Does political democracy enhance human development in developing countries? A cross-national analysis

American Journal of Economics and Sociology, The,  April, 2006  by Ming-Chang Tsai

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I

Introduction

"HUMAN DEVELOPMENT" (HD) HAS BECOME THE NEW BUZZWORD in the development literature during the last quarter-century and is now the professed aim of some prominent development agencies. In the not too distant past, quantitative economic growth was the sole desideratum of developing nations, but "human development" encompasses more than mere material growth. The United Nations Development Program (UNDP), arguably one of the most influential advocates of the new agenda for "quality of growth," has defined HD as "creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests" (UNDP 2001: 9). Sen (1998) elaborates the idea of HD by stressing the increased possibilities for people to lead freer and more fulfilling lives; it is, according to Sen, allowing individuals to "flourish as human beings" (1998: 734). (1) This broader view of development emphasizes opportunity improvement in the dimensions of education, health, and civil participation rather than annual flow of goods and services at market prices (Sen 1996; Streeten 2000; Thomas et al. 2000). Advocates of HD claim that it has the added benefit of generating positive social externalities that can, in turn, help boost economic development. For example, social cohesion, strong civil participation, and more equitable distribution of income are expected to increase with HD (Ranis, Stewart, and Ramirez 2000; Ocampo 2002).

Despite the considerable progress of HD in developing countries (DCs) since the 1950s (Easterlin 2000), vast differences still exist among individual countries. The "globalization" of HD thus can be unsecured on empirical grounds. Why do marked divergences across countries continue to persist? Previous research was conducted to assess the effects on HD of economic modernization (Diener and Diener 1995; Goldstein 1985; Ranis, Stewart, and Ramirez 2000), state influence (London and Williams 1990; Moon and Dixon 1985), and external dependency (Lena and London 1995; London and Williams 1988; Bradshaw, Noonan, Gash, and Sershen 1993; Ragin and Bradshaw 1992). In contrast to these economic and statist approaches, prominent scholars of democracy have proposed that democracy is a critical factor in enhancing the welfare of the general population. As Seymour Lipset (1981: 439) noted, political democracy constitutes "a guarantee that the products of the society will not accumulate in the hands of a few power-holders, and that men may develop and bring up their children without fear of persecution." Democracy is considered a good society in itself, but it is also "a means through which different groups can attain their ends." While the importance of political democracy has been emphasized in theoretical discussions (Leftwich 1996; Lipset 1981), empirical evidence for this thesis nevertheless is insufficient (Ersson and Lane 1996; Hadenius 1992; Lena and London 1993; Przeworski, Alvarez, Cheibub, and Limongi 2000). The relative neglect of the human impact of democracy is all the more perplexing given the growing numbers of democratic countries in contemporary DCs that have constituted a "third wave" of democratization (Huntington 1991).

This study thus conducts a standard cross-national research to empirically test the hypothesis that political democracy improves HD. Compared to previous research designs, this study involves more countries in the analysis, uses a wider variety of HD measures, and compares the impact on HD of recently developed democracy measures with that of economic and government factors in DCs.

II

Theoretical Arguments Regarding Democracy and Human Development

Democratic Encompassing, Political Contention, and Human Development

THE LITERATURE HAS PROPOSED THE HYPOTHESIS that political democracies influence HD. From the resources redistributive perspective, it is frequently argued that when the general population is allowed to vote, the government tends to redistribute public resources toward the consumption of the general population. That is, low-paid workers and the poor are more likely to benefit from a government that "responds." In perhaps the most authoritative definition of democracy, Lipset (1981: 27) defines democracy as "a political system which supplies regular constitutional opportunities for changing the governing officials, and a social mechanism which permits the largest possible part of the population to influence major decisions by choosing among contenders for political office." In this political system, majority rule allows the general population to exert its political influence, and consequently to enhance its social and economic welfare. The accountability of the government to the people derives from a power distribution structure that tilts favorably toward the masses.

The late Mancur Olson (2000) provided a different yet provocative rational-choice explanation of the relationship between democracy and development. Contrasting with Lipset's focus on civil participation in a democracy, Olson contended that a democracy tends to constrain the redistributional behavior of the ruling group. Because public resources (as well as the income difference between the ruling majority and the ruled minority) are maintained by collecting more taxes, the dominant majority in a democracy tends to "limit the dead-weight losses it imposes on society because it bears a substantial proportion of these losses" (McGuire and Olsen 1996: 86). Since the individual rights of the members among the majority (not exclusively the working class) are asserted in the first place, the state necessarily refrains from capturing enormous returns in the markets (Olson 2000: 192). In contrast, an autocracy, namely, government by an absolute ruler or a small elite, has an incentive to adopt a very short-term perspective and limit redistribution to itself. A democracy generally outperforms nondemocratic regimes and improves the welfare of the general population by protecting individual rights and avoiding monopoly power, rather than by redistributing public goods and enforcing social equity as a desirable social order (Olson 1982).