Business Associations and Democratic Reform

01.22.2004 | Articles | John D. Sullivan

Although most groups involved in the process of democratic, market-based reform are well aware of the important economic policy fundamentals – such as macroeconomic stabilization, trade liberalization, and privatization necessary to achieve it, there is perhaps less awareness of the political dimensions of the reform process. This dimension is critically important because in a democratic society economic reform is difficult to sustain if it is implemented outside of the political process.

Experience in reforming countries is showing that economic reform is untenable without the support of business associations acting as advocates of reform, a function they may carry out in a variety of ways. The concept of advocacy is an important one in building a democratic system. As one of the many groups that constitute civil society, business associations have much more of a role than that of a special interest group which lobbies national legislatures. Business groups represent an important segment of society – one that stimulates economic growth through the creation of goods and services and the jobs that accompany them. Their voice needs to be heard in the policymaking process if it is to be truly democratic.

It is important to keep in mind, however, that not all business groups will be in favor of reform. In fact, it can be argued that two key interrelated factors – the types of businesses in the associations and their relationship to the state – largely shape their behavior toward market-oriented reform. If associations are dominated by firms that depend on the state for special privileges, they are likely to promote cronyism and anti-market economic policies. Although the objectives and structure of business associations may seem an esoteric aspect of reform at first glance, their impact on how reform evolves in a newly democratic society is significant.