GLOBAL ECONOMIC RELATIONS
Course number DEVM 566, May 24 - June 4, 2010
James Raymond Vreeland
School of Foreign Service
Georgetown University
Democracy wasn’t always beloved
• 19th century:
– People thought universal suffrage expropriation!
• Easy to understand:
– Median voter income<mean
Downs offers a “spatial” model
of party competition.
• Based on Hotelling’s (1929) model
– Where should PUMA locate if people shop at stores closest to their house?
NIKE
Dems
PUMA
Reps
민주당
한나라당
Employment
concerns
Inflation
concerns
Vote single-peaked preferences
In a 2-party system, where will the left & right parties locate?
What happens when somebody decides not to vote?
Median preference shifts away from the absent voter
Solution?
Does culture cause
democracy?
What is democracy?
Democracy is…
• Representation
• Accountability
• Equality
• Dignity
• Rationality
• Security
• Freedom
• Happiness…
empty set
Get your hopes down!
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empty set.
• From an analytical pt of view, this is useless.
• Precludes important questions.
• E.g.
– Do repeated elections induce accountability?
– Does participation lead to income equality?
– Does economic freedom produce rationality in the
market place?
Democracy:
•
A political regime in which some government offices
are filled as a consequence of contested elections.
•
“Offices”: Chief executive, legislature.
•
“Contested”: There exists opposition that has some
chance of winning offices as a consequence of
elections.
•
“Democracy is a system in which incumbents lose
contested elections.”
1. Ex ante uncertainty
2. Ex post irreversibility
3. Repeatability (all outcomes are temporary – for a term)
Culture and democracy?
How might culture matter?
A shared democratic culture among citizens is
required for:
1. Coordination of views:
–
Shared view of what constitutes illegitimate action.
2. Coordination of actions:
–
Common sense of “duty” to act against potential
illegitimate actions.
Democracy
Culture
HOW DO WE MEASURE “CULTURE”?
(Almond & Verba)
• “The political culture of a nation is the
particular distribution of patterns of
orientation toward political objects among
members of a nation.”
Hypotheses
• Interpersonal trust
– (hypothesis: support democracy)
• Life satisfaction
– (hypothesis: support democracy)
• Support for revolutionary change
– (hypothesis: support dictatorship)
Inglehart finds the following:
Democracy
% of pop. saying “most people can be trusted.”
Leads us to believe that there is a positive relationship:
Democracy
% of pop. saying “most people can be trusted.”
What happens when we
study the impact of cultural
variables across all types of
political regimes and we
control for economic factors
(e.g. per capita income)?
Democracy
% of pop. saying “most people can be trusted.”
$6,000
$5,000
$4,000
Democracy
$3,000
$2,000
$1,000
% of pop. saying “most people can be trusted.”
Once we control for per capita income, there is no clear relationship between
“culture” and “democracy.”
Democracy
% of pop. saying “most people can be trusted.”
Other Cultural factors
tested (Przeworski et al.)
• Protestantism: not significant
• Islam : not significant
• Catholicism: not significant (weak finding- makes democracy
slightly more likely!)
• Colonial legacy: not significant (British colony, maybe)
• Education: not significant
• Ethnic heterogeneity: makes both democracy and
dictatorship unstable – generates general instability
• Religious heterogeneity: not significant
• Number of other democracies in the world: not significant
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We’ll come back to democracy
and development…
First, a little survey-level data:
Let’s unpack
the macro
relationship
at the micro
level in
Nicaragua –
unpack this
“aggregate”
data point.
Democracy
% of pop. saying “most people can be trusted.”
• If it is true that Civic Culture leads to
democracy,
– we should find that people who say “most
people can be trusted”
– Are likely to claim that democracy is
preferable to other forms of government.
Explaining support for Repression of
Civil Liberties in Nicaragua:
High interpersonal trust  LOWER support for
democracy
Not surprising that culture variables fail…
• Culturist arguments are typically “ex post” or “ad
hoc.”
• We observe
– many Protestant countries with democracy
– and not many Islamic countries with democracy
– so we (mistakenly) conclude that there must be
something in Protestant culture that leads to
democracy and something in Islam that prevents it.
• Example:
– A study concludes that Hinduism leads to
democracy because of its pluralistic belief
system.
– Confucianism, on the other hand, is not
pluralistic and thus leads to dictatorship.
• What do you think the study would have
found if China were a democracy and
India a dictatorship?
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• There are elements in every culture that are
conducive (and not conducive) to democracy.
• So one can pick and choose in an ad hoc manner.
– Protestantism:
• Legitimates inequality and upholds the ethic of self interest.
• How is this compatible with a political system based on
equality and resolving conflict through consensus?
– Islam:
• Stresses the importance of the umma – community.
• Aren’t these traits compatible with democracy?
There are no standard
assumptions about culture.
People seem to pick and choose.
Example of democracy
surviving cultural conflict:
• 19th century Belgium demonstrates that
the following is at least possible:
– Democratic consolidation can be the
contingent outcome of self-interested political
strategy, rather than the result of normative
principles. (Indeed, despite normative
principles!)
The Belgian Story
• 1830: Belgium created – revolt against the
King of Netherlands. Compromise between
Liberals and Pro-Catholic Conservatives.
• Institutional setting: Democracy.
• 1800s: Liberals begin challenging the power
of the Church.
• 1878: Liberal electoral victory: School Bill
(State takes over primary education).
• The Pro-Catholic Conservative Party reacts…
Possible outcomes:
• Civil war led by the Ultramontanes,
generating either:
– An Ultramontane Victory (subvert democracy,
Catholics win).
– An Ultramontane Defeat (subvert democracy,
Catholics lose).
• Continued democratic competition led by the
Moderate Catholics:
– Either the Liberals win.
– Or the Moderate Catholics win.
– Elections repeated
What does the Church
Leadership want?
• Note: They are NOT pro-democracy.
Church preferences:
1.
Ultramontane victory in (win civil war).
2.
Parliamentary victory of of right-wing (win elections).
3.
Losing elections, backing Conservatives (lose elections).
4.
Ultramontane defeat (lose civil war).
WHAT HAPPENS?
•
Church decides to back the Moderate-Conservatives.
•
1884: Conservatives win elections and rule Belgium for 30
years under democracy.
•
Remarkable: The democratic outcome is achieved NOT from
normative practice or as some process of civic learning.
•
Continued democracy is the result of purely self-interested
actions.
And now we return to…
Democracy and Development
Puzzle time
• Explain the correlation between
development (per cap income) and
democracy.
HINTS
• Development does NOT cause democracy to emerge.
• Democracy does NOT cause development.
• The correlation is NOT spurious.
– (There is a causal connection.)
Break
Regime dynamics
• High per capita income has little to do with why
democracies emerge.
• Democracy is more likely to survive at high levels
of per capita income.
• The cost of “struggle”/conflict/coup is too high
• Threshold ~ $10,000 PPP
• EXPLAIN THOUGHT EXPERIMENT
– http://freedom.indiemaps.com/
– Who do we get wrong?
Estimating separate determinants of why
democracies emerge and survive
EBA results
• 59 factors, evaluating over 3 million regressions
• Emergence of democracy:
– GDP growth (a negative effect)
– Past transitions (a positive effect)
– OECD membership (a positive effect)
– Some evidence that fuel exporters and Muslim countries are less
likely to see democracy emerge
– the latter finding is driven entirely by oil-producing Muslim countries
• Survival of democracy
– GDP per capita (a positive effect)
– Past transitions (a negative effect)
– Some evidence that having a former military leader as the chief
executive has a negative effect & having other democracies as
neighbors has a reinforcing effect
Why is oil important?
• Dutch disease
• Oil exports drive up currency value
• Suffocates other export entrepreneurial
activity
• Economy does not develop
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Alternative - Game theoretic story for oil
• Democracy  redistribution
• Rich vs. Poor
• Dictatorship: Rich pay “repression” cost
• Democracy: Rich suffer redistribution
• Unless the rich have a credible threat to
exit  the poor have a credible promise to
temper redistribution
• Democracy works 
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One more look at culture
Is there a habituation effect?
Habituation to democracy?
(Evidence of weakly culturist view?)
• Yes?
• Indeed, the longer a democracy exists, the more likely it is
to survive.
• BUT…
• This is due to economic growth.
• Over time, per capita income grows, and this is what
makes the democratic regime more stable.
• Once one “controls” for GDP per capita,
there is no habituation effect.
Summary
• Culture not a good predictor of democracy
• The emergence of democracy is largely
idiosyncratic
• Development predicts survival of
democracy
• Look for per capita income >$10,000 PPP
• So, where does development come from?
Is development due to culture?
So where does development come from?
• Maybe democracy doesn’t come from
culture…
• But does development come from
culture?
• Why are rich countries rich and poor
countries poor?
Jared Diamond’s Guns Germs and Steel
• Culturist stories – tend to be ad-hoc (if not simply racist…)
– “Protestant work ethic”
– If another culture had succeeded we could find some other quality…
• Diamond begins with the assumption that all societies
began with the same distribution of “talent.”
• Some societies had better “material” to work with.
• And some societies were better positioned to learn from
neighbors. (Diffusion was geography-dependent!!!)
• Reductionist story.
– Boils human history down to available plants and animals, latitude,
and orientation of landmass.
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Jared Diamond’s Guns Germs and Steel
• Culturist stories – tend to be ad-hoc (if not simply racist…)
– “Protestant work ethic”
– If another culture had succeeded we could find some other quality…
• Diamond begins with the assumption that all societies
began with the same distribution of “talent.”
• Some societies had better “material” to work with.
• And some societies were better positioned to learn from
neighbors. (Diffusion was geography-dependent!!!)
• Reductionist story.
– Boils human history down to available plants and animals, latitude,
and orientation of landmass.
Time-line
Story in a nutshell:
• Advances made by:
– Original discovery
– Learning from neighbors.
• Original discovery (by accident)
– A function of region’s biological endowments.
• Learning
– A function of geography
• The Eurasian landmass was the best suited for the
transfer of information.
• South America perhaps the worst suited.
• Northern Africa was better off than Africa South of
the Sahara.
• Many agricultural inventions can travel 1000s of
miles along the same latitudinal range.
• Cannot travel more than 100s of miles along the
same longitudinal range.
Languages, writing, etc…
• Sedentary lifestyle necessary.
• Elites necessary
– Only becomes possible when food is stored.
• Most societies borrowed / learned from
neighbors.
• Helpful to have other neighbors with sedentary
lifestyle and elites.
• Again – think of how luck is shaped by your
endowments.
• Much less likely to learn writing if none of your
neighbors have…
Lethal gift of livestock:
• Disease!
• Bad in the short-run.
• Great for the long-run resistance of
populations to diseases.
• Think of Europeans vs. Americans in 1500.
So you’ve learned which
democracies will survive
(developed)
Which democracies will have the
most stable policies?
Let’s close today with
1 take-away…
• Poor democracies are at risk of breakdown
Thank you
WE ARE GLOBAL GEORGETOWN!
Table 1: Democracies in 2009 with per capita income less than $8,000
Country
Thailand
Colombia
Peru
Albania
Vanuatu
El Salvador
Ecuador
Georgia
Maldives
Indonesia
Bolivia
Paraguay
Micronesia, Fed. Sts.
Mongolia
Papua New Guinea
Pakistan
Nicaragua
Solomon Islands
Senegal
Nepal
Timor-Leste
Mali
Sierra Leone
Madagascar
Niger
Burundi
Per capita income
$7,794
$7,529
$7,280
$6,643
$6,535
$6,339
$6,171
$5,052
$4,458
$4,075
$3,794
$3,705
$3,329
$3,167
$2,746
$2,353
$2,191
$2,005
$1,492
$1,211
$1,155
$999
$873
$753
$534
$368
Country
Macedonia
St.Vincent & Grenadines
Marshall Islands
Dominica
Ukraine
Guatemala
Armenia
Bhutan
Kiribati
Sri Lanka
Cape Verde
Honduras
India
Philippines
Moldova
Kyrgyzstan
Nigeria
Sao Tome and Principe
Ghana
Kenya
Benin
Comoros
Guinea-Bissau
Malawi
Liberia
Per capita income
$7,678
$7,372
$7,092
$6,577
$6,406
$6,285
$5,369
$4,566
$4,092
$4,034
$3,779
$3,605
$3,238
$2,839
$2,494
$2,299
$2,034
$1,680
$1,239
$1,206
$1,116
$916
$818
$653
$397
Notes: Per capita income measured in 2005 constant purchasing power parity prices.
Source: Penn World Table 7.0 (Heston et al. 2011).
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