the way in which different political systems and electoral processes do or do not impact the success of democratization, and the relationship between culture and democracy.

Masoud started the session, which was chaired by Mouna Cherkaoui of the University of Mohamed V and HB__8676ERF, by presenting on ‘The relationship between institutions and democracy.’ Masoud’s main premise is that institutions are, to a large part, almost inconsequential when it comes to political and economic effects, as demonstrated by the Tunisian and Egyptian cases. He asserted that literature findings on the matter are too theoretical and do little to affect the real world, adding that it is unlikely that political institutions would “ever” be chosen by different stakeholders on the basis of long-term economic effects. Expressing skepticism towards the idea that the survival of democracies has anything to do with the chosen institutions, ultimately, per Masoud, political systems are selected because the most powerful actors believe them to be in their political interest and not on the long-term economic impact they may have.

To back up his argument, Masoud compares and contrasts the experiences of Tunisia and Egypt following the Arab Spring. He says that while some will argue that the electoral systems adopted by both countries following their 2011 revolutions (pure proportional representation for Tunisia and a mixed system for Egypt) weHB__8692re responsible for the proceeding domination of Islamists in Egypt and the relative balance of power in Tunisia, this theory does not hold true. Rather, Masoud argues, the electoral systems reflected the balance of power in Tunisia and Egypt but did not determine it, namely because in Tunisia there was a strong civil society and different political parties with some degree of power covering the political spectrum; while in Egypt there was a monolithic bloc of Islamists that would have come to power regardless of the system and institutions chosen. In this sense, Egypt’s dominant religious infrastructure mobilized voters for the benefit of Islamists; while in Tunisia a more pluralistic landscape allowed different groups, religious and secular, to compete in elections in a balanced manner.

Moreover, Masoud cites the discrepancy in development between Egypt and Tunisia – with Tunisia enjoying higher urbanization, GDP per capita and literacy rates – to further his premise that economic and social structures are more consequential in determining outcomes than institutions and the different forms they make take.

Moving on, Nabli took to the podium and expressed some disagreement with Masoud’s take on the matter, arguing that while indeed structural factors are important and can account for the different political outcomes, one cannot simply neglect other factors, namely: forms of democracy or regimes, complementary institutions, and stage of democracy.

According to Nabli, empirical evidence lends credence to the notion that consensual democratic parliamentary regimes that are not majoritarian, and with more proportional representation, tend to be more inclusive, distribute more and generate more economic growth. Nevertheless, Nabli also notes the existence of some empirical evidence that more parliamentarian systems generate less growth during transition periods. In Egypt, for instance, Nabli argues that a more presidential/majoritarian political system and sharpened polarization led to failure; while a more parliamentarian and consensual approach in Tunisia helped drive the success of the tHB__8705ransition. Still, he conceded that Tunisia will have to bear some transition costs in the form of lower economic growth because of the quasi-parliamentarian system it adopted.

Furthermore, Nabli posits there are preconditions for democratization, when it takes place, that lead to good governance and better economic outcomes. For instance, a prior modern and capable State with relative political autonomy and an impersonal, meritocratic and competent bureaucracy, coupled with a consecration of the rule of law as a constraint on political power (especially the rulers), greatly enhances chances of success. Conversely, a democracy without previous good state capacity/strong rule of law is likely to produce clientelism and bad economic outcomes. This, for example, explains why democratization in the case of Yemen and Libya was doomed from the start, per Nabli.

To conclude his presentation, Nabli stressed the critical priority for building and strengthening state institutions, which are not clientelistic, and are responsive to the needs of the middle class in MENA countries, adding the process can be achieved relatively rapidly if real political will is present.

Finally, Roland adopted an altogether different approach on the matter, examining the impact of culture on democratization, and the possible link with income. Roland argued that cultural values affect direction of HB__8717institutional change when there is a window of collective action (revolution or elite revolt). Indeed, he said revolts do not necessarily lead to democracy, even when successful and could lead to autocratic regimes. In his view, individualistic cultures create demand for democracy, while collectivist cultures are more prone to autocracy by emphasizing the necessity of benevolent rulers to create stability between different clans/groups and by seeing freedom as endangering stability. Addressing the matter of the impact of culture on income, Roland said that countries with more individualist cultures have more innovation and higher long-term growth.

Roland concludes by offering a number of policy recommendations, including: (1) While culture changes very slowly, strong public debates should be pursued between proponents and opponents of democracy; (2) Inclusive democracy is important to avoid tyranny of the majority. (3) Political institutions characterized by strong separation of powers are stabilizing, even at the cost of possible paralysis of decision-making. (4) Decentralization and federalism help countries deal with geographical political heterogeneity and help to empower civil society.