how to make democratic accountability work better for development?

Democracy and Economic Development

ERF 21st Annual Conference

Gammarth, TunisiaMarch 20-22, 2015



How to make democratic accountability work better for

development?

Mustapha Kamel Nabli


Democracy and development

Impact depends on four types of factors: 1. Structural factors (endowments, inequality,

history, education, level of development, social structures, ….)

2. Forms of democracy or regimes3. Complementary institutions4. Stage of democracy

Focus on three dimensions

Democratic accountability

regimes

Complementary Institutions to

democracy

Stage of democracy

Question 1: Which democratic institutions or forms of democracy are more supportive of

inclusive development?

Three main distinctions in democraticinstitutions:

Forms of government: presidential vs. parliamentarian systems

Electoral systems: proportional representation (PR) vs. plural-majoritarian

Majoritarian vs. consensual democratic systems

Empirical findings

The weight of empirical evidence favors:• Democratic regimes which are more consensual,

not majoritarian and with more proportional representation, more parliamentarian

• Such regimes are more inclusive, tend to redistribute more, and generate more economic growth

But some empirical evidence that more parliamentrian systems generate less growthduring transition periods

Democratic transition in Arabcountries

• Experience in Egypt: more presidentialist/majoritarian political system sharpened polarization and led to failure

• Experience in Tunisia: more PR/parliamentarian approach, more consensual helped success of transition

• May be Tunisia has to bear some transition costs of lower economic growth because of quasi-parliamentarian system

Question 2: Are there preconditions for democratization, when it takes place, to

lead to good governance and better economic outcomes?

No country has democratized with full set of institutions present from the outset

The prior presence or not of some complementary institutions matters for success

Such critical institutions include:• A modern and capable state: relative autonomy with respect

to political masters; impersonal, meritocratic and competent bureaucracy, which has an eye on the common good and long term interests.

• Rule of law as a constraint on political power: the law applies to all including the most powerful, especially the rulers.

Historical experience

Fukuyama (2014)• In many countries good state capacity was well

established before democratization: democracysucceeds and reinforces good economic ptogressoutcomes: Prussia/Germany, France, Sweden, Denmark, Japan

• In most other experiences democracy is introduced before the development of a modern, strong, capable and impersonal state. The typical outcome is a clientelistic political system/bureaucracy, ripe with corruption.

General Lessons1. The way democracy impacts development depends on and interacts

with other sets of institutions such as state capability and prevalence of rule of law.

2. The presence prior to democratization of a strong state capacity provides a solid basis which supports the success of democratization.

3. The absence of prior strong state capacity makes the outcomes of democratization uncertain, but does not preclude its success.

4. Democracy with weak state capacity but strong rule of law can generate under some conditions good economic outcomes. However, democracy with no prior development of good state capacity or strong rule of law is likely to lead to clientelistic political system and bad economic outcomes.

Implications for Arab countries: criticalrole of state capacity

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TUN EGY LBY YEM DZA TUR CHN CHL ESP

2000

2010

1011

2012

Implications

• Democratization in the case of Libya and Yemen was doomed

• Tunisia has best prospects of success due to the presence of favorable conditions

• But recent weakening of state capacity such prospects less favorable

• Points to need to focus on this dimension as the highest priority

Question 3: Under which conditions can democracy succeed in spurring the

development of better state institutions and rule of law, i.e. better governance?

So critical but not well studied question.Useful experience of Britain during the 1850s

and the US from 1880s to 1930s

Main lessons1. Reform of the state can be achieved rapidly: in the case of Britain major reforms being completed within a decade. took much longer (a few decades) in the case of the US where it took a

few decades. The critical factor was the role of political leadership.

2. The process of economic modernization played a critical role in the emergence of an urban middle class which had a strong interest in an impersonal and effective state driven by

meritocracy. coalitions pushing for reform do not have a stake in the existing system,

and have most to gain from a new meritocratic system.3. The existence of a strong national identity is very supportive of the

development of state capacity: it increases the level of trust in state institutions It increases the sense of loyalty.

Implications for Arab democratization

• Critical priority for building and strengthening state institutions which are not clientelistic, and responsive to the needs of the middle class.

• This process can be achieved relatively rapidly if the political will is present.

• Particular attention should be given to the preservation and strengthening of the middle class

• As well as national identity and to strongly fight any attempts to weaken such identity.

how to make democratic accountability work better for development?

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