Is democracy the best form of government for economic prosperity?
Faris Al-S
This has been one of the most contentious and central focuses in the world of political economy. While the long-standing consensus is that democracy is key in achieving economic prosperity, this view has become increasingly debatable with the recent economic miracles of non-democratic states in east Asia and the rise of populist politics in the western world. Economic growth can be defined as the change in a country’s annual Gross Domestic Product and human development outcomes. It had been the traditional understanding that only democracy could lead to prosperity owing to the inclusivity of its institutions and its protection of rights. However, this view seemed to lose its validity in the 21 st century. 1 The fragility of early-stage democracies and their weak institutions in the 21 st century undermined the conventional wisdom while, at the same time, institutionalized autocracies in the late 20 th and early 21 st century, such as China and Singapore, were able to deliver periods of miraculous growth due to their ability to promote reforms, long-term developmental policies, and high levels of investment. 2 This essay therefore argues that the economic benefits that democratic governments bring may be overstated and that, while democracy may have been beneficial to growth in the past, its advantages are less obvious now. Even though risks remain, institutionalized autocracies, though not personalist ones, seem to be the best form of government to achieve rapid economic growth and development for a state in its early stages. 3 How can a country achieve economic prosperity? What type of government is most conducive to economic development? Acemoglu and Robinson (2012) provide one of the most influential answers to the question. In their book, Why Nations Fail , they argue that a country can only economically prosper if it has the right institutions, as institutions guarantee the rules that underpin how the economy works and the incentives that motivate people. They state that specifically political institutions are the key driver for growth, as they determine the economic institutions which are key for fostering long-term growth and innovation. For much of the 20 th century it was held that democracy was the best form of government in order to achieve economic prosperity. Acemoglu et al. (2019) found that the democratization of non- democratic countries causes a 20% increase in GDP per capita in the long run. But how did they reach such a conclusion? They argued that democratization is followed by an increase in economic reforms, tax revenues, investment, the provision of healthcare and education as well as a decrease in the levels of social unrest, all of which increases the allocative efficiency of the economy and productivity (output
1 Narita and Sudo 2021. 2 Jong, Pin and Haan 2011.
3 By democracy I mean either – broadly – the ‘rule by the people’ through electoral competition, or the more specifically liberal form of democracy that seeks to ensure individual liberties through the promotion of pluralism (see Kaina 2022). By autocracy I mean a political system without proper electoral competition, that can either be personalist, concentrated and absolute power within an individual, or institutionalized, where parties and bureaucracies constrain leaders (see Blattman, Gehlbach and Yu 2025).
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