Can the Democracies Do It Better?
Chapter 3 demonstrated that political and economic institutions matter when it comes to achieving sustained economic growth and successful economic adjustment. But no link was established between secure property rights and reliable contract enforcement, on the one hand, and democratic political regimes, on the other. The findings in the last two chapters raise an awkward question: If institutional credibility, relative political extraction and explicit public revenue and spending policies are critical to sustained high levels of economic performance, do these attributes flourish equally well in authoritarian and in democratic regimes, or do some types of regimes intensify the impact of state capacity on economic performance, while other types do not? That is the question to which we now turn.
When the international debt crisis erupted in 1982 it was widely believed that the imperatives of economic adjustment would pose more serious problems for democracies than for authoritarian regimes. Several countries, notably Argentina, Brazil, Bolivia, Thailand and Turkey, had only recently emerged from authoritarian rule. In many of these countries authoritarian regimes were held responsible by their own publics for the economic crises their countries faced in the early 1980s. Nevertheless, there was widespread concern that the economic decline brought on by changes in the world economy and the rigors of economic adjustment might discredit and reverse the trend toward political liberalization and democratization that had been gaining momentum, particularly in Latin America, since the late 1970s. 1
The prevailing assumption was that economic decline undermines the ability of democratic governments to consolidate democratic values and institutions. Because of their susceptibility to popular political pressures, democracies would not be able to respond as effectively as authoritarian regimes to the challenges posed by economic adjustment.