Why We May Be Richer than We Deserve to Be

Sometimes the value of democracy is discussed in terms of economic gains and losses. With (representative) democracy – the story goes – we get certain freedoms that, for instance, facilitate innovation, which, in turn, helps economic development. I have heard some claim that the lack of democracy in China places some limits on how much their economy can grow, since their system makes it easy for them to copy ideas and produce stuff on the basis of those ideas, but hard to come up with new ideas, due to the habit of deferring to authority (intellectual as well as political authority).

On the other hand, some claim that democracy must not be taken too far, because that, too, can hamper the economy. This was a common complaint in the 1970s and 1980s from right wing groups who complained of an “excess” of democracy, whereby too many “special interests” fight in the democratic arena to get a piece of the pie, without thinking about long-term financial stability (or about the plight of traditional elites). On the international level, this has often meant the support by Western countries of authoritarian regimes in the rest of the world, since democratic developments might mean land reforms in favor of the poor, and the like.

There is no need to decide the question about correlations between democracy and economic growth here. But it is probably safe to say that if a democratic system had been in place in the major European countries (including England) in, say, the 18th century, then the industrial revolution would probably have been retarded. People, and especially people in those days, are often rather conservative when it comes to changing their way of life – something which was probably necessary to get the industrial revolution going, and which was achieved by, for instance, privatizing the commons and creating a class of landless paupers. And if we add the fact that the gains of the industrial revolution took a long time to trickle down to ordinary people, I think it is safe to say that under a democratic system the voters would not have taken such chances lightly.

The conclusion seems to be that if democracy had prevailed earlier, and if the democratic culture had been more pervasive and participatory than what would in fact be the case later on, we would probably – or at least possibly – be poorer (i.e., having a lower GDP than today) in the industrialized world than we are today (add to this the gains of colonialism, slave trade, etc. – phenomena that would have taken place to a lesser degree under participatory democratic rule). However, this conclusion should not make us shy away from the idea of democracy, and of a more participatory democratic culture. If it is the case that “too much democracy” slows down economic growth or the material standard of living, then we should simply bite the bullet and accept lower economic growth and standard of living. (If it is not the case, then so much the better, obviously.)

Now, the discussion so far has been riddled with caveats relating to the difficulty of establishing correlations between economic parameters and democratic rule. There is, however, one thing that we can be relatively sure of: with a fuller democracy than what prevails today, it would probably be harder for the economic and political elites to be as rich and powerful as they are today, and that is something we should welcome, even if it would mean a somewhat lower GDP (a somewhat lower GDP would not make us less happy, provided that economic policies are designed in a reasonable manner).


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