Economics, Democracy

Democracy and Prosperity

Tom Christiano, a leading theorist of democracy, has just reviewed Jason Brennan’s Against Democracy. In it, he accuses Jason of having an ill-equipped micro-theory that fails to account for the phenomena Jason addresses. In particular, Tom thinks that the book cannot explain why actual democracies are as successful as they are. He doubts such success could have been led by Jason’s hobbits and hooligans. Here’s Tom:

[T]he modern democratic societies of Europe, North America, and East Asia have actually been quite successful; and the democratic element in them is a large part of what seems to explain that. First, there is a great deal of data marking out the remarkable differences between reasonably high quality democracies and other kinds of societies. Brennan mentions these but I don’t think he takes the full measure of the evidence. Democracies do not go to war with one another and respect the rules of war better than other societies.  They are responsible for the creation of the international trade system, the international environmental law system, and the human rights regime.  In fact, democracies do massively better on basic human rights than other societies, and it appears to be more their majoritarian character that explains this than their systems of checks and balances. Democracies prevent famines and, since the onset of universal suffrage, have developed powerful welfare states that have been enormously productive, have greatly reduced poverty, and have smoothed out the disastrous economic crises that occurred in their more free market ancestor societies.  Further, they have generally protected the interests of workers and lower economic classes, done a better job at producing public goods than other societies and generally have higher rates of per capita growth than their free market ancestors. Most of us hope for much more progress than this, but these achievements are extraordinary and are hard to square with the idea that hooligans and hobbits are at the helm.

 

Of course, I will let Jason defend himself. Here I want to examine the larger issue raised by Tom’s macro-theory: why are actual democracies successful?

There are reasons to doubt the accuracy of Tom’s story. Modern democracies have three components: a rights-constrained majoritarian component (universal suffrage and bill of rights), a redistributive component (the welfare state), and a capitalist component (robust markets). I do not quarrel with Tom’s observation that actual democracies do much better in terms of, well, democracy and human rights. But Tom thinks that these societies’ majoritarian and redistributive components are the key contributors to economic success, including poverty alleviation. This is entirely unclear to me and to those who have addressed the issue. For one thing, the Latin American experience shows that democracy and redistribution do not always lead to success. For another, the “free-market ancestors” managed to exclude many people from the market. So I think it is plausible (to put it mildly) that the great leap in prosperity and poverty alleviation occurred when modern democracies established secure property rights and allowed everyone the opportunity to better themselves through trade, as Deirdre McCloskey has claimed.

It may well be that, as Tom suggests, the introduction of universal suffrage is part and parcel of the ethics of equality that allowed everyone to attempt success. But it is much less clear that, with important exceptions such as publicly-funded education, redistributive institutions have contributed to the great enrichment and poverty alleviation in the modern world, and especially in successful democracies. Plausibly, these impressive achievements stem from the unprecedented opening of domestic and international markets, that is, from the capitalist component of successful democracies. Certainly, economic theory seems more congenial to this explanation (see here and here, and Lomasky’s and my discussion here.) If development economists are right, Tom’s argument sounds like a post hoc propter hoc fallacy.

  • UncleRitchie

    I think you should re-write this, you didn’t suggest bombing someone anywhere in the post.

  • MARK_D_FRIEDMAN

    You point is well taken. During the Victorian era the US and UK enjoyed the highest standard of living in the world, yet the franchise was greatly restricted. It was the rule of law, and particularly secure property rights, wot done it. Richard Pipes’s Property and Freedom is also a good source on this connection.

    • King Goat

      The franchise in the UK and U.S. were greatly restricted compared to now, but compared to the rest of the world at that time they were relatively two of the more democratic nations, so the correlation you’re arguing against is actually supported by your examples.

      • MARK_D_FRIEDMAN

        [This is a troll. I try to discourage him this way.] Thanks Goat for this brilliant insight, I will need some time to digest your penetrating comment and reply to you. In the meantime, you might wish to read through my Nozick’s Libertarian Project: An Elaboration and Defense. Matt Zwolinski, founder of this site, was kind enough to write the following blurb for it. Take a look and give me your thoughts, okay?

        Nozick’s Libertarian Project is the only book of which I am aware that attempts to defend and build upon the kind of neo-Lockean, market-friendly libertarianism articulated in Robert Nozick’s Anarchy, State, and Utopia. Given the importance of the topic, this book should be of great interest to academics working in political philosophy. And given the accessibility of its style and the popular interest in libertarianism, it will be excellent reading for a more general audience as well.”

        • Rob Gressis

          Hi Mark, I know you and Goat have static, but his comment seemed pretty reasonable to me, and seemed to make a good point. Of course, I’m perfectly open to the idea that I’m kind of a dumbass.

          • MARK_D_FRIEDMAN

            No, I’m sure you’re not a dumbass, but I think you missed this particular point. Teson summarizes Christano like this: “It may well be that, as Tom suggests, the introduction of universal suffrage is part and parcel of the ethics of equality that allowed everyone to attempt success.” Until recently no country had “universal sufferage,” yet some had much higher standards of living. So Goat’s point is irrelevant to my claim (and Teson’s) that secure property rights are the key. Hope that helps.

          • King Goat

            ” yet some had much higher standards of living”

            Yes, the ones with the relatively widest suffrage.

          • MARK_D_FRIEDMAN

            Now, Goat, if you’ve already read my first suggestion, or if it’s a little too well, philosophical for you, you might prefer my Libertarian Philosophy in the Real World. Hillel Steiner said of it: “Friedman here extends his natural rights approach to libertarianism–as discussed in Nozick’s Libertarian Project–into a series of currently salient public policy issues: an important work for libertarians and non-libertarians alike.” Nice, eh?

          • King Goat

            Dont mind Mark’s eternal butthurt, dude’s a bit on the obsessive side of the spectrum.

          • Well, as this comment ably demonstrates, Mark is correct on one point for certain: You are a troll.

          • King Goat

            Butthurt obviously contagious!

          • That’s right, goat, thaaaaat’s right. Everyone is butthurt who doesn’t give you the reaction you want. Oh, the lulz.

          • King Goat

            See, it’s evident how full of crap you are. As others have noted, I made a completely reasonable reply to Mark’s point with no attack on him at all. He replied with an attack. That didn’t bother your delicate sensitivities. My response to it, though, did. You’re just still butthurt from our disagreeing several times recently, it’s plain.

          • LOL I love this. Three comments deep into any exchange you’re invariably explaining “what really happened.” Serve me up another one of your award winning analogies, preferably in “You: , Me: ” format.

          • King Goat

            Not any exchange, but yes when people talk to people who are dullards or engaging in a bad faith personal thing (this is, what, the third thread since our initial disagreement only a week or two ago where you’ve inserted yourself into a debate I was having with someone else to troll me like this) they sometimes find themselves belaboring the obvious.

          • Haha! “I’m not a troll, you are!”

          • MARK_D_FRIEDMAN

            Actually it is pretty funny in a pathetic sort of way. I make a comment to Teson, Goat “corrects” me. I unambiguously indicate (as I have countless times before) that I don’t wish to communicate with him. A third party (Rob) speaks to me, and I answer him, and Goat again directs his unwelcome attention my way. Yet, accoding to Goat you are the troll. This after announcing to Rob that I am “on the obsessive side of the spectrum.” Now you know what I have been dealing with for the last couple of years.

          • Puppet’s Puppet

            That’s right, goat, thaaaaat’s right.

            Are you…bleating at Goat? What a speciesist shitlord you are!

    • Peter from Oz

      In 1900 the highest standard of living was enjoyed by the group of British colonies that later became Australia. Those colonies had a reasonably broad franchise with limited self government. Most of the big decisions were taken in London, with local concerns addressed on the spot. It actually worked very well, because they had the rule of law, property rights, oodles of wool and gold, and it was underwritten by the British government. In addition, the colonies had a British culture, adapted to local conditions. This ”mono-culture” added to stability and confidence.

      • MARK_D_FRIEDMAN

        Okay, so what is the origin of the “pomme” insult I’ve heard thrown at the British?

        • Peter from Oz

          No-one really knows.

      • Might be worth pointing out that it wasn’t a mono-culture. There was an enormous group of people who were left out of the game. The fact that there is always a few groups that “prosperity” left behind in every British colony everywhere, beginning with Ireland, seems like a pretty important point.

        How might history have been different, had the British installed a true universal democracy first, and then property registrations second? Can you imagine British officers traveling with their paperwork deep into the Outback to register property ownership among the aboriginal population as a first step to establishing a British colony there?

        It seems to me that the nations in which the British pattern appeared to work best were those that had large tracts of land and not too many aboriginal people: Canada, Australia, the USA. All the other British colonies ended pretty poorly/violently when you think about it.

        One theory might be that grabbing up all the land and then administering it in a British-style bureaucracy before anyone can object too much to what’s going on might serve free markets better in the long run. Even so, we’re still living with the aftermath of those processes, and the places where that didn’t go over so smoothly have since become failed states and breeding grounds for terrorism. It’s a tough call to make.

        • MARK_D_FRIEDMAN

          “All the other British colonies ended pretty poorly/violently when you think about it.” All? Just curious what states you are including: India, Hong Kong, Singapore, South Africa? Rhodesia is admittedly not looking too good. I suppose it depends on your yardstick.

          • “All” might be too strong a claim, so maybe what I really mean is “enough to comprise a trend.” I was thinking of India, China, and the Middle East. South Africa is another important example, though. We shouldn’t forget what happened there.

            I think India really proves the case best. The more you learn about India’s history, the more it becomes clear that the British did more harm than good there. Much more harm. And that’s even besides the genocide.

        • Peter from Oz

          Autralia in 1900 was as close to a mono-culture as a country can be. The aboriginal culture had virtually no impact.
          I think you have a good point about the fact that the US, Oz, Canada and NZ were the propserous colonies because of the fact that the native population was sparce and primitive. But they were the colonies. Along with South Africa. The other possessions of the Empire were not colonies in the same manner, because they were never meant to be settled by large numbers of people from the British Isles.
          The fact that Iraq and Palestine are hotbeds of terrorism has something to do with theie post-Ottoman rule by the British, but they were not colonies.

          • You make a good point that the other colonies weren’t ever settled by large numbers of Britons. I hadn’t considered that, and that does strike me as being an important difference.

  • HermanStone

    A simple challenge for Christiano: Are there good examples of societies that have become obviously prosperous and well functioning with democracy, but without markets? Because there are certainly examples that go the other way. Am I being naive, or is that not a pretty big red flag for the “democracy as the key ingredient” claim?

    • King Goat

      What’s an example of a ‘well functioning’ non-democracy?

      • HermanStone

        Hong Kong for quite a while, and to a lesser extent recently.

        Singapore kinda. It’s got a lot more markets than democracy.

        • King Goat

          Thanks for the response. I myself have a little trouble with those two examples though, as they’re essentially cities.

          • HermanStone

            Any particular problem, or just a general sense that they’re obviously different in a big way, so let’s be careful drawing conclusions?

          • King Goat

            The latter. It’s akin to the idea, popular in poli sci, that town hall style democracy works fine in New England towns but that that doesn’t tell us much about what would work outside such settings.

          • Peter from Oz

            It’s probably the same with holding up the Scandi nations as examples of the triumph of social democracy. They are places with very small populations and are thus more amenable to government planning the economy.

          • King Goat

            Agreed, I’ve always thought this as well. They would basically be states in the U.S.

  • Krinein_ev

    “It may well be that, as Tom suggests, the introduction of universal suffrage is part and parcel of the ethics of equality that allowed everyone to attempt success.”
    This is a key point.
    Authoritarian systems universally transform themselves into kleptocracies. While a well-run authoritarian free-market state is possible in theory, I doubt it has ever existed in practice… and certainly not for very long.

  • RJL

    The importance of democracy isn’t so much in who or how many have the vote, but that there is a vote, that leaders do not enjoy permanent tenures but are accountable to the selectorate and can be removed. This is the minimally sufficient incentive to not institute completely shit policies. Secure property rights &c &c follow from this.

  • geoih

    “Democracies do not go to war with one another and respect the rules of war better than other societies. ”
    Has he never heard of the War of 1812, or the American Civil War?

    • Peter from Oz

      What is that about exceptions,rules and proof?
      BTW, Britain was not a democracy in 1812.

      • geoih

        In which case, neither was the US. So where was all the prosperity coming from then?

        • Peter from Oz

          The industrial revolution

  • Horacio Spector

    The simple truth is that markets, the engine of wealth, need a well-controlled protective association that prevents pillage and plundering. Both private mafias and governmental bandits, and their associates, harm the engine and, at the limit, cause poverty, unemployment and a hopeless skepticism in freedom. The rule of law, social insurance and redistributive systems, voting methods and other institutional arrangements can have various effects on the protection of property rights and the stability of a free society. I believe that their evaluation in terms of general prosperity and poverty alleviation is subject to a multitude of factors that vary across contexts.

  • Sean II

    “…an ill-equipped micro-theory that fails to account for the phenomena…”

    Boy, have I got another example for you.

  • Peter from Oz

    “Modern democracies have three components: a rights-constrained
    majoritarian component (universal suffrage and bill of rights), a
    redistributive component (the welfare state), and a capitalist component
    (robust markets).”
    And thus we see the same old left-wing mistake, the conflation of government and society. The latter is totally separate to the state. It is the totality of individuals and families Margaret Thatcher referred to in the famous Women’s Own interview, the little platoons of Bourke and all the customs and conventions that we follow every day without reference to governments.
    Modern prosperity came about because of societal change in Britain that led to the industrial revolution. Democracy was adapted to fit in with this prosperity as it spread throughout Europe and the British colonies and ex-colonies.
    Society and the market/economy are two sides of the same coin. Government is something else entirely. The welfare state has been a curse of gigantic proportions. It has not lifted people out of poverty as much as introduce to a new kind of poverty, the poverty of low expectations.

  • Puppet’s Puppet

    So there are basically two howlers in Christiano’s review. One is the one that Teson addresses:

    [S]ince the onset of universal suffrage, [democracies] have developed powerful welfare states that have been enormously productive, have greatly reduced poverty, and have smoothed out the disastrous economic crises that occurred in their more free market ancestor societies.

    Did universal suffrage lead to the welfare state? Certainly noblesse oblige had its role, especially in the ancestral forms of state “poor relief” whose history is too little thought about these days by students of economic systems. But the case certainly seems a hell of a lot better than the case that universal suffrage led to liberalism.

    The other half of the claim–that the welfare state did indeed have the claimed economic effects–is what Teson’s main focus is. It’s essentially the central concern of “left-valued” libertarianism in general. It’s rather odd that Christiano, knowing that the author he is reviewing is a left-libertarian (in his defense, I’m not sure I or any of us know it either), simply throws this claim out there casually like backgrounded material when assessing Brennan’s claims about democratic theory. The entire thing reduces to the familiar economic debate between the libertarian and statist left.

    This is the other howler:

    In fact, democracies do massively better on basic human rights than other societies, and it appears to be more their majoritarian character that explains this than their systems of checks and balances. (Emphasis mine.)

    Teson only addresses the first half of this, conceding it before moving on. But it’s the second half that really leaves you scratching your head. In the first place, it sets up a false dichotomy. “Checks and balances” are not the only tool apart from (allegedly) majoritarianism for nurturing a liberal political culture. The UK–to take only the example of the grandfather of global liberalism–is extremely weak in this regard, essentially a Parliamentary dictatorship. But the Brits have a very strong, entrenched legal culture and strong liberal expectations and historical “prejudices,” as Burke would put it, that have acted as restraints on the arbitrary exercise of power. (I will leave it to McCloskey to explain how the story of these developments has been intertwined with that of economic developments.) Of course, they aren’t as good as the U.S., which does have a written Constitution with very strong separation of powers. But the fact remains–“checks and balances” are but one tool for nurturing liberalism. To reduce everything in democracy aside from majoritarianism to it is to stack the deck.

    Even with this deck-stacking, of course, Christiano’s claim is quite weak. As time has passed, liberalism (at least in compromised form) has advanced around the world. And so, in what has certainly seemed the more robust trend, has universal suffrage. What I do not really see is many examples of majoritarianism being responsible for liberalism. That does not seem to match very well with the history of the U.S., or the UK, or prewar Europe, or postwar Europe or Japan, or much of anything. And the history of popular voting is shot through and through with the rise of regimes that are anything but exemplars of “basic human rights.” Several of them are currently rotating through the daily front-page international headlines as we speak. This is hardly a new observation. Authors as profound as Dierdre McCloskey and as vapid as Fareed Zakaria have recently addressed lay books to the subject of distinguishing majoritarianism from liberalism as components of modern democracy. So I am not quite sure why Teson lumps “universal suffrage and bill of rights” into a single one while–of all possible occasions–replying to a review of this latest effort to remind the public of how distinct the questions of who wields political power and how it should be wielded are.

    One of Christiano’s more intriguing points is his questioning why Brennan’s epistocracy would not simply devolve into a technocracy with great self-confidence and no particular regard for human rights. I do suspect that technocracy is a serious threat, sort of the epistocrat’s counterpart to mob rule. And I suspect that much of what sets Brennan apart from conventional libertarians (left- and right-), with “epistocracy” finding little enthusiasm elsewhere in a crowd (to put it mildly) not known for their democratic fetishism, is that he is not particularly alarmed by the prospect of technocracy. I think he’s probably best characterized as an epistocrat with certain liberal tendencies (at a time when few on the left have any at all), rather than as a liberal per se of any variety. And–with perhaps less confidence–I suspect that, once liberal culture is sufficiently entrenched in a society, incorporating some amount of democracy really has become the best arrangement for promoting its long-term stability.

  • David D Boaz

    I wonder whether the pattern is really more like: countries have free(ish) markets, which lead to growth and (then?) democracy. That seems like what happened in Taiwan and South Korea, and maybe also in early modern Holland, for instance.

    • Sean II

      Even more likely:

      Countries have high human capital, which leads to value creation, which leads to trade, which leads to markets, which leads to cultural liberalism, which leads to democracy…

  • How can you even prevent the basic looting of minorities by the majority without a capitalist ideology?