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Democracy 101

Economic development maybe unsustainable in the absence of democracy but it is not guaranteed in its presence either

Neveen Wahish, Friday 25 Mar 2011
Egypt
Economic development maybe unsustainable in the absence of democracy but it is not guaranteed in its presence either (Khaled Desouki/AFP)
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For years, economists in the Arab region have been arguing that economic development is not sustainable without democracy. Nowadays, with revolutions breaking out from the Atlantic to the Gulf in quest for democracy, economists are not insuring that it could lead to solid and equitable development either.
 

“Politicians are motivated to stay in power and please their supporters. Because of that, they devise economic policies that are consistent with their interests. Also, they may not be necessarily restrained and forced to behave in a way that is consistent with development,” Ahmed Galal, managing director of the Economic Research Forum (ERF), told Al-Ahram Weekly on the fringe of ERF’s annual 17th annual conference this week in Antalya, Turkey. This year, the conference focused on “Politics and Economic Development”.


Within the same context, economist Ricardo Hausmann of Harvard University told the Weekly that the word democracy is a wide term. What is more important to him is to strengthen the response of society to actions of government.
 

Economist Lant Pritchett of Harvard University believes democracy is a deep and lengthy process. It is not just about elections every five years, and in between going about business the usual way, he told conference participants. He described elections as only the first phase of democracy, but that time is needed to create reliable rules-based society. That, he said, is the trickier part particularly when having to deal with aspects of behaviour that have long been embedded in all aspects of society.


In fact, Ibrahim Elbadawi, Director of the Macroeconomic Research Department, Economic Policy and Research Institute, Dubai Economic Council, showed conference participants that democracy alone is not enough and it must be accompanied with checks and balances. He gave an example saying that to insure those in power do not abuse the system, in an area such as fiscal policy for example, central bank independence is crucial.
 

Within the same context, Hausmann stressed that there must be a mechanism to feed information back to government on its performance and to keep it accountable. He gave the example of the U.S. having 22,000 lobbies which helps maintain the balance between the different interests. “Such a mechanism is needed because since governments are complements of the market in doing things, their malfunction keeps the whole economy performing poorly,” he said.

He suggested that those who care about government functioning in post-revolution societies such as Tunis and Egypt should organise to supervise and benchmark the performance of government institutions to discipline the government.
 

The best way to go about that is having a strong government to provide public goods yet limiting its power, according to economist John Wallis of the University of Maryland. This is possible through what he called open access which allows for the ability to form organisations at will. That is the key to a sustainable political and economic scene and to the dynamism of the whole social order, he said.

As Ahmed Galal put it, democracy is not a guarantee in itself, but when you have people participating, they create the institutions, checks and balances. It may not be sufficient initially but over time there will be progress.

 

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