Number 53 October 2012

The Link Between Democracy and Development
by Carl Gershman, President of the National Endowment for Democracy

What is the relationship between democracy and development? Is development a necessary precondition for democracy and vice versa? Does democracy have to produce development – does it need to deliver – in order to have legitimacy with the population? And how do democracy and free markets affect economic and social equality? These are the questions that the National Endowment for Democracy (NED) has been asking since it was founded nearly 30 years ago.

In some regions, such as East Asia and the Iberian Peninsula, economic development was a key factor in the emergence of stable democracy. Democratic political struggles in, for example, South Korea, Taiwan, and Spain succeeded in good part because significant economic growth had produced a strong middle class and an educated population that demanded political participation and respect for fundamental human rights. Economic success provided a solid foundation for consolidating democratic institutions.

In Central and Eastern Europe, however, communism was an obstacle to economic development, and the challenge facing the new democracies in the region after the fall of communism in 1989 was to make the transition to a market economic system that could achieve European levels of productive development. Despite some rough transitions, market liberalization eventually led to investment and growth, and democracy helped countries navigate and cushion the impact of economic dislocation.

It is not surprising that democracy played a protective role. There is a vast literature linking democracy to the economic well-being and social protection of the population. Nobel Laureate Amartya Sen has said that democracy protects its people by holding government accountable and preventing the abuse of power; promoting economic growth; encouraging governments to be alert to the needs of their citizens and to promote the health, education and overall welfare of the population; and defending people and their human rights against the cruelties of autocratic regimes. Other research bears out Adam Smith’s 250 year-old prescription for prosperity: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes and a tolerable administration of justice, all the rest being brought about by the natural order of things.”

Yet democracy also has its vulnerabilities and dilemmas. The political legitimacy of democracies can be weakened by severe economic problems. The 2011 Prosperity Index of the Legatum Institute reports that, as a result of the economic crisis, East Europeans now “express not only lower tolerance for immigrants and minorities but also less satisfaction with their freedom of choice.” In addition, the most recent Freedom House survey of press freedom reports that the blend of illiberal politics and grim economic prospects in the region is shrinking the space for independent media.

Just as democracy can produce prosperity, it can also derive great benefits from economic progress. President Ronald Reagan once said, “No, democracy is not a fragile flower. Still it needs cultivating.” As we head into the next 30 years, CIPE and the NED stand prepared to do just that.♦

This article is based on remarks delivered at the Wroclaw Global Forum, where the author received the Atlantic Council’s Freedom Award.