Sunil Khedkar






















December 15, 2006

Professor Perritt

Law of Nationbuilding Seminar



Since the end of the Cold War, it has become apparent that the best way for a society to unleash its potential is to adopt capitalism to promote economic development and pursue political liberalization.[1] As more of the countries throughout the world make advances toward democracy and economic liberalism, it begs the question: “What is the impact of capitalist economic development on democratization?” In 1959, Seymour Lipset conducted a study on this relationship entitled Some Social Requisites of Democracy: Economic Development and Political Legitimacy.[2] His basic conclusion was that “the more well to do a nation… the greater the chances it will sustain democracy.” Although most of the rich economically developed countries in the world are democratic, the direction of causality is unclear. Does democracy help to bring about liberal economic policies? Or do liberal economic policies help bring about democracy. Most political scientists have differed in their theories explaining how the development of a market economy affects the transition toward democracy.

This paper takes the position that as progress toward economic liberalization is made, a series of changes tends to follow. These changes are led by a change in the structure of social classes within the country. Wealthy landed classes are forced to cede power as a moneyed and an increasingly influential middle-class or urban working class emerges and eventually utilizes their new found influence to demand the right to organize and engage in political action. Newly developed groups have interests that seek representation within the new government and start to form the beginnings of political parties. Business interests, in particular, develop a vested interest in their own financial growth and seek a government with limited powers that will afford them space needed to protect that growth. To protect and expand that growth, they demand representation. Other social changes fostered by successful economic development have the effect of generating political pressures for greater autonomy from the state, for broader opportunities in public political participation, and for government that operates according to law rather than upon the whims of authoritarians. Factors such as a rise in education levels and a rise in income levels are strong forces in this process as well. In all, these changes detach the economy from the grip of government control and spur the development of an autonomous civil society, creating an environment conducive to democratic transition.

Civil Societies consist of independent social organizations—religious and professional groups, labor unions, civic associations and eventually political parties—that stand between the society and the state.[3]

Democracy can be defined as an institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people’s vote.[4] It generally consists of free and fair elections on the basis of universal suffrage.

Analyzing the relationship between democracy and economic development requires taking a critical look at how some of world’s most successful democracies have come into being by first incorporating free market development. In particular, South Korea, Taiwan and Chile provide some striking examples of the effects of economic development on a society.

It was not too long ago that South Korea held its first presidential election. Yet before this took place, the country had already been set down a path which structured its policies toward economic liberalization and eventual development. This history of economic development and eventual consolidation of democracy makes it a good example for the purposes of this paper. Similarly, Taiwan was run by a military authoritarian regime for much of its history following World War II. Yet, the nation’s policies were oriented toward economic liberalism and growth, which eventually produced social and economic pressure for democratization. The adoption of market-based economic polices affected Chile in a much different way. Though it eventually realized economic growth, it produced pressure for democratization through the empowerment of an urban working class, narrow middle-class and social institutions of both classes. The development of these countries provides a basis for understanding the interplay between both democratic transition and economic liberalization. In many ways the adoption of liberal economic principles which help move a country toward economic development begets changes in the socioeconomic structure of the country which are conducive to democratic transition.  

South Korea

            On June 25, 1950, North Korean forces invaded South Korea. A 16 member coalition, led by the U.S. undertook the first collective action under the United Nations Command (UNC).[5] In the years that followed, South Korea experienced a great deal of turmoil under various autocratic leaders, many of whom, however, had tendencies toward liberal economic policies.[6] During the latter part of the twentieth century, South Korea’s economy began to grow at a steady clip and eventually the nation began a transition towards democracy.[7] Today, it is the tenth largest economy in the world with a per-capita Gross Domestic Product (GDP) of nearly $15,000.[8]

            Though the republic was founded in 1948 with some formal institutions of democracy, it stumbled through the chaos of conflict, poverty and incompetent authoritarian leadership for more than a decade.[9] South Korea’s story of development began when Major General Park Chung Hee came to power in 1961.[10] General Park decreed new legislation which adopted a new constitution with a strong presidency and weak legislature and built the Democratic Republican Party (DRP), which was meant to be the majority party for years to come. [11] He considered the stabilizing effects of his policies to be very important and instituted repressive tactics including and military backing of those policies when he felt it was necessary.[12]

            Yet, General Park launched the Five-Year Development Plan making economic growth together with national security the prime objectives of his administration.[13] This plan included a switch to export led industrialization, devaluation of the Korean won, increasing the interest rate, restructuring of the tariff system, and overhauling the tax structure. [14] This was an important shift in policy emphasizing economic growth based on free-market principles. And General Park’s stronghold over the country’s government allowed him to institute policies in spite of any disagreement from his people. This allowed for increased confidence for businesses in the implementation of the policies. In South Korea, as in other societies, people initially felt insecure and vulnerable with a free-market system, so the government took the lead in resource allocation in the business-making process. In this, General Park displayed the benefit of a strong governmental authority in establishing a legal and economic framework upon which development could occur. Though he ruled as an authoritarian, it was precisely because General Park was not subject to the will of the people that he was able to make such sweeping reforms within a short period of time and did not succumb to initial disagreements with his policy choice. The strengthening of the bureaucracy made the exercise of the administrative power by the government and its leaders more economical, predictable, and effective—all of which are qualities necessary for providing continuity and stability in the face of changes that economic liberalization brings. One of the effects of Park’s drive for economic growth was the early development of what would later grow into a substantial middle-class and become the mainstay of South Korea’s democratic political system.

General Park was assassinated in 1979. General Chun Doo Hwan (of the same DRP party) took over in 1981. He promulgated laws that did not allow serious challenges to his ruling party.[15] This allowed him to effectively have free control over the national agenda. The National Assembly enacted laws which enabled the government to effectively control the press and the labor movement.[16] The Chun government behaved much like the Park government in that it placed a great deal of emphasis on economic growth. [17] Once again, whether for better or worse, the need for stability was used to justify political oppression.[18] The Chun government shifted the economy toward a private-sector managed model.[19] It sought to improve economic efficiency and pursued a policy of reducing account deficits and restoring price stability, improving its international competitiveness, dismantling barriers such as tariffs and export subsidies, curbing government price supports and suppressing labor unions.[20] These actions helped to regain its previous high rate of economic growth.[21]

Yet 1987 began discouragingly for President Chun Doo Hwan and the (DJP).[22] The DJP had reached a deadlock with the New Korea Democratic Party (NKDP) on the issue of constitutional revisions, which became political fodder for student protestors.[23] Chun’s actions served only to strengthen opposition parties which had unified, as the increasingly pluralized society began to view the existing government as weak and unstable.[24] Street protests erupted amongst widespread disapproval when the Chun government announced that the constitutional revision would not take place and the next presidential election would be held under the existing, unpopular constitution.[25] The government faced a choice between mobilizing troops to suppress the protestors, an alternative which would risk a civil war, and conceding to demands for democratic reform.[26] Faced with strong opposition from the protestors and political opponents, President Chun eventually chose to accommodate the opposition rather than use troops to suppress them. Something that likely was calculated into his decision was that if he were to choose to suppress the resistance, he would risk a breakdown of the entire political system, resulting in a sacrifice of the country’s economy and newfound international prestige.[27]

The economic policies up to this point had created a populace which had grown accustom to the positive changes in society in the form of increased wealth, greater respect as a country and marked improvements in health and education. There were more people with wealth, and more opportunities for jobs. Over time, people had become affected by their new-found assets and the change in social position that it had brought. Student groups, labor unions, and religious organizations had waged strong anti-government and pro-democracy struggles and voiced their support for change.[28] Leaders did not want to risk stirring further opposition by instituting policies that would run counter to these newly formed interest groups. Their ability to resist and protest had grown along with their wealth, as did their interest in protecting the wealth that they had accumulated. Ironically, the ruling party of the authoritarian leader, Mr. Chun, began to adopt democratic reforms as a strategy to mollify his resistance and retain power.

Between the 1967 and 1987, the South Korean economy grew at an annual average rate of over 7 percent converting the state from an underdeveloped, low-income country to a newly industrialized economy (NIE).[29] In comparison, India’s GDP around that time was fluctuating rapidly, growing at rates roughly between -4% and 6% per year and the United States GDP was growing at roughly between 3% and 5% per year. [30] Gross National Product (GNP) per-capita grew sharply during this period reaching to over $5000 by the time South Korea held its first presidential election in 1987.[31] As economic development progressed, it produced a large middle-class that was politically conscious, interested and assertive, as well as social groups that were capable of autonomy in management and decision-making.[32] By 1987, a survey showed that as many as 65 percent of Koreans identified themselves as members of the middle-class, providing a base upon which democratic polity could be built.[33] With the rise in income came an increase in the complexity and pluralization of society.[34] Different groups in society were developing and had diverse interests which they wanted represented. When social interests become more differentiated and potentially conflicting, requiring compromise, this can only be effectively realized within the political arena. Many newly formed groups including labor groups, student groups and other grassroots groups which had developed had began to politicize their issues in order to get the changes in policy they sought.

Society in South Korea also became more open as it was permeated by outside influences. The economy was further assisted by foreign investors, who had demands of their own from the government.[35] Together these different interests converged and pushed for increased transparency and uniformity of government policies, to ensure predictability and maintain confidence among business interests. Often times their requests had listeners in the form of opposition parties.

As the South Korean people witnessed the growth of their country’s economy over the decades, the country’s leaders, though authoritarian, also felt the need to support the economic progress being made as a matter of international prestige.[36] In the case of the Republic of Korea (ROK) people began to see that economic liberalization had elevated their country to a position of stronger financial status which translated into stronger defense capabilities in regard to their neighbors to the north.[37]

Different groups had differing views on how to accomplish increased economic growth, as well as personal financial interests they wanted protected. This made the economy a topic of discussion within the society. Also institutions and a structure through which to apply effective pressure upon the government had developed. Many of these institutions came in the form of social and economic groups which comprised an important part of South Korea’s expanding civil society. These groups soon organized themselves into new political parties, or sought to further their agenda through existing parties.[38] As is the case in any country that has adopted economic liberalization, often times the largest interests that demands representation are business interests. And the groups representing these interests sought to create a better environment for business to flourish, which often included reducing government regulation, loosening its stronghold over business, and stressing corporate as well as personal autonomy. Though economic issues had been marginalized in the past, as the economy gained steam, many of these issues came to the forefront. Issues such as the depreciation of the Korean won against the Japanese Yen and weakening national competitiveness, had become issues that were not only on the political radar screen, but were issues that demanded attention. This was in large part a result of the growing economy giving people a greater stake in the policies of their government and sparking social debate within the country.

Organizations that had become accustom to autonomy in management and decision-making multiplied, as state involvement in the private sector grew to be resented. A significant change wrought by the institution of market-oriented economic development in South Korea is that it decoupled the government from the economic realm in a way that enables one to offset the other as a check to political power.

Though South Korea did benefit greatly from liberal autocrats who laid the framework for development and set the country on a course toward economic growth, it nevertheless provides an example of how a transition toward liberal, market-oriented economic growth can help shift a nation toward democratization. Economic growth raised the stakes for government leaders and created something that people did not want to undermine. Also, the capitalist economic development that South Korea undertook had many effects upon its social system which increased pressures for democracy. In many ways, after newly developed social forces had exerted pressure, the authoritarian government was forced to adopt a democratization strategy over time simply to stay in power.



            Many of the factors that have impacted Taiwan’s march toward democracy have been either a direct or indirect result of economic development. These factors include a social structure and development of a middle-class, rising levels of education, and eventually, political competition. Accordingly, Taiwan is a model for how economic development can put a country on the course toward democratization.

             After fifty years of colonial rule by Japan, Taiwan was taken over by the Kuomintang (KMT) regime from mainland China when World War II ended in 1945.[39] Four years later, China’s civil war phased out, and the defeated KMT forces retreated to Taiwan. Martial law was instituted in Taiwan and government regulation encompassed production, consumption, savings, trade, commodity circulation, and the like.[40] In order to consolidate power, the KMT promulgated political as well as administrative regulations, which conformed to their form of “hard authoritarianism.”[41] The ruling KMT was also the Nationalist party.[42] It has been described as authoritarian, even Leninist, but liberal in many ways with respect to the economy.[43]

The KMT had “cautiously affirmed” capitalism.[44] The KMT under Dr. Sun Yat-sen embraced “Three principles of the People” or san min chu i which were nationalism, democracy, and the people’s livelihood.[45] It was interpreted as a very moderate form of state capitalism.[46] Towards the latter part of the 1950’s, Taiwan was shifted to an export-oriented industrialization (EOI) policy.[47] The product value of the private sector in manufacturing reached 86.2 percent of the total product value in 1973, when it had only been 40.3 percent in 1946.[48] Between 1952 to 1973, the private sector expanded 40.8 times in comparison to 7.4 times for the public sector during that time.[49] Its GNP growth rates for most of this century have consistently been close to double-digit figures.[50] Inflation rates were 2 percent in the 1960’s and in the low double-digits in the 1970’s, which were among the lowest among developing countries.[51] Income distribution improved markedly during this time as well.[52] Few would contend that Taiwan has experienced tremendous economic success.

            These dramatic changes in the economic makeup of Taiwan resulted in changes within Taiwanese society that facilitated its democratic transition. With the economy soaring, literacy rates increased, mass communication spread, per-capita income rose, social mobility accelerated, the rural sector shrank, a differentiated urban sector (including labor) developed, and a majority of people began to describe themselves as members of the middle-class.[53] Many of these resultant changes alluded to the rise of what many would consider a “civil society.” One of the most significant changes that resulted from the new economic policy though was the devolution of power downward toward the larger middle-class which followed a broader distribution of wealth.

The development of the middle-class can be considered a primary catalyst for the series of changes in society that took place after economic development has set in. This is in large part because the middle-class is the largest segment of population and generally consists of those most likely to form social and political groups due to their economic and social interests in democratization.[54] Additionally, economic development may enhance the autonomy and power of civil society by creating the material resources necessary for social pluralism and widespread accessibility of information.[55] The middle-class is generally more educated consisting of professionals, white-collar employees, small-business people, intellectuals, and students.[56] If democratic representation were to be extended to them, they would be among the primary beneficiaries of such a transformation. Also, people in the middle-class are generally more sensitive to both the abuse of power and corruption, which often accompany authoritarianism, and with increases in income and social mobility they have a greater capacity to organize themselves in pursuit of what they see as their rights and interest and affect change.[57]

            An economically developed middle-class eventually emerged in Taiwan and gradually became impatient to break through the political impasse.[58] It provided the momentum necessary to make an island-wide expansion.[59] By 1992, the middle-class constituted nearly 40 percent of the population.[60] The Chungli incident in 1977 was a well-known landmark in Taiwan’s democratization.[61] It resulted from suspicions of voter fraud in a local election and developed into a mass riot.[62] Many of those who protested were members of the newly developed, educated middle-class.[63] The Chungli incident marked the first time the authority of the KMT had been publicly challenged.[64]

            New social forces tend to congeal around new interests and new ideas. Along with a shift toward economic growth comes the growth of a middle or working class and new interests. People tend to assert those interests via the formation of interest groups and other social groups. Particularly important, in this regard, are the educated middle-class, and the business class, each with its own skills, interests, and ambitions.[65] This increase in pluralism provides an organizing element for a burgeoning civil society, as well as a means for people to voice opposition, and by doing so provides the requisite tools to challenge the existing authoritarian structure.[66] Since the 1980’s, various social movements have been rapidly on the rise, and have become increasingly active, in Taiwan.[67] By the end of 1989, there were a total of seventeen types of social movements protesting the existing public policies and the conduct of the party-state.[68] And in 1987 alone, there were about 1800 street demonstrations involving social groups.[69]

            Organized labor has always been a leading agent for democratization, as well as an important element in the emergence of a civil society.[70] It is a means by which people of similar economic interests can join and put forth an agenda.[71] In doing so, they assist in driving the development of civil society, increasing the prospects for democratization. This is in large part because unions carry strategic weight within the economy, making makes it harder to ignore them than non-productive groups.[72] By intertwining personal as well as national economic interests, labor unions are able to recruit large numbers of workers and hold sway within their communities and government.[73] With the growth of the middle-class and with more people working than ever before, labor unions became an active part of the democratization process in Taiwan. Throughout the 1980’s and 1990’s in Taiwan, labor union strikes steadily increased from 907 in 1984 all the way up to 1803 by 1992 with the number of workers involved increasing each year as well.[74]

            The growth of Taiwanese civil society was marked by various segments of society gaining the means to mobilize themselves into social movements pressing for change and eventually merging their interests into a political party.[75] Several social movements in particular were ignited as a result of Taiwan’s economic growth.[76] Among these was an organized consumer movement led by urban intellectuals and professionals, a rising conservation movement led by environmentalists, a student movement, Church groups and a women’s movement.[77] These social movements added substantial pressure for political change, reinforcing the political opposition to the KMT and legitimizing a democratization movement.

            Many of the new interests developed within Taiwanese society ultimately manifested themselves in the form of political opposition parties.[78] And much of the opposition movement was drawn from the still burgeoning middle-class.[79] Opposition political parties to the KMT were legalized following the creation of the Democratic Progressive Party (DPP).[80] Prior to the setup of the DPP in 1986 Taiwan had maintained a hegemonic one-party system for almost four decades. [81] The KMT had monopolized political power and public resources.[82] After the Chungli incident, a wave of nationwide opposition known as Tanwai, swept Taiwanese politics.[83] This surge, in large part fed by the growing middle-class resistance, led to opposition candidates wining one-quarter of the magistrates and mayors posts as well as 30 percent of the seats of the provincial assembly.[84] Yet, many of these groups were not yet recognized as legally constituted organizations.[85] Although in 1986, the newly organized DPP formally nominated party candidates for the parliamentary election, ran a nationwide coordinated campaign, and scored impressive gains both in terms of legislative seats and in the popular vote.[86] This competition in turn forced the KMT to transform itself to incorporate more Taiwanese and their interests as well as replace its “revolutionary” mission with commitment to representative democracy.[87]

A large contingent of support for the opposition parties which eventually merged into the DPP, were the medium and small businesses which had developed as a result of the booming economy.[88] These groups were connected to intellectual professionals through various social ties, such as school, regional and workplace affiliations.[89] These businesses also provided funds to political activists and even fallback career options, encouraging opposition leaders to pursue riskier political activities.[90]

            An explanation of Taiwan’s progress towards democracy without mentioning external factors would be incomplete. At the turn of the 1960’s the KMT was also under pressure from American aid-giving agencies, the United States government and technocrats within the country to reorient Taiwan’s economy toward export markets.[91] These efforts helped put Taiwan on a path of rapid and sustained economic growth in the first place and led many of Taiwan’s leaders to believe that democratizing Taiwan would be more likely to gain international, especially American, support in its rivalry with the undemocratic and increasingly powerful mainland.[92] President Reagan pressured the KMT to start democratic reform; and in 1986, the U.S. Congress warned that if it did not lift martial law, its relationship with the United States would suffer.[93] This pressure likely increased the KMT’s willingness to accede to the demands of the reformers.

            A review of Taiwan’s history of economic and political development makes it apparent that four decades of economic development created many of the social and economic preconditions favorable to a democratic surge in Taiwanese politics.[94] Taiwan is a good example of the interaction between economic and political forces and how economic liberalization can help bring about political liberalization. Rapid growth had liberalizing consequences that the ruling regime in Taiwan had not fully anticipated. With the economy taking off, Taiwan displayed the features common to all growing economically liberal societies: the literacy rate increased; mass communication intensified; per-capita income rose; and a differentiated urban sector—including labor, a professional middle-class, and a business entrepreneurial class—came into being.[95] These aspects along with growing pluralization within Taiwanese society established the foundation of a civil society conducive to democratic reform. Although much of the newly created business in Taiwan was small and unorganized, the forces it created reached a level beyond the capture of the authoritarian government, and eventually the party-state had no better choice but to give into social and economic forces pushing for democracy. 


            For many years now, Chile has been thought of as an example for other Latin American countries to follow. It has adhered to capitalist market principles to develop economically and many would describe its democracy today as consolidated. Chile’s move toward economic liberalization was by far the region’s earliest and probably the region’s most far-reaching. Moreover, Chile constitutes the region’s only clear-cut example of transition following substantial economic liberalization.

            To appreciate the effect which Chile’s economic development had on its transition toward democracy requires looking at the country’s history going all the way back to the 19th century. The case of Chile is not so much a creation of democracy as a result of economic reforms, so much as it is the reawakening (and further reinforcement) of civil society as a result of economic reforms. Much of Chile’s early economy was structured around the country’s natural resources such as copper and nitrates, as well as its agrarian resources.[96] Yet the first half of the twentieth century was marked by a shift toward industrialization, including a sharp rise in manufacturing, which first developed the middle and working classes.[97] Between 1937 and 1950, the manufacturing sector grew at an average yearly rate of nearly 7 percent.[98] Despite progress in its development, the economy during this time was still plagued by economic woes such as inflation, overvaluation of currency, and price controls.[99] From 1932 to 1973, Chile was led by a civilian government. Though during this time, economic growth was patchy, the remnants of semi-free civilian rule provided something of a base for further expansion of civil society.[100]

            General Augosto Pinochet took control in 1973 as the result of a military coup.[101] Ruling as a military dictator, Pinochet set the country’s economy on a free market path that he believed would help bring about the economic growth he sought.[102] With the help of the “Chicago Boys,” who implemented what became known as the neoliberal model, they set out to lead a broad revolution in Chile.[103] The Chicago Boys emphasized the need for private forces to guide economic and social activities, not the state. This represented a vast departure from all previous Chilean leaders. The state was to be noninterventionist and allow the market forces to dominate.[104] Although they suffered a few setbacks, such as the economic crisis of 1981, the neoliberal approach championed by the Chicago Boys had positive effects on Chile’s economic development.[105] Though a large gap between rich and poor did develop in the immediate years following these reforms, this policy of liberalization had the effect of raising employment and real wages during the 1980’s, particularly around the Santiago area, where 40% of Chileans reside.[106] Between the years 1985 and 1989, average real earnings increased by 10.6 percent.[107] Between 1983 and 1989 employment increased from 3.2 million to 4.4 million.[108]

            These drastic changes in the economy translated into changes into societal changes that differed from those that followed the economic liberalization in South Korea or Taiwan. Chile’s unique history, channeled economic change into different effects upon the social structure. For instance, the economic reforms did not lead to a large middle-class in Chile, at least not immediately. Instead, a large less-wealthy working-class developed alongside a narrow middle-class and moderate wealthy-class.[109] Nevertheless, working-class and middle-class people responded to Pinochet’s regime by forming grassroots economic and political organizations, women’s organizations, and labor unions, all of which had the ultimate goal of ending the dictatorship.[110] These organizations evolved into a massive social movement in favor of democracy and proved to be critical players in the popular mobilization period of 1983 to 1986[111] A massive popular movement heralded by large-scale street actions among these groups agitated for a return to civilian democratic rule.[112] Chile’s history with civilian rule and existing social structure can be credited with its push for democratization early on, even before the development of a broad-based middle-class. Because of their experience with democratic principles, many poorer Chileans did not require as much in terms of economic wealth before urging reform from their government. Yet, many changes in the social structure of the country wrought by economic growth played a large part in driving much of the reform.

            Over time, changes in the economic policy also manifested themselves in the form of changes in the labor movement. Popular protest against the Pinochet government began with the copper miners’ union call for a Day of National Protest on May 11, 1983.[113] Also, in 1983, five centrist and leftist union associations joined together in a large national association called the Comando Nacional de Trabajadores (National Workers’ Command; CNT). Its purpose was to coordinate the actions of different union groups as they strove to protect workers and fight for democracy.[114] Also, many of these new social organizations and labor groups attracted segments of the population, such as women and young people, which prior to 1973, had not been organized. In fact, many of the grassroots organizations had very high levels of female participation.[115] This was in large part because they needed to resolve concrete economic concerns regarding their families. Though in the case of Chile, the working class was more the driver of the political transformation, in many ways it was also its ability to appeal to middle-class people that allowed for both groups to work together to protest for political change.[116] In 1986, the Civil Assembly was formed, representing a coalition of different elements of society including interest groups, professional associations, as well as unions and women. Together these two different classes forged a social movement to further their interests.

            Though they were illegal under Pinochet, opposition political parties took a cue from labor groups in calling for a day of “national protest.”[117] The popular mobilization gave parties an incentive to patch up their differences in order to forge a united viable alternative to Pinochet’s continued rule.[118] One of these parties, Democratic Alliance (AD), was comprised of small dissident right-wing groups, the Republican and Liberal parties, Christian Democrats, renovated Socialists and small center-left parties like the Social Democrats, and the Radical Party.[119] Parties excluded from the AD formed their own coalition, the Democratic Popular Movement (MDP).[120] Perhaps more important, is that via social groups, different classes were able to converge within both parties in large part due to their interest in continued growth and other policy issues. The return of competitive politics allowed parties to resume their role as the backbone of the democratic Chilean government that was to follow. 

That Chilean society did not require a complete transformation of the society to include a broad middle-class before moving toward democratization can be attributed in large part to the country’s history and culture. As a result of its partial democratic past, established institutions and working class, democratic transition was able to take hold earlier on. Working classes made their voices heard through social groups, labor unions and other organizations. In a sense, Chilean society already had some of the beginnings of a working civil society. Yet the economic development was responsible first for allowing poorer agrarian workers to share in more of the wealth creation and for leading to the growth and empowerment of different classes and different interests which translated into the increased pluralization of society.

Chile’s early agrarian economy did not do much to create conditions favorable to democracy. It produced an elite prosperity, but by itself did not produce any significant pressure for inclusion. Progress toward democracy and civil society only occurred after the economy began shifting toward a more industrial, less labor intensive agrarian model.[121] Under these conditions, the landowners feared the loss of an abundant supply of cheap labor in the wake of democratization and they were powerful enough either to resist any opening of the political system altogether or at least to keep the rural sector excluded.[122] Though the strong middle-class was not the driving force of democratization in Chile, the clustering of society into different social and eventually political groups was in large part a result of economic liberalization, and set the stage for political liberalization of the government. After having lived through a time of civilian democratic rule, the masses were eager to return to some form of representative government and pushed their agenda when they had mustered the economic clout to do so.[123] It is significant that the middle-class was willing to stand side-by-side with the working-class after more than a decade of suspicion and distrust. This is particularly noteworthy when viewed in light of the fact that it was alienation of the middle-class from the previous Allende government that made the military coup feasible.[124] Together these groups formed the resurgent civil society and consequent revolt against the militarist government. On March 11, 1990, Patricio Aylwin became the first civilian to take the presidential oath of office in Chile since Salvador Allende. What is similar about Chile’s road to democratization to the other cases given here is that it was the forces unleashed, or in the case of Chile revived, by economic liberalization that eventually helped to bring about political liberalization.


One common theme which underlies the progression of democracy among these three countries is the development of a civil society as a product of economic development. In all of these countries economic growth had the result of increasing pluralism and social mobility. Independent social organizations provided a buffer between the state and the people allowing them autonomy within the social realm. This buffer eventually developed into a counterbalance to the power of the government. Once a certain degree of autonomy had been reached in the economic and social realm, the next step was to apply those principles to politics and government.[125]

In South Korea, the economic growth many people experienced allowed for the autonomy and the means to organize, which spurred the formation of student groups, labor unions and religious organizations. These groups helped form the basis of a civil society, which could effectively pressure the government for reform.

Chile had a history which included (though for a short time) representative politics, and this likely impacted the society’s shift toward pluralism.[126] Nevertheless, the number of social groups greatly increased soon after the Pinochet government had committed itself to economic development, with labor unions taking the lead in the effort.[127] Accordingly, when it came time to press for political liberalization it was these same groups which exerted the most pressure upon the Pinochet regime for a presidential plebiscite.[128] Not too long thereafter political parties developed as vehicles by which these groups demanded political rights.[129] By creating different classes and interests within society, as well as producing the material resources necessary for pluralism and improving the accessibility of information, economic growth is indispensable in its ability to affect democratization.

Economic development can also be attributed to the growth of a middle or urban working class, both of which have the potential to be a fundamental catalyst in this process. When a new middle-class comes into being, the people who make it up acquire the requisite support and autonomy to protest. Authoritarian governments can oftentimes silence the smaller, poorer classes, but it is difficult to do so with a large middle-class that has increased its financial resources and is growing by the day.

Also, middle-class acts as a buffer between elites, who often times prefer the existing authoritarian regimes over a government dominated by the influence of poorer classes.[130] This is because the middle-class is more likely to prefer less redistributive policies than those advocated by poorer classes and the middle class acts as a viable middle ground option.[131] This provides a guarantee of moderation making democratization more attractive of an option for elites and making them less likely to stand in the way of democratization efforts. This was the case in Taiwan. Once a strong middle-class had developed and offered a fairly moderate alternative to the KMT, the upper-classes became more willing to accept a representative form of government.[132] Eventually a middle-class, along with the urban working-class and business classes became too large, too highly educated, too politically conscious and too well mobilized under their own leadership to accept any longer the authority of a state that excludes them from political participation.

            Economic development can positively benefit the development of property rights and the rule of law, both of which are vital to a successful civil society. It has been said before that “capitalism requires contracts,” yet a mistake that many people make is interpreting this to mean that a democracy must be created in a country first before successful economic development can occur [133] In fact, imposing democracy without any economic structure can have destabilizing effects. And some countries which first tried to develop a democratic rule of law only later increased the size and power of their governments.[134] Economic liberalization provides a framework within which to bring about political liberalization. Sudden adoption of an electoral system can occur at any economic level, but there are legitimate doubts as to whether such breakthroughs can be transformed into sustainable democracies without certain social requisites.[135]

            Implementation of a successful economic liberalization policy by a government, in large part, requires the extrication of the state government from economic affairs. This separation of the economy from the control of the state aids the production of other aspects of a civil society. Wealth cannot be generated unless it can be protected. A country that adopts economic growth as a goal will soon realize that businesses must have confidence in knowing that their investments are in a country governed by a system that is safe, consistent and reliable. This is the same confidence required to ship goods to distant destinations, invest in long-term projects without excessive government intrusion or encroachment of property rights, be able to secure dependable payment and have these rights enforced. In its entirety, successful economic development requires property rights and some consistent rule of law. These are also issues that have inherent liberalizing implications upon the government. For instance, a government that loses the ability to unjustly seize people’s property loses that much of its ability to coerce and manipulate its citizens.

            Moreover, two defining features of liberal politics have counterparts in market economies. First, the individual choice is dominant. The electoral selection by which members of governments are chosen corresponds to the principal of consumer sovereignty in the market, by which individual preferences determine what gets produced in the market, and the prices at which products are sold.[136] Second, the reach of the state is inherently limited, with certain rights –political rights in the case of democracy, private property in a market economy—blocked off from government control, allowing for the development of personal autonomy.[137]

            It is hardly the case that political change is determined entirely through economic growth. But the impact of economic liberalization upon political liberalization in South Korea, Taiwan and Chile show that it is a powerful force in the push for democracy. There is no list of absolute preconditions for democracy. Nor is there assurance that particular actions are certain to have particular effects. Yet economic liberalization has the potential to loosen a government’s control over its people, transform a country’s social structure as it empowers large contingents of the population and foster an environment that is conducive to political liberalization and eventually democracy.

[1] Throughout the paper, “economic development” is used interchangeably with “economic liberalization” based upon the assumption that economic liberalization is simply an effective means by which to achieve economic development.

[2]Seymour Martin Lipset Some Social Requisites of Democracy: Economic Development and Political Legitimacy, American Political Science Review 25, (1959)

[3] Michael Mandelbaum, The ideas that changed the world: Peace, Democracy and Free-Markets in the Twenty-First Century 269 (Perseus Books 2002)

[4] John Gerring, Phillip Bond, William T Barndt & Carol Moreno, Democracy and Growth: A Historical Perspective, 57 World Politics 323, 325 (2005).

[5] Sung-Joo-Han & Oknim Chung, South Korea: Economic Management and Democratization, in Driven by Growth 197 (James W. Morley ed., 1999).

[6] Id. at 199.

[7] Id. at 216.

[8] CIA World Factbook , (last visited Oct. 14, 2006).

[9] Han & Chung, supra note 3, at 197.

[10] Id.

[11] Id. at 198-200

[12] Id. at 199

[13] Id.


[14]Id. Devaluing the won and increasing the interest rate has the effect of brining foreign exchange and domestic currency to their equilibrium values and allowing the market to take a greater role in forming business decisions.

[15] Id. at 205

[16] Id. at 207

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id. at 210

[23] Id.

[24] Id.

[25] Id.

[26] Id. at 212

[27] Id. at 215.

[28] Larry diamond & doh chull shin, institutional reform and democratic consolidation in korea 280 (Hoover Institution Press 2000) (1999)

[29] Han & Chung, supra note 3, at 218.

[30] PBS website, (last visited Dec. 2, 2006). India’s low rate of growth during the years 1950 and 1980 after independence was referred to derisively as the “Hindu rate of growth” because it was in sharp contrast with the economies of the “East Asian Tigers” of the same region.

Heritage foundation, (last visited Dec.2, 2006).

[31] Id. at 6

[32] Id. at 217

[33] Id. at 216

[34] Id.

[35] Id. at 219

[36] Id. at 220

[37] Id.

[38] Id. at 218

[39] Hung-Mao Tien & Chyun-Jeng Shiau, Taiwan’s Democratization: A Summary, 155 World affairs 58, 58 (1992).

[40] Id.

[41] Id.

[42] Tun-jen Cheng & Chia-lung Lin, Taiwan: A Long Decade of Democratic Transition, in Driven by Growth 225 (James W. Morley ed., 1999).

[43] Id.

[44] Id.

[45] Id.

[46] Id.

[47] Tien & Shiau, supra note 36, at 58.

[48] Id.

[49] Id.

[50] Cheng & Lin, supra note 41, at 227.

[51] Id.

[52] Id.

[53] Id.

[54] Dietrich Rueschemeyer, Evelyne Huber Stephens, & John D. Stephens, Capitalist Development & Democracy 16 (University of Chicago Press 1992) (1992)

[55] Id.

[56] Harold Crouch & James W. Morley, The Dynamics of Political Change, in Driven by Growth 324 (James W. Morley ed., 1999).

[57] Id.

[58] Tien & Shiau, supra note 36, at 59.

[59] Id.

[60] Id.

[61]  Id.

[62]  Id.

[63]  Id.

[64]  Id.

[65]  Crouch & Morley, supra note 53, at 318.

[66]  Tien & Shiau, supra note 36, at 60.

[67] Id.

[68] Id.

[69] Id.

[70] Paul G. Buchanan & Kate Nicholls, Labour Politics and Democratic Transition in South Korea and Taiwan, 38 Government and opposition 203, 203 (2003).

[71] Id.

[72] Id. at 211

[73] Id. at 211

[74] Id at 227

[75] Hsin-Huang Michael Hsiao, Political Liberalization and Taiwan’s Farmers Movement, in The Politics of Democratization 208 (Edward Friedman ed., 1994).

[76] Id.

[77] Id.

[78] Tien & Shiau, supra note 36, at 59.

[79] Id.

[80] Id.

[81] Id.

[82]  Tien & Shiau, supra note 36, at 61.

[83] Id. Tanwai translated into English literally means “non-KMT”

[84] Id.

[85] Id.

[86] Id.

[87] Id.

[88] Id.

[89] Id.

[90] Id.

[91] Minxin Pei, Implementing the Institutions of Democracy, 19 International Journal on World Peace 3, 4 (2002).

[92] Pei, supra note 90, at 8.

[93] Id.

[94] Tien & Shiau, supra note 36, at 59.

[95] Fareed Zakaria, The Future of Freedom 72 (Norton & Company 2004) (2003)

[96] David E. Hojman, Chile 9 (University of Pittsburgh Press 1993).

[97] Id.

[98] Id.

[99] Id.

[100] Id. at 8

[101] Lois Hecht Oppenheim, Politics in Chile 142 (Westview Press 1999) (1993).

[102] Id. at 139.

[103] Id. at 140. The Chicago Boys were economists by profession, most of whom had been trained at the University of Chicago as a result of an exchange program that had been set up between Catholic University and the University of Chicago. They shared a coherent view of the economic world. One that was influenced by economists such as Milton Friedman, Arnold Harberger, and Fredrick Hayek, who was considered as the intellectual father of the Chicago Boys. 

[104] Id. at 141.

[105] Id. at 141.

[106] Id. at 145.

[107] Id.

[108] Hojman, supra note 95, at 20.

[109] Oppenheim, supra note 100, at 63

[110] Id. at 163

[111] Id.

[112] Id.

[113] Id.

[114] Id.

[115] Id. at 175

[116] Rueschemeyer, supra note 51, at 191.

[117] Oppenheim, supra note 100, at 164

[118] Id. at 172

[119] Id.

[120] Id.

[121] Oppenheim, supra note 100, at 165

[122] Id.

[123] Oppenheim, supra note 100, at 184

[124] Id.

[125] Mandelbaum, supra note 1, at 269. Interestingly enough it was the aim of Nazi and Soviet states to eliminate all social groupings that the ruling party did not control to prevent from social autonomy.

[126] Hojman, supra note 95, at 45.

[127] Id. at 28

[128] Id. at 24

[129] Id.

[130] Daron Acemoglu & James A. Robinson, Economic origins of dictatorship and democracy 39 (Cambridge University Press 2006) (2006).

[131] Id.

[132] Cheng & Lin, supra note 41, at 234.

[133] Zakaria, supra note 91, at 152.

[134] Thomas Friedman, The First Law of Petropolitics, Foreign Policy, May/June 2006, at 28.

[135] Morton H. Halperin, Joseph T. Siegle & Michael M. Weinstein, The Democracy Advantage 29 (Routledge 2005) (2005).

[136] Milton Friedman, Capitalism and Freedom 24 (University of Chicago Press 1962) (2002).

[137] Id.