Isobel Coleman

Democracy in Development

Coleman maps the intersections between political reform, economic growth, and U.S. policy in the developing world.

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The Economic Approach to Middle East Democracy

by Isobel Coleman
June 8, 2011

 

A vendor sells pulp and peanuts near Tahrir Square in the center of Cairo March 2, 2011. The souvenirs on the side of the cart display the date of the start of the Egyptian protests. (Amr Abdallah Dalsh/Courtesy Reuters)

There is considerable concern about the political transitions ongoing in Egypt and Tunisia—rightly so given the many obstacles to building a stable democracy. In this guest post, my colleague Charles Landow, associate director of CFR’s Civil Society, Markets, and Democracy Initiative, takes a look at this process from an economic angle.

As Egypt and Tunisia navigate the perilous path out of autocracy, what can help make them enduring democracies? History suggests that one answer is economic development.

Empirical work by scholars shows that wealthier countries are more likely to sustain democracy than poorer ones. In a groundbreaking 1997 study and later work, political scientist Adam Przeworski of NYU and colleagues found that no democracy with a per-capita income higher than $6,055 in 1985 dollars had ever collapsed into autocracy. And even under this level, more income was associated with longer-lasting democracy. In their sample of 135 countries, the authors found that a per-capita income under $1,000 gave a democracy a one-in-eight chance of collapse in a given year. A per-capita income of $1,001-$2,000 lowered the chance to less than one-in-seventeen. And so on.

In current dollars, the magic income level of $6,055 equals $12,656 (see the U.S. Bureau of Labor Statistics inflation calculator). Egypt, with a 2010 per-capita income of $6,354, according to IMF data, has some way to go. Tunisia, at $9,483, is closer. But whether or not the exact cut-off holds true, every bit of development should help.

Indeed, more recent studies have confirmed the conclusion that increased wealth correlates to greater democratic endurance. A 2006 study of 169 countries by David Epstein of Columbia University and colleagues rejected the idea of a “sharp drop-off” in democratic failure above a certain level of income. But it found, like Przeworski et al, that “higher GDP per capita reduces the probability that countries fall out of democracy.” A 2008 study by Milan Svolik of the University of Illinois examined 133 countries during periods in which they were democracies, ranging from 1789 to 2001. It found that “the level of economic development determines the extent to which a democracy is susceptible to the risk of a reversal.” (Interestingly, though, Svolik also found that the actual timing of reversals in vulnerable democracies is linked not to a country’s level of wealth but to the occurrence of a recession.)

There are many questions about these studies: historical income figures are inexact, methodologies and definitions of democracy differ, and other factors besides income—say, a country’s history and institutions—can affect democratic consolidation. Moreover, political events can influence economic growth in addition to the other way around. Overall, though, the empirical evidence seems clear that economic development helps democracy endure.

President Barack Obama and the leaders of other major powers appear to recognize this. In recent weeks both Obama and his G8 counterparts have outlined plans to bolster the Egyptian and Tunisian economies with the explicit aim of supporting democracy. Obama announced in his May 19 speech on the Middle East that his administration would relieve up to $1 billion in Egyptian debt, guarantee another $1 billion in loans, work with Congress to launch enterprise funds for Egypt and Tunisia, start a trade and investment partnership initiative in the region, and work with multilateral institutions to promote economic development. The G8 followed this at its May 27 summit in France with a pledge of $20 billion from member countries and multilateral institutions. This Deauville Partnership, as the official declaration put it, “will develop an economic agenda that will enable reforming governments to meet their populations’ aspirations for strong, comprehensive growth and help facilitate a free and democratic outcome to the political processes under way.”

It is heartening to see leaders aware of the economic challenges facing Egypt and Tunisia and of the potential for these challenges to derail nascent democratic transitions (see this post from CFR’s Elliott Abrams on the potential consequences of economic stagnation in Egypt). But with all the talk of economic growth, continued vigilance on the political front is crucial. After all, the research on per-capita income and democratic stability will not matter if Egypt and Tunisia do not become democracies in the first place. To start down this road, they must hold free, fair, and competitive elections and begin building institutions that respect basic rights and freedoms and uphold the rule of law.

In any case, efforts to support this process by boosting economic development are on solid empirical ground. The first step, then, is to make the plans announced by Obama and the other G8 leaders as effective as they can be.

Post a Comment 2 Comments

  • Posted by Fawaz h. Alfawaz

    The key thing os to differentiate between sustaining democracy and creating one .The creation is the more difficult one , however, I agree to the centrality of the economic development. .It is directional on nature more the the quantity , and this is where the politics ( collective aspiration , and social organization ) meet with the economic sense of achievement is most effective to create democracy .The experience of the Asian countries indicate that pride weaved onto economic success is the key , and once these countries reached the critical point of sorts in the economic well beings democractoc demands became tenable .Accountability takes roots only once true interdependence in the economy are forged .
    It may sound politically incorrect , but it is clear to me that Egypt is not on the right path judging from the nature and level of people expectations by the people .
    The social cohesiveness in the egyptian society is not not at the level or thrust to conjure up set of policies to undertake serious long term strategies .
    Several revealing points came out over the. Last few months , the government raised the minimum wages,the subsidies , and more attention to foreign affairs at the expense of local affairs , the hint of the military sharing power with the MB before even gaguing. The outcome of the new political process.
    The ultimate test is can Egypt come up with an Egyptian Samsung in 10 years .I will bet on it, but. Who knows?

  • Posted by Stephen R. Ganns

    Great post.
    From an Blog of mine this year.

    The Real Effects of Global Imbalances:e.g. Egypt 2011
    by Stephen R. Ganns on February 3rd, 2011

    There are some including the IMF, as well as a cadre of preeminent central bankers and economists, who have pegged the true cause of the current financial crisis as trade imbalances which left the world awash in too much currency–the effect of which lowered rates on investments and fueled significant “fat tail distributions” (or bubbles as they are called these days). This is a limited view of significant proportions: however, it contains at least a modicum of truth. But let’s briefly look at the real “imbalance” problem, which if not handled, threatens the entire geo-political landscape.

    In the Post on this website entitled, Speculative Economics…, Section IV. , a few countries are represented in terms of their 2009 GDP. The U.S. is first at $14.25 T, followed by Japan at $5T with China a close third at $4.9 T. Lower on the list is Iran, at $330B. To our point, Egypt’s GDP is $217B. Also included in the same Post is the population of each country. This very bluntly, tells an interesting story–quite relevant to the current social unrest occurring in Egypt today.

    The U.S. has a population of some 313M with a yearly per capita GDP of about $46,000. Two current examples of social unrest in the Middle East are Egypt and Iran. Both have populations of about 80M. Per capita GDP is approx. $2,770 and $4, 100 respectively. Yemen has a per capita GDP of $1,230 and Jordan’s is $4,400– however, in its Palestinian sector, it fares much worse. We could go on about other parts of the world. But the truth: most of the world lives in poverty and yearns for a livelihood, freedom and government infrastructure stability.

    In contrast, Kuwait’s per capita GDP is $54,000–no social unrest. Saudi Arabia’s per capita GDP is around $26,000–some social unrest. The relative correlation of per capita GDP to social unrest would be an interesting study and could conceivably be predictive (a priori) rather than reactive (posteriori) in the universe of geo-politics.

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