Does Democracy Facilitate Economic Reforms - Essay Example

Does democracy facilitate economic reforms? The necessity of democracy in implementing economic reforms is a controversial Many economists are of the view that democracy is essential to facilitate economic reforms citing examples from countries like India, America etc whereas many others believe that implementation of economic reforms is possible even without democracy citing examples from China. The characteristics of a democratic government is well explained in the statement of former American president Abraham Lincoln; “A government of the people, by the people, for the people”. In other words, democracy allows people to select a government of their choice. Protection of human rights, freedom of expression, freedom of believing in religion or God, freedom of using any media of their choice for expressing their ideas, less censorship etc are some the major advantages of a democratic country whereas all these things are denied in a socialist country like China. In fact, multiparty system is prevailing in democratic countries which help that country in implementing economic and political policies only after comprehensive discussions. For example, taking loans from IMF or World Bank was a controversial subject in India. Political parties expressed different opinions about this matter because of the tight norms put forward by these financial institutions. However, the Indian government decided to take the loans from IMF and World Bank only to aid some particular sectors of the country after taking into the account of the arguments in favour and against this issue. Such a healthy discussion about the implementation of an economic policy is possible only in a democratic country. In countries like China such open debates are not allowed in the country by the communist administration. Even then, China is able to implement economic reforms and attain economic progress more rapidly than any other countries in the world. This paper analyses how far democracy facilitate economic reforms. The power of democracy in facilitating economic reforms can be better studied with the help of two neighbouring countries like India and Pakistan. India is believed to be one of the largest democratic countries in the world. Indian democracy is operating on the pillars of well defined judiciary, Parliament and Executive. Moreover, human rights protection, secularism, freedom of expression, lack of censoring etc are some other characteristics of Indian democracy. On the other hand, India’s neighbouring countries like Myanmar/Burma, North Korea, Pakistan, Afghanistan etc are struggling to mobilize their internal resources because of the lack of democracy in these countries. These countries have severe internal problems which retard their efforts to attain economic growth. Pakistan and Afghanistan are believed to be the major contributors to global terrorism and they are facing the consequences of it now. Burma and North Korea don’t have any belief in freedom, liberty and human rights and their slow economic progress underlines importance of democracy in maintaining economic progress. Pakistan is considered as a democratic country by the Pak government and the Pak people; however, external political observers have strong disagreements. In a true democratic country, judiciary, executive and parliament will combine well and function together for the progress of the country. In Pakistan, these democratic institutions often clash each other. We have witnessed the removal of Pak Supreme court judge by the former Pakistan president Pervez Musharaf and the subsequent problems in Pakistan. “An independent judiciary prospers only in countries where democracy, human rights and in particular a free press, set a general framework stabilizing the rule of law” (Tomuschat, p.308). Judiciary is considered as an independent body functioning in a democratic country. Normally a democratic government will respect the rulings of the Supreme Court in that country even if they have different opinions. It is the duty of the judiciary to interpret the constitutional rights in the correct manner whenever a conflict arises in the country. In other words, judiciary helps the administration to function strictly in accordance with the constitution. Judiciary can prevent the administration from derailing from the main streams of constitution. In short, judiciary can prevent a democratic government from functioning against the interests of the people. Whenever a controversy occurs in a democratic country about the implementation of certain economic policies, judiciary can interfere in the matter and can assist or prevent government from going ahead with an economic policy. In India, even though the left parties criticized many of the economic reform policies of the government, judiciary helped the government to go ahead with its economic reform policies. In Pakistan most of the power rest on the shoulders of the president or the military chief and hence judiciary, executive and parliament have value only on papers. Moreover, in Pakistan, though they have a written constitution, it is not much respected. As per the Pak constitution, Pakistan is a secular state. In a secular country people have the right to believe in religions and have the right to spread their beliefs. However, nobody can think in terms of spreading Christianity or Hinduism in Pakistan even though as per the constitutional rights, it is possible. In implementing economic policies also, the Pak administrators like the President or the Military chief do not care much about the constitutional do’s or don’ts. In short, improper functioning of democracy in Pakistan prevents them from implementing economic reforms just like their neighbours India. Democratically elected governments would tend to have greater legitimacy, because democracy, political freedom and civil liberties were among the most important aspirations of the people of those countries. In the absence of democratic changes, and the legitimacy they provide governments, it is hard to implement economic reforms. Even if they are implemented by non-democratic governments, there are significant uncertainties with respect to their future, which weakens their impact. In many of the Former Soviet Republics where the political transition either did not occur or was only partial (e.g. in Uzbekistan and Belarus) many members of the previous elite remained in power and economic reforms are slow and carried out in a haphazard way (Dethier et al, p.5) Institutional changes are necessary for implementing economic reform policies. For example, privatization of public undertakings or the selling of the shares of the public or governmental enterprises etc is some of the economic reform policies needed for the rapid development of a country, especially under the current globalization era. Implementation of such drastic policies may possible only in a democratic country. Political freedom is necessary for the implementation of such polices. In other words, political freedom and democracy are the key factors in implementing economic reforms or market reforms in a country. Democratization puts in place a system of checks and balances that penalizes self-interested leaders, and creates an atmosphere conducive to economic liberalization policies whereas communism encourages the legacy of exploitation (Dethier et al, p.6). In most of the nondemocratic countries, the power rested entirely on the shoulders of some dictators. These dictators may not have much interest in the development of the country because of the absence of any objections against their policies. For example, in North Korea, nobody can question the authority of the dictator Kim Jong. Whatever the reforms or policies implemented by Kim is accepted without any protests in North Korea because of the fear of consequences. In short, in non-democratic countries, the administration is not accountable for any of their polices whereas in democratic countries accountability is necessary for everything which helps the economic reformation process in a positive manner. After the communist regimes collapsed, the Czech Republic, Hungary and Slovenia—attained a level of political freedom and civil liberties comparable to the United Kingdom or Germany. Most post-communist countries succeeded in sustaining at least a moderate level of democracy, despite very turbulent economic and political developments, military conflicts or coup attempts. The high speed of democratization reflected not only the desire of these countries’ citizens to live in democracy, but also the encouragement or outright pressure from Western governments, international organizations and especially the European Union, which made democracy an explicit precondition for accession negotiations. This approach, helped simultaneous implementation of political and economic reforms (Fidrmuc, p.584) In the absence of democratic institutional reform, it is nearly impossible to implement liberalisation policies that seek to de-monopolise the economy, and open it to competition. Healthy competition is necessary for the implementation of the economic reformation process. In the absence of competition, nobody will take much interest in seeking new ways to improve their productivity or competing power and the hence the economy will never grow. Competition forces entrepreneurs to devise new ways for existence which will contribute heavily to the economic growth. For example, competition forced Apple Company to unveil their touch screen phones in the market. The introduction of iphones helped Apple to capture a substantial share of market in the mobile phone industry. In the absence of any competition, Apple will never think in terms of introducing a new product in the market. In short, competition is necessary in a liberalised market which is possible only under a democratic administration. Political freedom facilitates economic reforms in several transition economies, but should not be seen as a necessary condition for liberalisation, given that some countries (China) achieved marked oriented reforms, while more democratic structures (Russia, Ukraine) weren’t able to introduce substantial economic reforms. Many of the economic pundits cite China as an example in order to weaken the arguments in favour of democracy as a facilitator to economic reforms. It is fact that China is able to achieve rapid economic growth even without democratic administrations. In my opinion, China’s case is entirely different. China implemented many democratic policies suitable to stimulate its economic growth even though it is a communist country. Gao (2005) has mentioned that in China, “the agriculture sector transformed from collectivization to a system of household responsibility and the industry sector relieved from the complete dominance of the government. Moreover, lot of small scale industries under private ownership has been developed as part of Deng’s reformation process” (Gao). Deng has realised the practical limitations of communist theories and made lot of changes in it in order to make it more acceptable to the public. Thus the concept of collective agriculture methods was given way for individual agriculture method. Deng has opened the Chinese economy and made it more transparent than the Japanese economy at present. The Deng administration quickly realized the possibilities of globalization and made everything possible to exploit it. In fact Deng has diluted some of the core communist principles in order to stimulate economic reforms and to exploit globalization. Deng has realized that the economic reforms would be ineffective unless the party could also be reformed (Gittings p.173). Political structure was dominating the Chinese economy before the Deng era. So before implementing the economic reform Deng decided to implement political reforms in China. Mao was more adamant about the implementation of the tight communist principles whereas Deng has given the communist principles more liberal look and a human face. Deng separated the president ship and the party leadership. He has realised that if both the posts were assumed by a single power, dictatorship might happen in China just like the Mao era. The major challenges faced by Deng in implementing the economic reform were from the party itself. Most of the party leaders were against the economic reforms, since they were afraid that privatization, and liberalization policies may harm the party’s interest. Moreover, the domination of party in industrial and agricultural sector was reduced by Deng which was not acceptable to the party leaders. In short, even though China is a communist country, under the visionary leadership of Deng, it was ready to implement some of the core principles and values of a democratic country which helped them to facilitate economic reforms. Other communist countries like North Korea, failed to imitate China and they are still struggling to implement economic reforms in their countries. To conclude, without doubt or second thoughts, we can say that democracy facilitates economic reforms. Except China, most of the other countries which implemented economic reforms and achieved growth are democratic countries and hence the importance of democracy in stimulating economic growth cannot be neglected. China’s success in implementing economic reforms can be attributed to their readiness in borrowing and implementing some of the core principles of democratic administrations. In short, democracy and its principles definitely facilitate economic reforms. Works Cited 1. Dethier, Jean-Jacques., Ghanem Hafez and Zoli Edda. “Does Democracy Facilitate the Economic Transition?”1999. POLICY RESEARCH WORKING PAPER 2194. The World Bank Europe and Central Asia Region Poverty Reduction and Economic Management Sector Unit October 1999. Web. 09 January 2011. 2. Fidrmuc, Jan. “Economic Reform, Democracy and Growth During Post-communist Transition.” European Journal of Political Economy. Vol. 19 (2003) p.583–604 3. Gao,Tao "Globalization and China: Impacts on the Economy and People's Quality of Life" Hofstra Universty. Web. 09 January 2011. 4. Gittings, John. “The Changing Face of China: From Mao to Market”. 2005. Publisher: Oxford University Press, USA; illustrated edition (September 23, 2005) 5. Tomuschat, Christian. “Human Rights: Between Idealism and Realism.” 2008. (Oxford University Press, 2nd edn., 2008) Read More