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Is there any evidence that democracy is causatively linked with improved outcomes such as happiness and wealth?

And is there any data on the nature of the link? For example: do greater levels of democracy deliver greater levels of these benefits?

52d6c6af
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  • I think it might make sense to narrow the question to focus only on the economy, since happiness and wealth are not always linked and discussing both would make this a very broad question. And since the only answer mainly discusses wealth, spinning the "happiness" part into a new question wouldn't invalidate any answers – divibisan May 09 '19 at 14:16
  • @divibisian Maybe or maybe not. It's possible to have beneficial economic policies typically seen under democracies without actually being a democracy. So it's unclear whether the questioner is asking about those policies, or the mere act of voting for representatives. – Joe May 09 '19 at 14:59
  • The question is very broad. Can you narrow it down to a certain kind of outcome? Depending on your desired outcome, it could be useful to specific what 'improved' means. People naturally have very different ideas about what democracies should accomplish. – indigochild May 09 '19 at 17:49
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    I just want to share this visualization which doesn't speak to happiness but clearly indicates at least a correlation between the Economist's Democracy Index and GDP per capita. Use the year slider to see how it's changed over time but note that we're still stabilizing 2022 data and working on incorporating 2023 data. Would love to also somehow integrate a historical happiness index if someone has one they'd recommend. – Greg Venech Jun 14 '23 at 04:10

3 Answers3

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At least in recent times, democracy did boost economic growth, according to a 2017 study:

Empirical results based on a panel data of 144 countries observed for 1980–2014 show that democracy had a robust positive impact on economic growth. Credit guarantee is one of the most significant positive links between economic growth and democracy. The marginal effects of credit guarantee and foreign direct investment inflows are stronger in democratic countries than they are in non-democratic ones. In order to check the robustness of these results, a dynamic model constructed with a flexible adjustment speed and a target level of GDP is also tested. The results of this dynamic model also support the positive impacts of democracy on economic growth.

Apparently investors are more willing to invest in democracies. Of course, there's only one China, so they'll invest there too. But if you're a small country...

And even considering the more mixed results of older studies, some positive effects were derived (in 2008 meta-analysis):

Despite a sizeable theoretical and empirical literature, no firm conclusions have been drawn regarding the impact of political democracy on economic growth. This article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy-growth literature. It applies meta-regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth. Using traditional meta-analysis estimators, the bootstrap, and Fixed and Random Effects meta-regression models, it derives several robust conclusions. Taking all the available published evidence together, it concludes that democracy does not have a direct impact on economic growth. However, democracy has robust, significant, and positive indirect effects through higher human capital, lower inflation, lower political instability, and higher levels of economic freedom. Democracies may also be associated with larger governments and less free international trade. There also appear to be country- and region-specific democracy-growth effects. Overall, democracy’s net effect on the economy does not seem to be detrimental.

And as you probably expect (in this last paper):

Real-world factors appear to be important. The coefficient on Latin America is positive and statistically significant. That is, partial correlations from studies that include Latin American countries in their samples are larger than those that use OECD without Latin American observations (OECD is the base region). In addition, studies report lower democracy-growth effects when Asian countries are included in their datasets.

These conclusions are not universally accepted though. There's 2016 IADB paper which disagrees in the following sense: if you exclude all former-Socialist countries (because their economic data before 1990 cannot be trusted) and if you also exclude all countries in which transition to democracy happened (according to experts) primarily due to the poor economic situation (e.g. Benin and many of the other African transitions, or Latin America due to the 1980s debt crisis), then what's left is a sample where the transition to democracy happened "exogenously" (e.g. Spain after the death of Franco) and in these exogenously democratized countries no improvement in GDP growth due to a democratic transition is observed. However, even for these exogenously democratized countries they found some non-economic benefits, e.g. an improvement in "Physical integrity rights index (measured by the degree of torture, extrajudicial killing, political imprisonment, and disappearance indicators)" and "Empowerment rights index (measured by indices regarding freedom of speech, freedom of assembly and association, workers' rights, electoral self-determination, freedom of religion, and citizens' freedom to leave and return to their country as well as to travel within their own country)".

I should also mention that this IADB paper seems largely intended to debuk a paper of Acemoglu et al. (draft in 2014, peer-reviewed published in 2019) which not making this separation of democratization events in endo- and exogenous ones just concluded that democratization events increased the GDP growth rate for the time frame 1960-2010.

Another interesting nuance paper (2015), using data that goes back to 1820, basically finds that

prior to 1960, democratizations were not confounded by the influx of [foreign] aid and were not associated with accelerated rates of economic growth.

To reach this conclusion this paper excluded (controlled for) Marshall Plan recipients (which was pre-1960).

the gods from engineering
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  • I usually love your answers but this one lacks the usual historical depth and critical analysis that you put in them. Nazi Germany produced an economic miracle. As did Franco's Spain. Or France's 2nd Empire. Or Chile after the Chicago Boys got kicked out. Or 3/4 of the Asian Tigers. Or China. The amount of counter-examples is too overwhelming to dismiss as flukes IMO. What's actually at play here is that the past 75 years since the end of WW2 were unusually peaceful and prosperous, on a backdrop of democracy slowly but steadily gaining ground. And that is what has been feeding the narrative. – Denis de Bernardy May 09 '19 at 20:30
  • @DenisdeBernardy: you may be correct, but there's probably only sparse data for a more extensive period to consider world-wide. Or else I expect studies would have covered it. In any case, your arguments are based on exceptionalism. – the gods from engineering May 09 '19 at 20:46
  • I'd put forward that, on the contrary, if you look at he 19th century and the 20th century until ww2, there's ample evidence that there's no correlation whatsoever between the two. What has been exceptional is the long term prosperity since ww2. – Denis de Bernardy May 09 '19 at 20:51
  • @DenisdeBernardy: there's no reason why the trend cannot be different in different time frames. Just looking at what 1st paper I found, clearly it depends on the mentality of the investors. Actually a bit more digging found a paper that found no correlation just for time frame 1960-1985 https://www.nber.org/papers/w4066 – the gods from engineering May 09 '19 at 20:57
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China and Singapore are two fairly notorious examples of nations that developed without a democratic system. South Korea is another oft-cited example -- the latter gradually became more democratic since the late 1980s. Taiwan is yet another example of a country that wasn't particularly democratic until the early 1990s, yet did rather well.

While Singapore, South Korea, and Taiwan might be small enough to dismiss as flukes in the data, China is large enough that it should give pause to any commentator who, like those who prognosticated the end of History after the fall of the USSR, thought that a democratic system and economic well-being were two sides of the same coin. In the minds of thinkers at the time, there was a notion that by promoting economic development in China, democratic institutions would follow. It has not been the case, and in our age of mass surveillance there's little reason to think it'll be the case in the near future.

At the other end of the spectrum, there's a laundry list of countries with less stable institutions than the West been enjoying since WW2, which show that the democratic nature of a regime doesn't correlate much with economic well-being. And even in the West there actually are no patterns either -- see e.g. France under Napoleon III or the Spanish Miracle under Franco.

Whether citizens in non-democratic wealthy countries are more or less happy than citizens in democratic wealthy countries is subjective, but I would raise a quote from this document by the World Happiness Report which echoes the above. Discussing whether quality of government services delivered is more or less important than the government being democratic, its authors write (emphasis mine):

Previous studies comparing these two indexes as predictors of life evaluations have found that quality of delivery is more important than the democracy variable, both in studies across countries and in ones that include country-fixed effects.

Denis de Bernardy
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  • Nevertheless, Chinese communism does have democratic means of getting to consensus. Its probably important, if one is to take about this issue in a substantive way to take an in-depth look at the different forms of democracy and establish some means of judging equivalences (or non-equivalences for that matter). – Mozibur Ullah May 09 '19 at 11:29
  • I would not say the happiness is generally subjective. One can study several factors - in particular, there are many surveys that question self-reported happiness, which can be indicative and in principle provide objective data. As many statistics/surveys, any such survey can however be subjected to critical analysis with respect to methodology and local context, e.g. to how open people did/could answer and how neutral the phrasing was etc. – Frank Hopkins May 09 '19 at 11:58
  • Other than that, agree in so far that economic success is not tied to democracy. Some Near East countries could also be economically successful while still having monarchies. Perhaps an argument could be made about the likelihood for the distribution of wealth following certain patterns, but in general, government style does not strictly influence economic decisions, it may just make some more likely than others. – Frank Hopkins May 09 '19 at 12:03
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    You mention only three countries. That's not enough to establish a link or draw a substantial conclusion (other than saying there are exceptions, assuming a correlation is there). – JJJ May 09 '19 at 12:12
  • @JJJ: I've added a few more examples to address that. But frankly, insofar as I'm aware there's no correlation whatsoever if you scratch except at a superficial level. Germany enjoyed an economic miracle in the run up to WW2. The evidence that democracy is better for economics is circumstantial IMO; it just happened that the narrative was a nice story to tell in the run up to and in the decade that followed the collapse of the USSR. – Denis de Bernardy May 09 '19 at 13:53
  • @DenisdeBernardy I'm pretty sure there's correlation if you'd take some happiness index and some democracy index. That doesn't mean there's causation (which is much harder if not impossible to prove). I'll see if I can find a nice dataset if I have a bit more time. – JJJ May 09 '19 at 13:57
  • @JJJ: I found a big meta study and edited the answer accordingly. – Denis de Bernardy May 09 '19 at 14:18
  • @DenisdeBernardy yes, that speaks more to the causative aspect of the question. Intuitively I'd guess that democracies are better at the delivery and as such you'd get a correlation with happiness. – JJJ May 09 '19 at 14:24
  • @JJJ: What you wrote is not that intuitive to me: I'd expect a strictly technocratic government that has the public interest at heart and that is above the whims of this or that interest group to be as much if not more likely to maximize economic output and government service quality. (Singapore probably fits that description, too.) – Denis de Bernardy May 09 '19 at 14:30
  • @DenisdeBernardy yea, but it's intuitive if you consider that there are actually very few of those examples but a significant number of democracies. That's of course a pitfall of only using correlation if we consider each country as one example, rather than each type of governing. Of course that's why people are encouraged to look further than correlation and as you do you arrive at a more nuanced conclusion. ;) – JJJ May 09 '19 at 14:42
  • It looks like Wikipedia disagrees with you: https://en.wikipedia.org/wiki/Democracy_and_economic_growth – the gods from engineering May 09 '19 at 18:54
  • @Fizz: I'll be looking forward to reading your better answer then. I'll stand by mine. – Denis de Bernardy May 09 '19 at 18:56
  • @Fizz: I should add: the very last section in that article lists some of the same countries as I do as counter examples. But not China for some reason, so I would suggest it is not the slightest bit objective or up to date. – Denis de Bernardy May 09 '19 at 19:01
  • Doesn't most wealth generated by the cited countries come directly from democratic countries? A few non-democratic countries, doing all the democracies' dirty work (cheap labour) doesn't seem to make a strong or even somewhat reasonable case. – localhost May 09 '19 at 20:36
  • @localhost: you've put the finger on why I purposefully didn't cite countries like Kuwait or Brunei, which are by some measures are richer than western countries. Those are obvious examples of countries whose wealth are entirely related to having something developed countries want. Also, my answer expands on how places like France or Spain are also counter-examples. – Denis de Bernardy May 09 '19 at 20:38
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First part of the question -

"Is there any evidence that democracy is causatively linked with improved outcomes such as happiness and wealth?"

There is evidence that democracy is linked with improved outcomes, this evidence does not support necessary causation. At best, one would say that democracy is one of many factors that contribute to improved outcomes.

Reasoning:
For the sake of this discussion set aside the many issues with the following items:

  • "improved outcomes" are the same thing as "happiness and wealth".
  • we really could come up with some kind of metric for happiness and/or wealth that could be agreed upon.
  • we could agree on what we mean by "democracy" (There are three basic forms of democracy and many variants)

This answer:

  1. Focuses on the terms in the question "evidence" and "causatively".
  2. Uses "improved outcomes" as a single term for either wealth or happiness.
  3. Argues that democracy is not a necessary cause of improved outcomes.

One might point to a list of wealthy democratic countries or a list of the happiest countries as evidence that democracy is causatively linked with improved outcomes. This is the questionable cause logical fallacy.
Having evidence that democracy is linked with improved outcomes provides a correlation but correlation does not prove, or imply causation.

The fact that China, Singapore, and South Korea (as Denis points out in his answer) have experienced rapid economic transformation without being particularly democratic and the existence of democratic countries with persistent high poverty levels such as India, Jamaica, Philippines and others demonstrates that democracy is not a necessary cause for improved outcomes. At best, democracy is a sufficient or contributory cause for improved outcomes.

Second part of the question

"Is there any data on the nature of the link? For example: do greater levels of democracy deliver greater levels of these benefits?"

The question requires that we be able to rank levels of democracy and correlate them to improved outcomes - wealth and happiness. Here are some conclusions based on data to illustrate the issues with attempting to draw links between democracy and improved outcomes.

Ranking Democracies
The Economist has ranked democracies based on:

  1. Electoral process and pluralism
  2. Civil liberties
  3. The functioning of government
  4. Political participation
  5. Political culture

Based on this here are the top five most democratic:

  1. Norway
  2. Iceland
  3. Sweden
  4. New Zealand
  5. Denmark

Wealth Levels
Richest countries in the world - should this be measured by GDP or GDP per captia? For simplicity I'll show GDP only.

  1. China
  2. United States
  3. India
  4. Japan
  5. Germany

Happiness Ranking
World Happiness Ranking 2015-2017 Here is a graph of this data.

  1. Finland
  2. Norway
  3. Denmark
  4. Iceland
  5. Switzerland

U.S. News has it's own ranking of "Best Countries"

What can one say more democracy causes based on these rankings? Democracy causes happiness but not wealth. Or, one might say any number of other things, like:

  • Nordic countries are more democratic and happy.
  • Northern Europeans tend to be the most democratic and happy.
  • Parliamentarian democracies have improved outcomes
  • [insert your correlation here] are the most democratic and happy.

Conclusion
There is evidence that democracy is linked with improved outcomes, but this evidence does not support necessary causation.
The factors that drive "improved conditions" are more complicated than a democracy ranking.

This complexity requires us to ask better questions so that we can get actionable answers.
Suggested questions, Not a complete list.

  • What do we mean when we talk about happiness? Getting into the details on this question will uncover that there are many ways of thinking about happiness and we need to be more specific about the problem we are trying to solve to arrive at clarity
  • What are the characteristics that contribute to (the types of) happiness?
  • What role does government play in contributing to happiness?
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