Economic Origins of Dictatorship and Democracy
Page 1
Table of Contents
ECONOMIC ORIGINS OF DICTATORSHIP AND DEMOCRACY
Title Page
Copyright Page
Dedication
Preface
PART ONE. - QUESTIONS AND ANSWERS
Chapter 1 - Paths of Political Development
1. Britain
2. Argentina
3. Singapore
4. South Africa
5. The Agenda
Chapter 2 - Our Argument
1. Democracy versus Nondemocracy
2. Building Blocks of Our Approach
3. Toward Our Basic Story
4. Our Theory of Democratization
5. Democratic Consolidation
6. Determinants of Democracy
7. Political Identities and the Nature of Conflict
8. Democracy in a Picture
9. Overview of the Book
Chapter 3 - What Do We Know about Democracy?
1. Measuring Democracy
2. Patterns of Democracy
3. Democracy, Inequality, and Redistribution
4. Crises and Democracy
5. Social Unrest and Democratization
6. The Literature
7. Our Contribution
PART TWO. - MODELING POLITICS
Chapter 4 - Democratic Politics
1. Introduction
2. Aggregating Individual Preferences
3. Single-Peaked Preferences and the Median Voter Theorem
4. Our Workhorse Models
5. Democracy and Political Equality
6. Conclusion
Chapter 5 - Nondemocratic Politics
1. Introduction
2. Power and Constraints in Nondemocratic Politics
3. Modeling Preferences and Constraints in Nondemocracies
4. Commitment Problems
5. A Simple Game of Promises
6. A Dynamic Model
7. Incentive-Compatible Promises
8. Conclusion
PART THREE. - THE CREATION AND CONSOLIDATION OF DEMOCRACY
Chapter 6 - Democratization
1. Introduction
2. The Role of Political Institutions
3. Preferences over Political Institutions
4. Political Power and Institutions
5. A Static Model of Democratization
6. Democratization or Repression?
7. A Dynamic Model of Democratization
8. Subgame Perfect Equilibria
9. Alternative Political Identities
10. Targeted Transfers
11. Power of the Elites in Democracy
12. Ideological Preferences over Regimes
13. Democratization in a Picture
14. Equilibrium Revolutions
15. Conclusion
Chapter 7 - Coups and Consolidation
1. Introduction
2. Incentives for Coups
3. A Static Model of Coups
4. A Dynamic Model of the Creation and Consolidation of Democracy
5. Alternative Political Identities
6. Targeted Transfers
7. Power in Democracy and Coups
8. Consolidation in a Picture
9. Defensive Coups
10. Conclusion
PART FOUR. - PUTTING THE MODELS TO WORK
Chapter 8 - The Role of the Middle Class
1. Introduction
2. The Three-Class Model
3. Emergence of Partial Democracy
4. From Partial to Full Democracy
5. Repression: The Middle Class as a Buffer
6. Repression: Softliners versus Hardliners
7. The Role of the Middle Class in Consolidating Democracy
8. Conclusion
Chapter 9 - Economic Structure and Democracy
1. Introduction
2. Economic Structure and Income Distribution
3. Political Conflict
4. Capital, Land, and the Transition to Democracy
5. Costs of Coup on Capital and Land
6. Capital, Land, and the Burden of Democracy
7. Conflict between Landowners and Industrialists
8. Industrialists, Landowners, and Democracy in Practice
9. Economic Institutions
10. Human Capital
11. Conjectures about Political Development
12. Conclusion
Chapter 10 - Globalization and Democracy
1. Introduction
2. A Model of an Open Economy
3. Political Conflict - Democratic Consolidation
4. Political Conflict - Transition to Democracy
5. Financial Integration
6. Increased Political Integration
7. Alternative Assumptions about the Nature of International Trade
8. Conclusion
PART FIVE. - CONCLUSIONS AND THE FUTURE OF DEMOCRACY
Chapter 11 - Conclusions and the Future of Democracy
1. Paths of Political Development Revisited
2. Extensions and Areas for Future Research
3. The Future of Democracy
PART SIX. - APPENDIX
12 Appendix to Chapter 4: The Distribution of Power in Democracy
1. Introduction
2. Probabilistic Voting Models
3. Lobbying
4. Partisan Politics and Political Capture
Bibliography
Index
ECONOMIC ORIGINS OF DICTATORSHIP AND DEMOCRACY
This book develops a framework for analyzing the creation and consolidation of democracy. Different social groups prefer different political institutions because of the way they allocate political power and resources. Thus, democracy is preferred by the majority of citizens but opposed by elites. Dictatorship, nevertheless, is not stable when citizens can threaten social disorder and revolution. In response, when the costs of repression are sufficiently high and promises of concessions are not credible, elites may be forced to create democracy. By democratizing, elites credibily transfer political power to the citizens, ensuring social stability. Democracy consolidates when elites do not have a strong incentive to overthrow it. These processes depend on (1) the strength of civil society, (2) the structure of political institutions, (3) the nature of political and economic crises, (4) the level of economic inequality, (5) the structure of the economy, and (6) the form and extent of globalization.
Daron Acemoglu is Charles P. Kindleberger Professor of Applied Economics in the Department of Economics at the Massachusetts Institute of Technology and a member of the Economic Growth Program of the Canadian Institute for Advanced Research. He is also affiliated with the National Bureau of Economic Research, Center for Economic Performance, and Centre for Economic Policy Research and is a Fellow of the European Economic Association. Professor Acemoglu previously taught at the London School of Economics. He received the award for best paper published in the Economic Journal in 1996 for his paper “Consumer Confidence and Rational Expectations : Are Agents’ Beliefs Consistent with the Theory?”, the inaugural T. W. Shultz Prize at the University of Chicago in 2004, and the inaugural Sherwin Rosen Award for outstanding contribution to labor economics in 2004. Professor Acemoglu is editor of the eminent journal Review of Economics and Statistics and associate editor of the Journal of Economic Growth. He is the recipient of the 2005 John Bates Clark Medal from the American Economic Association, awarded to the most outstanding economist working in the United States under age 40.
James A. Robinson is Professor of Government at Harvard University. He previously taught at the University of California, Berkeley, the Unive
rsity of Southern California, and the University of Melbourne. He is a member of the Economic Growth Program of the Canadian Institute for Advanced Research and affiliated with the Centre for Economic Policy Research. A 2002 Carnegie Scholar and a 1999-2000 Hoover Institution Fellow, his research has been published in leading journals such as the Quarterly Journal of Economics, American Economic Review, American Political Science Review, and Journal of Economic Literature. Professor Robinson is on the editorial board of World Politics. Together with Professors Daron Acemoglu and Simon Johnson, Professor Robinson is coauthor of the forthcoming book, The Institutional Roots of Prosperity.
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© Daron Acemoglu and James A. Robinson 2006
This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press.
First published 2006
Printed in the United States of America
A catalog record for this publication is available from the British Library.
Library of Congress Cataloging in Publication Data
Acemoglu, Daron.
Economic origins of dictatorship and democracy / Daron Acemoglu, James A. Robinson.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-521-85526-6 (hardback)
ISBN-10: 0-521-85526-8 (hardback)
1. Democracy-Economic aspects. 2. Democratization. 3. Equality.
4. Political culture. 5. Dictatorship. 6. Comparative government.
I. Robinson, James A., 1960- II. Title.
JC423.A248 2005
321.8 - dc22 2005011262
ISBN-13 978-0-521-85526-6 hardback
ISBN-10 0-521-85526-8 hardback
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To the memory of my parents, Kevork and Irma, who invested so much in me. To my love, Asu, who has been my inspiration and companion throughout.
Daron Acemoglu
To the memory of my mother, from whom I inherited my passion for books and my indignation at the injustices of this life. To the memory of my father, from whom I inherited my fascination for science and my curiosity about this extraordinary world.
James A. Robinson
Preface
A fundamental question in political science and political economy is which factors determine the institutions of collective decision making (i.e., the “political institutions”). In tackling this question, a natural initial distinction is between democratic and nondemocratic institutions. Why is it that some countries are democracies, where there are regular and free elections and politicians are accountable to citizens, whereas other countries are not?
There are a number of salient empirical patterns and puzzles relevant to answering this question. For instance, while the United States moved very early toward universal white male suffrage, which was attained by the early 1820s by northern and western states and by the late 1840s for all states in the Union, such a pattern was not universal in the Americas. Elsewhere, republican institutions with regular elections were the norm after countries gained independence from colonial powers such as Spain and Portugal, but suffrage restrictions and electoral corruption were much more important. The first Latin American countries to implement effective, relatively noncorrupt universal male suffrage were Argentina and Uruguay in 1912 and 1919, respectively, but others, such as El Salvador and Paraguay, did not do so until the 1990s - almost a century and a half after the United States.
Not only is there great variation in the timing of democratization, there also are significant qualitative differences in the form that political development took. Democracy was created, at least for white males, with relatively little conflict in the United States and some Latin America countries, such as Costa Rica. In other places, however, democracy was often strenuously opposed and political elites instead engaged in mass repression to avoid having to share political power. In some cases, such as El Salvador, repression was ultimately abandoned and elites conceded democracy. In others, such as Cuba and Nicaragua, elites fought to the bitter end and were swept away by revolutions.
Once created, democracy does not necessarily consolidate. Although the United States experienced a gradual movement toward democracy with no reverses, a pattern shared by many Western European countries such as Britain and Sweden, democracy in other countries fell to coups. Argentina is perhaps the most extreme example of this: the political regime switched backwards and forwards between democracy and nondemocracy throughout most of the twentieth century.
What determines whether a country is a democracy? Which factors can explain the patterns of democratization we observe? Why did the United States attain universal male suffrage more than a century before many Latin American countries? Why, once created, did democracy persist and consolidate in some countries, such as Britain, Sweden, and the United States, and collapse in others, such as Argentina, Brazil, and Chile?
In this book, we propose a framework for analyzing the creation and consolidation of democracy that we use to provide tentative answers to some of these questions.
The framework has the following three fundamental building blocks:
1. Our approach is “economic-based” in the sense that we stress individual economic incentives as determining political attitudes, and we assume people behave strategically in the sense of game theory.
2. We emphasize the fundamental importance of conflict. Different groups, sometimes social classes, have opposing interests over political outcomes, and these translate into opposing interests over the form of political institutions, which determine the political outcomes.
3. Political institutions play a central role in solving problems of commitment by affecting the future distribution of dejure political power.
To starkly illustrate our framework, consider a society in which there are two groups: an elite and the citizens. Nondemocracy is rule by the elite; democracy is rule by the more numerous groups who constitute the majority - in this case, the citizens. In nondemocracy, the elite get the policies it wants; in democracy, the citizens have more power to get what they want. Because the elite loses under democracy, it naturally has an incentive to oppose or subvert it; yet, most democracies arise when they are created by the elite.
Why does a nondemocratic elite ever democratize? Since democracy will bring a shift of power in favor of the citizens, why would the elite ever create such a set of institutions? We argue that this only occurs because the disenfranchised citizens can threaten the elite and force it to make concessions. These threats can take the form of strikes, demonstrations, riots, and - in the limit - a revolution. Because these actions impose costs on the elite, it will try to prevent them. It can do so by making concessions, by using repression to stop social unrest and revolution, or by giving away its political power and democratizing. Nevertheless, repression is often sufficiently costly that it is not an attractive option for elites. Concessions may take several forms - particularly policies that are preferred by the citizens, such as asset or income redistribution - and are likely to be less costly for the elite than conceding democracy.
The key to the emergence of democracy is the observation that because policy concessions keep political power in the hands of the elite, there is no guarantee that it will not renege on its promises.
Imagine that there is a relatively transitory situation in which it is advantageous for the citizens to contest power. Such a situation may arise because of wars or shocks to the economy, such as a harvest failure, a collapse in the terms of trade, or a depression. If repression is too costly, the elite would like to buy off the citizens with promises of policy concessions - for example, income redistribution. However, by its very nature, the window of opportunity for contesting power is transitory and will disappear in the future, and it will be relatively easy for the elite to renege on any promises it makes. Anticipating this, the citizens may be unsatisfied with the offer of policy concessions under unchanged political institutions and may choose to revolt.
In our framework, the key problem is that the politically powerful cannot necessarily commit to future policy decisions unless they reduce their political power. Democracy then arises as a credible commitment to pro-citizen policies (e.g., high taxation) by transferring political power between groups (from the elite to the citizens). Democratization is more of a credible commitment than mere promises because it is associated with a set of institutions and greater involvement by the citizens and is therefore more difficult to reverse. The elite must democratize - create a credible commitment to future majoritarian policies - if it wishes to avoid more radical outcomes.