Intro to Comparative Politics 1 24 13 Economic Determinants of Democracy Gross Domestic product GDP the value of all goods and services produced in a country US has the largest China the second size of the economy GDP per capita GDP size of population China s isn t high because of large pop ulation Wealth of economy distribution of wealth is completely ignored there s a significant relationship between wealth and democracy but correlation isn t causation so how do we explain it Classic Modernization Theory societies move from immature traditional to mature modern as countries mature they become more complex economically dictatorships are less effective dictatorships are unstable in developed countries democracy is unstable in developING countries Traditional traits large agriculture small industry small service dictatorship Modern traits small agriculture large industry large service like restaurants democracy Predictions 1 Democracy more common in rich countries 2 transitions to dicta torships less likely as income increases 3 transition to democracy more likely around 90 of countries with a per capita GDP of 7 000 or more are democra cies only about 12 with GDP less than 2 000 are democracies India is poorest democracy on the contrary some of the most stable autocracies are very wealthy especially oil producers like the United Arab Emirates problem with modernization theory is that it relies on a correlation not a causal argument Variant of Modernization Theory it s not wealth but changes in the socio eco nomic structure of the economy that accompany democracy ex England in the 1500s England has Glorious Revolution king turns over power king needs money from elites needs additional resources besides taxes mod ernization affects assets of elite Types of Assets Quasi rent the difference between an assets vale and its short run opportuniyt cost copper mine has huge quasi rent can t be hidden Cash has low quasi rent can be hidden Liquid Assets cash bank deposits can easily be turned into other types of as sets without losing value Fixed assets cannot easily be converted to cash without losing value like a farm if you sell it you only get selling price lose all future revenue you couldve gotten if you kept it modernization greatly affects all this by 1600s modernization shifted wealth from landed agricultural elites to mer chants and financial intermediaries the new gentry can hide the assets from the king sovereign debt debt accred by the goverment credible commitment problem an actor who makes a promise today has an in centive to renege on that promise in the future ex king no longer wants to pay back elites once he regains power game theory Elites can either pay taxes and invest disinvest or give money and demand limits on king s power E demand limits King rejects E either pay taxes or disinvest If King accepts growing economy and limited gov t If King rejects Elites can either disinvest or pay Elites disinvest there s a stagnant economy and unlimited gov t Elites pay taxes there s a growing economy and unlimited gov t Rules If one has liquid assets one has a credible exit threat E the crown is dependent L maintaining loyal citizens 1 payoff of getting the power C cost of demanding power E 0 E 1 C Find Equilibrium through Backwards Induction Best Option for Elites is to demand lim its best option for King is to accept them payout is 1 C for elites L for king Rule Change Crown is not dependent Elites submit to taxes Mobile Assets Autonomous King Poor Dictatorship Mobile Assets Dependent King Rich Democracy Fixed Assets Autonomous King Rich Dictatorship Fixed Assets Dependent King Rich Dictatorship rentier state derives all or substantial portion of revenue from rent of indigenous natural resources to external clients have resources and external buyer resource course countries with large supply of natural resources suffer from poor gov t low econ development civil war and dictatorship foreign aid money food technical assistance weapons that one country gives another reduces gov t dependence on citizens Inequality democratization in unequal countries will likely lead to pressure for economic re distribution poor will expropriate form rich democracy is costly for elites many successful right wing coups to block democratization but weak empirical evidence universal suffrage has not led to the expropriation of the rich if elites have mobile assets poor depend on elite for economic growth taxes vs depend on type of inequality income inequality sign of growing middle class with mobile assets increase in land inequality sign of elites with fixed assets decrease in democracy difficult to say which is better both richest and poorest countries are under au democracies tend to be wealthy and wealthy democracies tend to remain democ the extent to which a ruler is dependent upon elites and the type of assets elites hold help to explain why some countries are democracies and not others foreign aid natural resources and types of inequality there is great variation in the economic outcomes of dictatorships job creation democracy thoritarian rule Conclusions racies
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