Democracy Hinders Growth And Its Effect On Economic Development

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Some scholars have argued that democracy hinders growth as a result of a collective action problem, while others argue it is the democratic institutions constraining government, and providing individual property rights which allows for economic growth (Montesquieu, 1748; Smith, 1776; Buchanan and Tullock, 1962; North and Thomas, 1973; North, 1981, 1990; Hall and Jones, 1999; Easterly and Levine, 2003; Rodrik, 2007). The former approach focuses on the role of leadership in a nondemocratic regime, specifically in how a good leader can affect the economic development in a region. The latter approach focuses on how investor risk aversion that results from the lack of property rights, corruption, inefficiencies, and political instability in a…show more content…
The notion goes back to de Tocqueville, but in modern form it has been revived by Barro’s empirical work (1996a and b). Finally, Wintrobe (1998) argues that the authoritarian elite successfully rules by repressing some in the population while nurturing the loyalty of others. Similarly, the threat of a rebellion by the opposition compels the dictator to share rents in Gandhi and Przeworski (2006).
The literature on rent seeking suggests a means by which alternatives to collective action can insulate state actors from societal interests (Mares, 1993: 457). Rent creation implies rent distribution, creating incentives for rent seeking in the domestic economy; even efficient firms will devote resources either to capture the rents or to lobby for their elimination ' (Buchanan, p.35). Bates ' work on Africa demonstrates that, rather than simply buying off societal opposition, state actors can distribute rents to build supportive policy coalitions (1981). A second way for state actors to build a winning policy coalition is to help potential supporters of state preferences overcome barriers to collective action through their power to tax and regulate. Here, state actors can force would-be free riders to contribute to the provision of the collective good (Olson, 1965).
Olson (1993, Olson and McGuire, 1996, Olson, 2000) compares the economics of dictatorships
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