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Elisabeth Woodcock examines the structures that underpins democracy and questions whether it is truly representative at all levels.
As countries throughout the world continue to strive for greater prosperity, democracy has been widely recognised as a means of improving both gross domestic product (GDP) and human development index (HDI). In 2019, 9/10 of countries that were ranked in the global top 10 for GDP, were democratic or of some democratic persuasion. This statistic not only highlights the direct relationship between democracy and prosperity, it further serves to inform and influence less prosperous countries of the powers created by democratic political systems to enable them to prosper.
Since the 1970s, over 90 nations have made progress towards a democratic system, including Ukraine, Georgia, Lebanon and Kyrgyzstan. However, very few of these states have seen improvements in prosperity levels, giving rise to the question: Is democracy truly the key to success?
An inclusive and holistic definition of state prosperity must firstly be established before democracy can be analysed as a means of achieving prosperity. Whilst Gross Domestic Product (GDP), is one measure, it fails to value factors such as volunteer work, childcare, elderly care, and leisure. These values are considered vital to a state’s quality of life.
Therefore, the Human Development Index (HDI) must be equally considered as a transparent means of measuring life expectancy, education, and living standards. HDI rankings are described as a “matter for governments, [have raised] the profile of important issues and [have been] used to guide policies.” A high HDI is therefore instrumental to a country’s prosperity.
Interestingly, the country of Bhutan has been proactive in implementing a modern means of measuring prosperity; Gross National Happiness (GNH). GNH focuses on the psychological wellbeing of the state through policy making that reflects international human rights. Without an evaluation of the ethos and psychological trends of the state, HDI and GDP are meaningless. These measures are therefore equally fundamental to the analysis of state prosperity – not only because they can compensate for one another’s shortcomings, but because they ensure that prosperity is measured through a more holistic lens.
Firstly, nations that are grappling to achieve prosperity cannot rely on the system of democracy due to the inherent flaws within its principles. Although democracy is pivotal to voicing the majority of citizen’s beliefs in governmental policy making, J. S Mill examines that “the will of the most numerous,” is merely, “the opinions of those who succeed in making themselves accepted as the majority.” This exposes the tendency of populous social groups to capitalise on their dominant influence, by persuading or oppressing smaller parties in order to achieve a desired political outcome.
These concepts are not new. The ramifications of democracy were first examined by Plato who, in his search for the ideal state, rejected Athenian democracy due to the belief that such governance is anarchic, following citizens’ impulses, rather than pursuing a more common good. Indeed, dominant social and political parties can significantly impact political campaigns and policies, as individual politicians and policymakers obey these parties’ mantra to maximise their personal popularity.
In turn, this can lead to the potential for over-populism and a consequential demagoguery. For example, after two alleged murderers received bail in NSW in 2013, mass media outcry and social criticisms led to a “knee-jerk reaction” in the policies of the criminal justice system. Amendments under the Bail Act 2014 (NSW) s 20(1) now mandate that, in order to receive bail, the accused must prove that they do not pose an unacceptable risk to society.
Not only is this reform ignorant to the ‘presumption of innocence’ under the rule of law, but it also highlights that without control, democratic principles (freedom of speech and media influence) allow excessive power to rest in the hands of certain citizens, who are arguably less informed of the strategies necessary for prosperity in HDI.
Secondly, democracy cannot lead to greater prosperity unless changes are also implemented economically. The adoption of inclusive economic institutions advances equitable opportunities for market participants by ensuring that property rights are enforced and by encouraging investment in growth technology. As a result, it is said that, “inclusive economic institutions are supported by, and support, inclusive political institutions (democracy).” In turn, these political institutions are able to create law and order and meanwhile facilitate an advantageous and all-encompassing market economy.
This chain of events not only leads to prosperity in GDP terms, as individuals are encouraged to participate in the economy, but also leads to prosperity in HDI, because enhanced law and order assists in developing fundamental measures, such as education. Inclusive economies are also underestimated as a measure of achieving high GNH, as thriving economies lead to higher employment, leading to individual routine within society and therefore satisfaction among citizens.
But what about countries like China, who are undemocratic, do not have an inclusive economy, yet whose GDP has risen exponentially since 2000? Extractive economies such as China are heavily reliant on the extraction of natural resources and fail to incentivise domestic economic involvement. Extractive institutions permit the concentration of political power – the opposite of democracy, whereby only those who influence economic participation are able to enjoy the benefits.
In China, the dominance of state-owned enterprises (especially state-owned banks), crowds out private sector development, and individual businesspersons are unlikely to engage in broad economic activity or create a market without support from local party cadres or Beijing. As a result of this tendency towards an extractive economy, China grapples to shift away from centralised political power and towards more inclusive institutions.
Despite Chinese economic institutions becoming more inclusive, as they transition toward a consumer-led market economy, their growth under authoritarian and extractive political institutions means this short-term prosperity in GDP and HDI will likely not translate into sustained growth that is supported by an inclusive economy. Until additional growth towards more inclusive economic institutions are made, a state’s political principles cannot lead to lasting prosperity.
Thirdly, without the effective implementation of democratic principles, developing states cannot progress toward greater prosperity. Prosperous Western states and international organisations often attempt to guide developing states towards democracy by informing them on how to ‘engineer prosperity’ via economic change. Acemoglu and Robinson’s (2012) ‘Ignorance Hypothesis,’ summarises the underlying reasoning behind such intentions: if ignorance has led developing states to incomplete prosperity, then informing rulers and policymakers of ‘what is good economics,’ can engineer prosperity.
However, such efforts often fail to contextualise and tailor recommendations to best suit the state. Consequently, recommended policies are often not adopted or are implemented in name only, as proven by both Colombia and Argentina. Since adhering to the IMF’s advice and transitioning to an independent banking system in the 1990s, little growth in prosperity has been achieved due to the lack of government commitment to policies.
Furthermore, whilst inclusive political institutions (which support and are supported by inclusive economies) have led to prosperity in Western countries, it is often ineffective to encourage developing states to adopt these measures. “The small market failures in developing countries may only be the tip of the iceberg in a state of deeper-rooted problems,” wherein policy makers are reluctant to grapple with the underlying institutional causes of poverty.
Therefore, imposing Westernised ideologies of inclusive economies often limits a state’s prosperity, even if in an attempt to effectively implement democracy. As such, these measures fail to consider the context and underlying needs of the developing state.
Therefore, contrary to certain statistics which often highlight the belief that democracy is the pathway to prosperity, this structure cannot be relied upon as a universal approach for success. There are underlying shortcomings inherent to democracy and additional reforms are required in order to achieve true prosperity. Further, the implementation of such reforms, through the influence of Westernised recommendations, can misinform and mislead states from their goals of greater prosperity.
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