The Effect of Organized Business on Democracy

12.29.2005

Ben Ross Schneider’s book Business, Politics, and the State in Twentieth-Century Latin America (Cambridge University Press, 2004) explores the linkages between business associations and democracy. Business associations, as an important part of civil society, have the ability to influence “the quality, capacity, and resiliency of new democracies.” In his concluding chapter, Schneider poses the question, “Does stronger organization tend to make business more democratic?” The answer is that it can, provided that organizations speak for a wide range of businesses and do so transparently.

Schneider lays out several ways in which business associations can make positive contributions to democracies. First, they may perform certain representative functions better than parties do. They can accurately assess the preferences of the business community and supply reliable information about the private sector to policymakers. Second, associations, like other organizations in civil society, can serve as a check on potential abuses of state power. They also serve as a venue for businesspeople to voice their opinions openly instead of conversing with government officials behind closed doors. Finally, associations may reduce the governance burden on nascent democracies by engaging in self-governance and resolving disputes among businesses.

To be most effective, Schneider argues, associations should be “all-encompassing,” that is, they should represent multiple industries. The more broadly representative an association is, the less likely it is to pressure the government on behalf of narrow interests, and the more likely it is to advocate for generally good economic policy. Thus, strong business associations in Colombia have a record of challenging authoritarianism and encouraging open debates on economic policy that did not occur during election campaigns. By contrast, weak associations in Brazil were quiescent under military rule, even when business as a whole opposed the government’s policies.