For Amartya Sen, winner of the 1998 Nobel Prize for economics, it was clear: "The most important thing that has happened in the 20th century is democracy. "Yet today, for many developing countries in Africa, Eastern Europe, Latin America, and Asia, the value of democracy is not quite this self-evident. While Western nations preach "democratization" as the key to economic progress, the developing nations themselves must determine the best form of governance and the best economic policy that will drive their countries forward.

In opposition to its knee-jerk appeal, some have argued that "democracy"--the presence of freely elected institutions and the ability to participate in them--is unnecessary and is, in fact, an obstacle to the progress of developing countries. There are theoretical arguments, empirical evidence, and events from recent history that may appear to support this thesis; yet, upon closer examination, the bulk of the argument proves untenable. Indeed, democracy is a factor that promotes economic growth. Though it cannot guarantee increases in a nation's GDP or per capita income, the practice of democracy is critical for long-term sustainable growth.

Centralized Power

Resistance to democracy arises from the belief that a strong central government is more conducive to development than democratic institutions. In particular, the influence of populism on policy formation is seen as the major drawback of democratic government. Since a democracy is dependent on the will of the people, some argue that such governments are less likely to make necessary but politically unpopular economic decisions; on the other hand, an authoritarian government could theoretically take necessary economic measures with an eye toward the long-term good without fear of reprisal at the ballot box.

For instance, several historians have attributed Russia's economic disarray after the breakup of the Soviet Union to Russian President Boris Yeltsin's untimely introduction of democracy. In 1992, implementation of Russian Finance Minister Yegor Gaidar's "shock therapy"--abolishing price controls on all goods--was delayed because it was highly unpopular. This delay was a move that economists have widely criticized, and it undermined later economic reform.

Conversely, officials may formulate popular but economically unviable policies, catering to the short-term desires of the masses rather than following a long-term economic blueprint. India, Asia's largest democracy, has often excused its economic failures as the "price of democracy"--frequent elections and proportional representation meant weak coalition governments that followed public opinion slavishly and isolated India from the world economy.

However, political decisions are neither made in a vacuum nor based completely on public opinion. Although democracy may make government sensitive to the people's desires, this may be seen as insurance against the opposite: an oppressive government insensitive to the people's needs. An open political system helps root out pervasive corruption, which hurts development and discredits public authority. With democracy, a government has to account for its policies before an ever-demanding public, thus ensuring greater transparency and reining in corruption. Even as some argue that corruption is not intrinsic to undemocratic government and that an autocrat might be willing to forgo bounty in the near term to enhance long-term growth prospects and future revenues, evidence to the contrary abounds. Zaire's Mobutu Sese Seko, the Philippines' Ferdinand Marcos, and Kenya's Daniel arap Moi are just a few prominent examples of the corrupt dictators produced by a lack of transparency within the system. Without accountability to the people, there is no way of ensuring that undemocratic governments deliver the goods.

Getting Results

Yet critics of democracy say that in the area of economic-policy implementation, undemocratic governments may be superior because, unlike democracies, they are not beset by constantly changing governments, bureaucracies, and interest groups. The resultant inconsistency can lead to instability or political paralysis, and as Harvard economist Alberto Alesina points out, political instability is one surefire predictor of poor economic performance. Particularly in developing countries, uncertainty about government policies reduces investment and encourages capital flight. On the other hand, many people believe that policy implementation in an authoritarian state would, by definition, be more uniform in application and hence more likely to be effective.

Just as democracies are more prone to the will of the majority, they are also more prone to the influence of special-interest groups. Robert Wade of Sussex University's Institute of Development Studies argued in his 1992 book Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization that if a country is to sustain growth, its government must be able to resist the pressures of special-interest groups. He substantiates this with reference to Taiwan and highlights the role of "state corporatism" in effecting policy, by which autocracies can intervene in economic management because they are insulated from special-interest pressures. Compare this to the Philippines where, since 1945, democratic governments have let landlords dominate agrarian policies at serious cost to the economy.

Undemocratic governments may get quicker results in implementing or imposing policy, but of greater ultimate importance are the long-term effects of such policies. It is only democracy that creates the environment of security of property and person that makes long-term economic development possible. In democracies, economic activities take place undeterred by the fear of future curtailment, as an electoral mechanism provides for a change in the government if it is continually ineffective or abusive.

Beyond that, democracy accords individual rights a constitutionally ensured protection, so that even with changes of leadership, investors need not fear arbitrary seizure of their property and investments. As the late economist Mancur Olson explained, security of property is more firmly anchored under democracy. Though a leading analyst of democracy's economic weaknesses, Olson concluded that democracy is far more conducive to long-term economic growth than dictatorship, even a benevolent one. In fact, Nobel Laureate Milton Friedman postulates that democracy and development are mutually reinforcing. It is the reassurance that, despite any short-term hiccups, a democratic government remains firmly committed to certain economic principles that allow for long-term economic growth. Though some exaggerate the extent to which occasional grains of sand in the gears of democracy can undermine the whole economic system, the democratic machine functions the best.

Discourse and Division

The last main line of reasoning from those who reject democracy's role in development is that significant divisions in developing countries along the lines of race, region, caste, or language suggest that an authoritarian government could be preferable. Robert Scalapino, an Asia specialist, notes that, "where political divisions are centrally based upon religious, ethnic, or regional lines, the democratic system is vitiated, and the resulting instability soon creates a sharp aversion to the system."