Conclusion

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Markets and democracy

Debate continues over the most relevant factors leading to sustainable democracy. However, support for modernisation theory – the notion that economic development over time leads to democracy, albeit with some exceptions – has received strong empirical support in recent studies that cover long time series and control for several factors.

This chapter provides some further support for modernisation theory by extending the analysis of the relationship between economic and political factors in development to the transition region. Increasing GDP per capita leads to more democracy – with the exception of oil-exporting countries, which are less democratic than their level of income would otherwise predict. Market reform appears to benefit democratisation, not only through its effect on growth, but also directly – perhaps because it prevents the entrenchment of anti-democratic political and economic elites.

The development of a broad middle class is also strongly correlated with the level of democracy, again with the proviso that in resource-rich states the middle class seems – thus far, at least – to play a less significant role in creating a strong demand for democracy.

It is evident that education is the main driver of support for democratisation from the bottom up, and that state employees in less democratic countries tend to oppose democratisation – although less so if they are highly educated. Since state employees tend to outnumber their private sector counterparts in such countries, this may dampen electoral demand for more pluralistic political systems.

These results are not surprising, as they generally match worldwide trends and the main strands of the theoretical literature. However, they do have implications for the development of more effective democratic governance in the transition region.

• Continued support for market-based reform and private sector-led growth is likely, over time, to lead to higher levels of democracy in less democratic countries and to prevent erosion of democratic systems in established democracies.
• Interventions that support the growth of the middle class and a strong civil society will reinforce demand for democratic change.
• Investment in private sector companies and generation of private sector employment may create a workforce with a stronger focus on democratic governance.
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In countries that are rich in natural resources the promotion of economic diversification and specific support for the private sector could foster an electorate with higher expectations in terms of public-sector accountability.
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Individual countries will themselves ultimately decide on their preferred form of political governance. The international development community will have to exercise patience and persistence in supporting long-term transition objectives and the underlying institutions that are most conducive to achieving them.

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