THE ROLE OF ECONOMIC DEVELOPMENT IN THE TRANSITION TO DEMOCRACY
December 15, 2006
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. 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. 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.
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. It generally consists of free and fair elections on the basis of universal suffrage.
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,
It was not too
long ago that
June 25, 1950, North Korean forces invaded
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.
Yet 1987 began discouragingly for President Chun Doo Hwan and the (DJP). 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. 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. 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. 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. 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.
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. 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). In
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. 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.
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
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
of the factors that have impacted
After fifty years of colonial rule by
The KMT had “cautiously
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.
It was interpreted as a very moderate form of state capitalism.
Towards the latter part of the 1950’s,
dramatic changes in the economic makeup of
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. 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. The middle-class is generally more educated consisting of professionals, white-collar employees, small-business people, intellectuals, and students. 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.
economically developed middle-class eventually emerged in
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. 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. Since
the 1980’s, various social movements have been rapidly on the rise, and have
become increasingly active, in
labor has always been a leading agent for democratization, as well as an
important element in the emergence of a civil society.
It is a means by which people of similar economic interests can join and put
forth an agenda. 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
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. 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
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.
Several social movements in particular were ignited as a result of
of the new interests developed within Taiwanese society ultimately manifested
themselves in the form of political opposition parties. And
much of the opposition movement was drawn from the still burgeoning middle-class.
Opposition political parties to the KMT were legalized following the creation
of the Democratic Progressive Party (DPP). Prior
to the setup of the DPP in 1986
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. These groups were connected to intellectual professionals through various social ties, such as school, regional and workplace affiliations. These businesses also provided funds to political activists and even fallback career options, encouraging opposition leaders to pursue riskier political activities.
many years now,
appreciate the effect which
Augosto Pinochet took control in 1973 as the result of a military coup. 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.
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
drastic changes in the economy translated into changes into societal changes that
differed from those that followed the economic liberalization in
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. 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. 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. 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. 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.” 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. 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. Parties excluded from the AD formed their own coalition, the Democratic Popular Movement (MDP). 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.
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.
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.
acts as a buffer between elites, who often times prefer the existing authoritarian
regimes over a government dominated by the influence of poorer classes.
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.
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
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  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. 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.
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. 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.
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 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.
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