Saturday, January 1, 2011

acemoglu on democracy and economic growth

See this excellent debate on democracy and economic growth between Ed Glaeser and Daron Acemoglu. This is a bit old but it's the first time I'm seeing it:

I particularly enjoyed this part (Acemoglu):

The main barrier to democracy is not low education but deep social and economic divides that create intense conflict. Democracy has failed in highly educated countries -- such as Germany before World War II or post-war Argentina. It has also been extremely successful in very low-education countries. Botswana provides a perfect example. It is the most successful democracy and the fastest growing economy in sub-Saharan Africa. When the British granted independence to this colony in 1965, there were only 22 Botswanans who had graduated from university and 100 from secondary school.

But Botswana was fortunate to have avoided the most adverse effects of colonialism and thus did not suffer from deep social divides or distributional conflicts, because the British essentially had no interest in the colony and left it alone. Botswana used the revenues from its diamonds both equitably and wisely. Botswana's democracy has not only endured and flourished, but has not even been challenged by a coup or tarnished by major electoral fraud during the past 40 years.

I would also like to emphasize -- and conclude with -- this point: Sustained economic growth requires secure property rights and a level playing field for generating new technologies and entry by new firms. Democracy is the best guarantor for such sustained economic growth. Economic growth generates various vested interests, ranging from landed elites to businessmen in declining industries to privileged workers. These vested interests will try to block the introduction of new technologies and stop the entry of new firms. Democracy is not perfect, but with its more egalitarian distribution of political power, it will have greater resistance against vested interests than autocracy.

By the way, apparently Acemoglu is writing a Principles of Economics text with Laibson and List, due out in 2012: (last page). I'm interested in seeing what this looks like (though a coauthor with List somewhat diminishes my excitement).

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