There is an age old debate in the economic growth literature on whether democracy in the political realm promotes, impedes or has no effect on economic growth. It seems we might be having the wrong kind of debate. Political Legitimacy not political democracy is the critical component in economic growth, though democracy is what brings about legitimacy over the long term. The empirical literature in democracy Vs. economic growth has not still been resolved for many good reasons. There are authoritarian regimes that have registered remarkable and sustained economic growth and prominent new democracies have been seen to lurch in their growth performance. The most popular illustration of the first group is China which has sustained the fastest economic growth despite its repressive political regime. Still, many argue that, though China is still an authoritarian regime, the hike in growth is due to marginal improvements in political systems towards a more free and open economic system. This would not be a robust argument given that almost every other country has experienced possibly a greater marginal improvement in political systems than China has but have not registered commensurate growth performance. One certain observation is that countries, including both democratic and authoritarian, have been able to chronicle significant increases in their growth performance. Even after controlling for other factors, one wonders if there is something common about the political system of economies that set on faster economic growth in recent history. The debates still ensue about these elements. But, political legitimacy of governments in these nations seems to be higher than in others, even when they are authoritarian.
In 2006, a political scientist (2) calculated measures of legitimacy for 72 countries. He defined legitimacy as follows: “A state is more legitimate the more that it is treated by its citizens as rightfully holding and exercising political power”. A state must fulfill (1) three criteria to claim political legitimacy: (i) conformity to established rules, (ii) justifiability of the rules by reference to shared beliefs and (iii) the expressed consent of the people. Thus no government is legitimate unless it enjoys the consent of the governed. The most important thing needed for a regime to be legitimate is for its citizens to believe that it is. Any political system, democratic or authoritarian; can have greater legitimacy. Lock’s (1690) original claim “consent cannot be rendered except through majority rule” is in question. Whether the Chinese political elite obtained legitimacy through conformity with their principles or fear and intimidation is another discussion. But there is a predominant consensus about the higher level of legitimacy of the Chinese government. China ranked 13th among the 72 countries in Gilley’s legitimacy index, well above other developed economies including the UK, France and Australia. China is still an authoritarian party-state. Yet, the Chinese government enjoys an almost robust legitimacy across the population.
Political legitimacy tends to promote economic growth. Legitimacy tends to garner consensus and strong popular support vital for the effectiveness of growth-enhancing governmental activities. Citizens who consider their government legitimate may be more apt to venture into more productive and innovative activities. They are less prone to commit crimes, revolt or initiate an uprising and hence lessen the burden on resources for law enforcement including tax collection and criminal justice. Governments with low levels of legitimacy might allocate greater resources to law enforcement and maintenance of law and order due to the possibility of greater non-compliance. There could also be greater reliance on the property rights system if there is greater legitimacy of the state. Sustained growth and political stability by itself could create and promote government legitimacy irrespective of democratic status. This makes legitimacy endogenous to economic performance. Overall, there are numerous reasons why a more legitimate government could enhance growth.
There are risks of legitimacy without a democratic system. There are very valid fears about the long term prospects of the Chinese economic and political system especially in a very volatile and risk prone world. Legitimacy could easily be eroded and open rooms for chaos in the wake of some unanticipated shocks, economic or political. This is particularly the case if there is not a strong democratic foundation for legitimacy. The main reason the democracy-growth literature is inconclusive may be due to the wrong focus on democracy, the means, rather than legitimacy, the end. Democracy is only one way towards legitimacy that fosters growth. But, it is not the only way, at least in the short term. A legitimate government, even without a democratic system can register faster growth. Hence, the main focus should be on identifying ways to promote sustained state legitimacy. As far as systems go, a democratic process is the best and proven method to set off persistent legitimacy. In the very long run, only a democratic process ensures state legitimacy and hence economic growth. Thus, the continued discourse on democracy and growth could only be valid only if it is taking a very long term perspective or if it considers the nuances in the democracy-legitimacy-growth nexus.
Notes
(1) Beetham, David. 1991. The Legitimation of Power. London: Macmillan Education LTD,.
(2) Giley, Bruce. 2006. The Determinants for State Legitimacy: Results for 72 Countries, International Political Science Review, 27(1): (2006) 47-71.
(3) Locke, John. 1690 Two Treatises of Government. London, UK.
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