Development and democracy: the debate post-crisis

Editor, The Asian Wall Street Journal

Many of you are journalists, so I'm sure you know what I mean when I say that I'm usually more comfortable on your side of the lectern than on this side of it. I'm much more used to skulking somewhere in the back of an auditorium, jotting down notes as people far more knowledgeable than me speak about some topic or another. Of course, by now I know - as I'm sure you do - that sometimes the speakers aren't in fact all that knowledgeable about the topic they're talking about - and I might count right now as one of those occasions.

Speaking of speakers and their knowledge, however, I do recall another occasion, where I was in the back of a packed auditorium, busy taking down notes. The place was Manila, the year 1992, and the speaker Singapore's Senior Minister Lee Kuan Yew.

That was the speech where he famously declared that "contrary to what American political commentators say, I do not believe that democracy necessarily leads to development." The reason, he said, was that democracy's "exuberance" leads to "undisciplined and disorderly conditions" which hamper development.

Now that wasn't the first time such an assertion had been made, of course. But it's not a bad point to mark the time when the democracy versus development debate began in earnest. Along the way it got entangled with the "Asian values" debate - which in some ways it's related to but in other ways it isn't - all the time picking up steam and column inches.

Most of you are well aware of the details of the debate, so I'll keep my recap of the basic background short.

Asia's economic successes obviously gave champions of Mr. Lee's view - let's call them the pro-development side - some basic facts on which to hang their position. They noted that Asia's democracies, such as India and the Philippines, lagged more authoritarian countries in economic progress - evidence, if you like, that democracy did sometimes get in the way of development. At the very least, they said, Asia's amazing growth record over three decades demonstrated that you didn't need democracy to grow, even if it didn't actually get in the way of development.

Of course, there were also many who took the opposite view - let's call them the pro-democracy camp - and the financial crisis of 97-98 gave them ammunition for their argument. The crisis, they said, highlighted the dangers of authoritarian regimes which lacked transparency and checks and balances. And, they said, Asia's new democracies, such as Korea, Taiwan and Thailand, rode the crisis out better than the dictatorships did - evidence, if you like, that democracies were better at handling crises than dictatorships.

Not that that convinced many in the pro-development camp. Their return argument was that China was one of those that weathered the crisis best, and it hardly qualifies as a democracy. And so it went - and goes -a bit like a ping-pong match.

And so the debate continues, unabated. Both sides have very strong views and well-argued positions, and have proven remarkably impervious to facts; Indeed, I have to say I haven't found anyone yet who's been swayed one way or the other by any of the arguments, despite the huge changes of the last decade - boom, crash, recovery - a sign, perhaps, that is clearly a very ideological debate. As with most ideological battles, people take facts selectively to boost their argument; and they rely a great deal on theoretical arguments about human behaviour.

And it generates a lot of emotion. Early last year we gathered all our reporters and editors in Hong Kong to discuss coverage issues. While we had some great discussions over key topics such as restructuring the region's economies and Japan's role in the region, it was the talk about whether the crisis would lead to greater democracy in the region that really got people going. In fact, the discussion got pretty heated, which I suppose is a good thing - it's nice to have a team of reporters who actually care deeply about what they cover.

Still, all that emotion can - and often does - get in the way of better understanding.

It doesn't help, too, that positions shift. Post-crisis, we have people who used to deny the existence of Asian values now blaming the crash on the "Asian values" of cronyism and corruption. And we have people who proclaimed the superiority of Asian ways of doing things now saying they didn't mean to defend the entire system of governance, just the good bits.

So let's take a step back and ask ourselves exactly what this debate is supposed to be about.

To me, it seems, one useful question is ask is, "Does democracy help or hinder development?" That's not the only question to ask, but it seems to be the one most debated about.

Before we can address that issue, we need to define two terms: Democracy and Development.

Democracy means many things to many people. It can mean having some say in picking leaders; it can mean a system of governance that's transparent, response to the populace and somewhat accountable; it can be expanded to encompass a range of institutions and ideas including the rule of law, equality of treatment, and so on. While most of these things come as a package in Western industrialized democracies, they don't necessarily have to anywhere else. Is it possible to have some kind of ability to vote for leaders without having reasonable rule of law? Indonesia and the Philippines sort of have that. Conversely, can you have some kind of accountability, stability, and economic under an authoritarian government? In theory, why not?

Incidentally, as a complete but fascinating aside, I'd draw your attention to an interview that Singapore's George Yeo gave to the Wall Street Journal late last year, in which he raised an interesting new perspective on democracy. He was speaking about changes in the way societies organized themselves, and was asked by his interviewer whether that invalidated the notion of democracy, and one-man one-vote. His reply was interesting. He said democracy would remain, but there were questions about what scale it should be on. In other words, should Acehnese vote for their future, or should Indonesians vote on Aceh's future? Should Thais have a say in how Thailand is governed, or should Asean citizens vote on that? Or should residents of Bangkok be able to veto the wishes of Thais in general in regard to Bangkok?

As I say, it's a complete aside. But I expect this trend of argument to surface in the future, if only because Singapore has tended to be out front in debates such as these.

Anyway, back to development. What does that mean? Higher per capita incomes is one measure, but it's far from being the only one. What about infant mortality rates, life expectancy, income inequality, access to potable water and schooling? And that doesn't even include some of the broader measures we could use, such as environmental quality, opportunities for women, and so on. If you measured a country like Bhutan, for example, purely on per capita income, then I'd be willing to bet it doesn't show a huge improvement over the past decade. But if you look at a statistic like life expectancy, you'll see it's risen 20 years in that period - a real achievement. But again, you can have some measures of development, but not others. They don't always come in a package.

But all these subtleties often get glossed over in the course of what are often very theoretical arguments. To those in the pro-development camp, democracy has intrinsically too many built-in inefficiencies to be the best way to promote development. It takes too long to buid consensus to do painful but necessary measures, the argument goes. Vested interests can scuttle needed reforms. Another argument advanced by this camp is that political freedoms are a desirable long-term goal, but for poor countries and poor people it's an immediate luxury they can't afford, and don't want. Given a choice, this argument goes, a starving man is more interested in food than in the right to vote.

One of the problems with this second argument, of course, is that the starving man is not usually given that choice - the assumption is that his government knows best what he wants, and it's not political freedom. The pro-democracy camp often makes this argument, and they're right. They also argue that democratic governments, because they want to stay in power, have an in-built self-interest in seeing as much economic growth as they can manage. Dictators, they argue, even the benevolent sort, don't have that self-correcting mechanism, and are hence more likely in the long term to work against the interest of their citizens.

That makes some sense in theory, but frankly so does the argument that democracy is inefficient. Luckily there's some body of research on the relationship between democracy and development; unluckily, the consensus isn't terribly clear. In some cases, a positive relationship is detected - meaning that democracy is good for development. In others, a weakly negative relationship is found, meaning that democracy retards development slightly.

For example, Robert Barro, for example, a conservative economist at Harvard, did a comprehensive study of various economies over several decades, and came to the conclusion that some factors did contribute to growth: rule of law, free markets, small government consumption and high human capital. All of those, you might argue, often come with democratic governments. But if you factor those issues out, as Mr. Barro did, and equalize for starting GDP figures, then democracy, meaning narrowly political rights in choosing a government, actually harms development, slightly. I'd stress that this study wasn't a theoretical one - all he did was take data and find statistical correlations.

His evidence also showed that higher levels of prosperity tend to lead to higher levels of democracy; and that countries that have a higher level of democracy than their level of prosperity would allow, so to speak, usually experience a reduction in democratic rights. So if you accept his findings, the good news is that democracy tends to follow growth in prosperity. The bad news is that poor countries that have democracy imposed on them don't usually maintain that level of democracy.

That's one way of looking at it. But there's also some evidence to suggest that democracies are much better at handling some kinds of economic issues than others. Amartya Sen, the Nobel Laureate, notes for example, that one might argue, from various quality of life indices, that people in China are better off than people in India. Chinese people have longer life expectancies, and so on, despite living under an authoritarian government. Indian democracy hasn't served Indians well in this regard.

On the other hand, India has never suffered a famine since gaining independence, while 30 million Chinese died from 1958 to 1961, after the great leap forward. Since famines are usually relatively easy to prevent, the argument he makes is that the greater the distance between the ruler and the ruled - in other words, the less democracy there is - the easier it is for such crises to occur. And indeed, as he points out, no democracy has ever suffered a famine.

Still, if that's right, it's a pretty poor choice in this example – live under an authoritarian regime where you enjoy a better standard of living, but risk a cataclysmic famine every now and then, or live under a stable democracy but at a much lower standard of living.

On the other hand, that's much more the reflection of reality than simple arguments about whether one form of government is more efficient than others, or whether the promotion of democracy should take precedence over the promotion of economic reform, or vice versa. As with most things, this is never really simple. Particular circumstances, people's desires, and so on, are critical inputs into an argument that shouldn't be decided purely on ideological grounds.

But I will suggest that there is a place for some ideology here. I said earlier that there is another way to look at the debate, and I freely admit I'm stealing it from Mr. Sen. Much of the debate about development and democracy is focused on the efficiency of democracy as a means of achieving development, and as I've noted, the jury is still out on that.

But to some extent does it really matter if democracy is more or less efficient at promoting development? After all, what's the point of development? To raise levels of prosperity, of course, to increase some of the indices I mentioned earlier, to increase people's choices and freedoms - including the freedom to have some say in their choice of leaders and policies. So if we want development in order to have more democracy, then why not just have more democracy up front? If it's an essential good we all want - and hardly anyone says it's something they don't want - than some inefficiency seems a small price to pay for it.

Suppose we could all be equally or more prosperous (or poor) under a centralized system where we were allocated jobs, and given little choice about what we could buy, sell or trade. Would we be happy under those circumstances, no matter how high our development indices rose?

To put it another way: After slavery was abolished in the United States, some plantation owners tried to entice former slaves to return to work in the old work gang system by paying them large salaries - they couldn't get them to come back. Which is another way of saying that while economic arguments and issues are important, so too are social and human considerations. The trick is to have some choice and open debate about what really matters.