To illustrate the point in more detail, it is worth considering the experience of Europe in the first half of the twentieth century. In 1918 the American president Woodrow Wilson declared: ‘Democracy seems about universally to prevail…. The spread of democratic institutions … promise[s] to reduce politics to a single form … by reducing all forms of government to Democracy.’51 As Figure 33 shows, Wilson’s optimism seemed well-founded between 1916 and 1922, during which time the average democracy score in Europe more than doubled. But thereafter it began to slide downwards, touching 5.7 out of 10 in 1931, 4.6 in 1938, and a nadir of 1.9 during the Second World War. Of the 29 countries covered, nearly all had acquired some form of representative government before, during or after the First World War. Yet six had become dictatorships by 1925; a further four by 1930; six by 1935 and eight by 1940. Russia, of course, was first to go when the Bolsheviks shut up the National Assembly in 1918. In Hungary the franchise was restricted as early as 1920 and Gömbös’s presidency (1932–6) was to all intents and purposes a dictatorship. Mussolini seized power in Italy with the approval of the king and the army in 1922. In Turkey Kemal established what was effectively a one-party state in 1923. A coup in Lithuania imposed authoritarian rule under Smetona and Voldemaras in 1926; while Pilsudski set up a military dictatorship in Poland. Zogu installed himself as king of Albania in 1928; Salazar came to power in Portugal in 1932; and Dollfuss took control of Austria in 1933 – the same year that another Austrian became Chancellor of Germany. In Latvia an authoritarian regime was established under Kviesis in 1932–4; much the same happened in Estonia under Päts. In Bulgaria an army coup in 1934 was followed a year later by a royal dictatorship under Boris III; meanwhile in Greece a republican coup attempt in 1934 was the prelude to the royally sponsored dictatorship established by Metaxas two years later. Romania too slid into royal dictatorship under Carol II in 1938. In Yugoslavia King Alexander staged a coup in 1929, restored parliamentarism in 1931 and was assassinated in 1934. In Spain there was a constitutional monarchy from 1917 until 1923, then a military dictatorship under Primo de Rivera until 1930, then a highly unstable republic, civil war and finally Franco’s dictatorship. In those few countries where democracy survived, invasion by Germany, Russia or Italy had snuffed it out by 1940. The exceptions were Britain and the neutrals Eire, Sweden and Switzerland.
Table 21. Average democracy score per country, by regions, 1800–1998
Source: Polity III database.
Figure 33. The average democracy ‘score’ for 29 European countries, 1900–1950
Source: Polity III database.
Viewed in a longer-term perspective, then, there has been no rule of natural progression from autocracy to democracy. It is only legitimate to speak of ‘a long-term progressive evolution of human political institutions in the direction of liberal democracy’ if by ‘long-term’ we mean the last twenty-six years. To some, of course, that seems a long time. By a strange irony, it was the Portuguese premier Antonio Gutteres who orchestrated, as chair of the European Union, the diplomatic sanctions against Austria following the formation of a coalition government including the Freedom Party in January 2000. Portugal was, of course, the last West European state to embrace democracy – in 1974, exactly twenty-six years earlier.52
An optimist might retort that the long run really means the last two and a quarter centuries since the American Revolution. But that period has been characterized by too many extreme dips to justify confidence in an unstoppable progressive trend. Indeed, given the vastly enhanced capabilities of the modern state to interfere in the lives of individual citizens, it might even be argued that there is somewhat less liberty in the Anglo-American world than there was at the turn of the last century. That, of course, had been Tocqueville’s fear. Only by redefining liberty to encompass such notions as ‘freedom from unemployment’ or ‘freedom from relative poverty’ can justifications be devised for the diminution of liberty in its classical sense.
DEMOCRACY AND PROSPERITY
At first sight, Francis Fukuyama’s claim that democracy and economic growth are positively correlated might seem self-evident. In economic terms, the triumph of democracy is even more impressive than any measure previously considered. Democracies today account for a huge proportion of the world’s wealth. The world’s fifty biggest economies have an average democracy score (using the Polity III measure) of 8.8. Of these, the democracies scoring 10 account for almost exactly three-quarters of world GNP; and that proportion would rise above 80 per cent if all countries scoring 10 were included.53 The Freedom House statistics also seem to bear out the idea that democracy and economic prosperity go hand in hand. Interestingly, Karatnycky echoes Fukuyama’s emphasis on ‘the links between economic freedom and political freedom’:
Not only does economic freedom help establish the conditions for political freedom by promoting the growth of prosperous middle and working classes, but successful market economies appear to require political freedom as a barrier against economic cronyism, rent seeking, and other anticompetitive and inefficient practices. Open and democratically accountable societies and economies have also shown them selves capable of weathering economic setbacks …54
There are, in fact, two distinct propositions here: the first, that economic growth leads to democratization; the second, reversing the direction of causation, that democratization promotes economic growth.
The first proposition is much the less controversial. Numerous studies based on different samples and periods have identified strong statistical links between economic development – to be precise, per capita income – and democracy. A certain level of prosperity, it is generally argued, is one of the ‘social requisites’ of democracy. In 1959 the American political scientist Seymour Martin Lipset pointed out the correlation between democracy and wealth, industrialization, urbanization and education.55 Lipset was careful to avoid a crude determinism: his findings, he insisted, did ‘not justify the optimistic liberal’s hope that an increase in wealth, in the size of the middle class [and] in education … will necessarily mean the spread … or the stabilizing of democracy’.56 In his view, the legitimacy of democratic institutions depended as much on the cultural setting, the development of civil society and a country’s past (especially colonial) experience, as on economic performance.57 However, subsequent research has tended to play down these other factors.58 A characteristic determinist conclusion is that ‘a democracy can be expected to last an average of about 8.5 years in a country with per-capita income under $1,000 per annum, 16 years in one with income between $1,000 and $2,000, 33 years between $2,000 and $4,000, and 100 years between $4,000 and $6,000…. Above $6,000, democracies are impregnable … [they are]certain to survive, come hell or high water.’59
The most sophisticated analysis to date of the relationship between democracy and living standards concludes that there is indeed ‘a strong positive linkage from prosperity to the propensity to experience democracy’. The economist Robert Barro’s analysis of data from around a hundred countries between 1960 and 1990 suggests that various measures of living standards (real per capita GDP, life expectancy, and the size of the gap between male and female educational attainment) do indeed stimulate the development of democratic institutions.60 In an ambitious study which focuses on the rate rather than the level of growth, Benjamin Friedman too argues that ‘the link … between rising living standards and an open democratic society’ holds good. According to his version of the rule, ‘a society is more likely to become more open and tolerant and democratic when its citizens’ standard of living is rising, and to move in the opposite direction when living standards stagnate’.61
Yet there are many exceptions to challenge this apparent historical law. The events of the 1990s provided a salutary reminder that quite economically advanced societies can turn away from liberal democracy. Fifteen years ago Yugoslavia appeared economically better placed than most East European countries; yet democracy has fared worse there than in almost a
ny other post-Communist country. Moreover, it was chronic economic stagnation, not growth, that led to the democratization in most of the Soviet bloc after 1989. Conversely, China has experienced extremely rapid economic growth in the past decade and a half; yet there is little sign so far that its gerontocracy will relax its grip on political power. The same goes for Singapore. Conversely, the success of democracy in poor countries like Papua New Guinea and Sri Lanka seems to defy the determinist model.62 Nor is it easy to explain the crisis of democracy in relatively prosperous Latin American countries like Argentina, Chile and Uruguay in the 1960s and 1970s.
One possible explanation for some of these anomalies is that ‘the strain flowing from economic growth may undermine democratic stability’.63 Though the data are problematic, it may also be that the increased inequality initially caused by rapid development tends to undermine democratic institutions.64 This point can be reinforced by comparing the Freedom House Survey with some other cross-country data. An analysis of a sample of fifty-nine countries reveals a striking absence of the alleged positive correlation between liberal democracy and growth. On the contrary, for the period 1990–1997 there was a positive relationship between lack of political freedom and growth.65 Or consider the long-run development of total factor productivity in the British, American and German economies. Both Germany and the United States outstripped the United Kingdom in the twentieth century; but it would be less than easy to tell from the available data that one of the two had spent only the period 1919–33 and 1947 to the present under democratic forms of government.66
Perhaps the most that can be said is that major economic crises such as high inflation and depression can undermine representative institutions, especially when these are of comparatively recent origin.67 The tendency for economic losers to blame liberal policies for their troubles and to vote for equality and even dictatorship in preference to democracy is well documented. Indeed, it is typically argued that ‘the immediate effect of the economic crisis in Europe was to increase domestic political and social tensions, to bring Hitler to power in Germany and to encourage the development of fascist movements elsewhere’.68 Yet there are problems even here. Figures 34 and 35 present the available figures for real growth of national product for two groups of European countries: those that successfully sustained democratic institutions throughout the inter-war period; and those that failed to do so (‘dictatorships’ for short). It will be immediately apparent that there is no significant difference in economic performance between the two groups. To take two specific examples, the Depression was only slightly worse in Germany, where democracy failed, than in the Netherlands, where it did not. Moreover, as the figures in Appendix E show, there is simply no correlation between the severity of the Great Depression (measured in terms of the decline in real GNP from peak to trough) and the ease with which dictatorships were established in the 1930s; if there had been, then Czechoslovakia and France would also have turned fascist in, respectively, 1935 and 1936.69 In any case, in eight of the fourteen dictatorships democracy failed before 1928. Nor, indeed, is it possible to identify any straightforward correlation between an economic or socio-economic indicator and the durability of democracy in the period. Neither the proportion of the population in education nor the relative size of the armed forces – to take two examples – bear any relationship to the political stability of the countries in the sample. The only faint statistical correlation is that the more urban a society was, the more likely democracy was to endure. The problem with this statistical finding is that two of the ‘outliers’ were none other than Germany and Austria, which were second only to Britain in the relative size of their urban populations.
Figure 34. Real national product indices for European democracies, 1919–1939 (1927 = 100)
Sources: Lethbridge, ‘National Income’, pp. 542, 555, 571, 575, 582, 592; Flora et al., State, Economy and Society, vol. ii, pp. 370–400; Mitchell, European Historical Statistics, pp. 409–16.
Figure 35. Real national product indices for European ‘dictatorships’, 1919–1939 (1927 = 100)
Sources: As for Figure 34.
Similar anomalies arise when one considers the relationship between economic crisis and democracy in other periods and settings. Economic crises may have been responsible for the failures of Latin-American democracy in the mid-1960s; but democracy in the region survived the debt crisis of the 1980s and the financial crises of the 1990s. High inflation appears to have increased the likelihood of democratic breakdown from 1950 until the mid-1970s, but not in the 1980s.70
What of the converse proposition that democracy is good for economic growth? It ought by now to be uncontroversial that the undemocratic socialist regimes of the post-1917 period failed in the long run to generate sustainable growth compared with their declared democratic capitalist foes. Even the long-cherished belief of Marxists like Eric Hobsbawm that Stalin’s policies of forced collectivization and industrial planning were necessary to modernize the Russian economy can hardly be sustained when the human cost is set alongside the contemporaneous increases in physical output. To put it brutally, for every nineteen tons of steel produced under Stalin, at least one Soviet citizen died as a result of man-made famine, deportation, incarceration in the gulag or execution.71 The evidence is compelling that the Communist system was so wasteful of resources and so perverse in its incentive structure as ultimately to be self-destructive. According to one recent estimate, allowing for new investment and human capital, Soviet growth was ‘the worst in the world’ between 1960 and 1989.72
However, when the comparison is extended to include non-socialist autocracies, the evidence from a multitude of empirical studies is ambiguous to say the least.73 It was not only the democratic states of Western Europe that grew faster than those of Communist Eastern Europe between 1950 and 1989; it was also countries like Greece, Portugal and Spain, which were undemocratic for much of the period.
One possibility is that democracy is not in fact a crucial determinant of economic success. According to Barro, the key contributions a government can make towards growth are:
1. providing or encouraging the provision of secondary and higher education;
2. providing or encouraging the provision of effective health care, since there is a correlation between growth and life expectancy;
3. promoting birth control;
4. avoiding ‘non-productive government expenditure’, since ‘big government is bad for growth’;
5. enforcing the rule of law;
6.keeping inflation below around 10 per cent per annum.
This conclusion is echoed in The Wealth and Poverty of Nations by David Landes, who suggests that ‘the ideal growth-and-development’ government would:
1. secure rights of private property, the better to encourage saving and investment;
2. secure rights of personal liberty … against both the abuses of tyranny and … crime and corruption;
3. enforce rights of contract …
4. provide stable government … governed by publicly known rules …
5. provide responsive government …
6. provide honest government … [with] no rents to favour and position;
7. provide moderate, efficient, ungreedy government … to hold taxes down [and] reduce the government’s claim on the social surplus …74
(Suprisingly, Landes omits the provision of good education.) But both he and Barro agree that such an ideal government need ‘not necessarily [be] democratic’. The latter’s figures show that the fact of a government’s being democratically elected is statistically insignificant as a determinant of growth. In other words, both sets of growth-promoting policies could be delivered as readily by a non-democratic as by a democratic government. Barro himself cites a number of examples of growth-promoting dictatorships: the Pinochet government in Chile, the Fujimori administration in Peru, the Shah’s regime in Iran, as well as the now familiar Asian examples.75 It is also worth recalling that most developed econom
ies experienced their industrial revolution some time before they enacted universal suffrage.76
On closer inspection, there are no hard and fast rules linking democracy and growth. Clearly some dictatorships (‘right wing’ or ‘technocratic’ ones) do deliver high growth, while others (‘populist’ or ‘kleptocratic’ ones) do not.77 The relationship between democracy and growth, on the other hand, appears to be non-linear: graphically represented, it is shaped like an inverted U. Democratization is initially beneficial to growth – up to a point roughly halfway along Barro’s scale – but thereafter the relationship appears to turn negative.78 In short, democracy is not ‘a critical determinant of growth’:
At low levels of political rights, an expansion of these rights stimulates economic growth. However, once a moderate amount of democracy has been attained, a further expansion reduces growth. A possible interpretation is that, in extreme dictatorships, an increase in political rights tends to raise growth because the limitation on governmental authority is critical. However, in places that have already achieved some political rights, further democratization may retard growth because of the heightened concern with social programs and income redistribution.79
This is a crucial caveat.
To the historian, Barro’s finding is not surprising. The inter-war period furnishes a number of striking examples of new democracies pursuing disastrous economic policies. Indeed, the real significance of the inter-war failure of democracy in Europe may lie here. It has been argued that it was the combination of proportional representation and deep economic divisions that produced the most severe policy failures (such as hyper-inflation) after the First World War.80 In fact, the evidence suggests that more or less any form of democracy failed to deliver sustained growth in the 1920s because of conflicts between fiscal and monetary policy, the former in the hands of universal suffrage parliaments, the latter still largely controlled by financial élites. And the point is not simply that ‘democracies that arise without prior economic development … tend not to last’.81 Germany, Austria and Italy were economically far advanced by 1919, with relatively high levels of per capita income.
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