Today

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Todays TopicsInstitutional Design/ Economic
Reform Democratization

1. Small group discussion activity to conclude
   institutional design.
2. Understand potential dangers for democracy in
   economic reform process.
3. Learn and assess between sides of debate on
   authoritarian advantage in economic reform/
   performance.

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Small-Group Discussion Designing Institutions

• Iraq, South Africa, Russia groups.
• Would you have a presidential or parliamentary
  executive? Mechanisms for balancing powers?
• What would the electoral system be for electing
  legislative and executive leaders?
• What are your reasons for choosing these
  institutions?

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Democratization Economic Reform
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Dangers for democratic regime

• Economic deterioration may erode peoples
  attachment to democracy.
• Extremist parties may gain power.
• Growth of voter apathy.
• Danger of coups.

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Dangers for democratic regime

• Leaders may seek to ram through reforms to
  break political logjams.
• Strong presidency or multiparty parliament
  preferable?

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Common issues of conflict and controversy

1. Role of the state in economic development.
2. Distributional consequences of reform (who gets
   what?).
3. Government accountability.

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Debate over regime type and reform

• Authoritarian advantage?

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Pro-Authoritarian Argument

1. Democratic governments may lack capacity for
   quick action.
2. Workers demands in democracy reduce profits and
   investment for growth.
3. Democratic citizen demands for social programs
   divert monies from investment.

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Pro-Democracy Argument

• Authoritarian advantage depends on enlightened
  dictator.
• Why would dictator invest in country instead of
  squandering resources on self?

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Pro-Democracy Argument

1. Democratic leaders face punishment at polls for
   failure.

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Pro-Democracy Argument

• Lack of rule of law in authoritarian regimes ?
  investors fear to commit.
• Danger of losing property rights at any time.

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Pro-Democracy Argument

1. Political freedom generates better information
   for decisionmaking.

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Pro-Democracy Argument

• Democratic governments are risk-averse.
  (Przeworski Limongi)
• Tend not to invest in grandiose schemes.

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Pro-Democracy Argument

• Democratic legitimacy can weather economic
  crisis. (Huntington)
• Not based on performance legitimacy.

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The Historical Record

• Authoritarian advantage based on limited time
  period and regions. (Maravall)
• 1960s-70s Latin America
• 1980s-90s East Asian tigers

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The Historical Record

1. No difference between dictatorships democracies
   in growth rates 1950-1990. (Przeworski Limongi)