The Wall Street Journal is running an interesting debate on democracy and economic growth between two economists: Ed Glaeser and Daron Acemoglu. A quick summary:
Glaeser: Data does not back up the idea that democracy is a key ingredient in economic growth
Acemoglu: There are different kinds of democracies, what you define as democracy matters. Further, the relationship between democracies and economic growth differs, depending which view you take (short-term vs. long-term)
Glaeser: Democracies are not necessarily more stable than dictatorships. More stable, successful democracies invest in human capital – and there is data to back this up.
Acemoglu: Education is important, but if you look around the world today it is evident that education is not necessarily more likely to consolidate democracy.
Glaeser: The link between education and democracy works, because: 1) educated people often lead political uprisings 2) educated people can craft better constitutions 3) educated people stand up and fight for democracy
Acemoglu: Educated countries may be more democratic and prosperous, but it does not mean that they are democratic and prosperous because they are more educated – the fact that they become more educated does not necessarily mean they are more likely to become more democratic.
You can read readers’ reactions here. One of them really gets at the core of the issues (at least in my view), by taking a closer look at China and suggesting that economic growth alone is not enough. Its not raw GDP growth numbers that matter, the commenter suggests, but institutions of a market economy that do.
I think it’s relatively easy to attract capital for low end production and to learn to copy successful practices from abroad. You don’t need elected officials to make a tax-free zone. What is hard (maybe impossible without democracy) is to build up the myriad financial institutions, practices and values that make for a vibrant, world-leading economy. China, and other countries like it, no matter how good things look now, have a really long way to go before they become leaders in innovation and business.
Published Date: March 14, 2007