Governability and Democracy Birkbeck College, University of London Department of Management Governability and Democracy Daniele Archibugi Module Business Environment (Convenor Frederick Guy) Tuesday 23 February 2016

Assignments for the Lecture Amartya Sen, DEMOCRACY AND SOCIAL JUSTICE, in Democracy, Markets and Economic Development, Edited by Farrukh Iqbal and Jong-it You, The World Bank, 2011, available online at http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2001/06/08/000094946_01052404084912/Rendered/PDF/multi0page.pdf#page=29 Archibugi, Daniele. 2008. The Global Commonwealth of Citizens: Toward Cosmopolitan Democracy. Princeton, NJ: Princeton University Press, chapter 2. Crouch, Colin. 2009. What Will Follow the Demise of Privatised Keynesianism? The Political Quarterly 80:S302-S315.

The development of democracy Democracy is a conquest and, as all conquest, is the outcome of a struggle A struggle among different social groups to get or to reduce economic privileges and to participate to the management of the political community Three generations of rights according to T.H. Marshall Civil rights – typical of the XVIII century Political Rights – typical of the XIX century Social and Economic Rights – typical of the XX century What are the rights typical of the XXI century?

From POLITY IV http://www.systemicpeace.org/polityproject.html

Intrinsic and extrinsic advantages to be members of a democracy Intrinsic – participation to the norms and management of the community of belonging Extrinsic – material advantages associated to a specific political regime

The impact of rights development on the political process When individuals are not only members of the economic community, but also of the political community, do they manage to get some advantages? Is there a democratic dividend? To look at a democratic dividend means that the distribution of income and wealth is the result of a political struggle among different social and economic groups Within this struggle, political institutions can make a difference

Markets and Governments While income distribution is strongly associated to market forces, they alone are not able to explain all of it Governments condition income distribution through a variety of rules and regulations, including: Competition Access condition Taxation Trade agreements

The international dimension In a closed economy there are more instruments available to the government to regulate and shape the economic activities (rate of exchange, rate of interest, openness to international trade, control over capital inflows and outflows, regulation of inward and outward foreign direct investment, even control over inflows and outflows of people The international dimension put a constrain to the possibility of governments to regulate internal markets The Keynesian paradigm was conceived for economies that had important economic policies instruments. Does it hold also now?

The Democratic Deficit Political Aspects Citizens of democratic countries live in countries that respect their civil and political liberties (tautological) Citizens of democratic countries are less likely to be victim of mass killing from their own government (tautological) Citizens of democratic countries are less likely that their country participate to wars that are lost

The Democratic Deficit Wages Workers in democracies earn more than in non-democracies (Rodik, 1999) Through political rights, the populace manage to get a higher share for their labour

Rodrik, Democracies pay higher wages

The Democratic Deficit Income Inequalities Through political representation, citizens acquire also a say in the political process and can introduce laws that increase their income and wealth share (such as progressive income taxation and capital tax) It should therefore be expected that the more democratic a country the lower income inequalities

Relation between UDS index of democracy and GINI index for the year 2010

Relation between UDS index of democracy and the spending on education as % of GDP

Relation between spending on education as % of GDP and the GINI index

Sources: Marco Cellini Source: Elaboration on data of the Database SWIID 4.0 (2010), Solt F., “Standardizing the World Income Inequality Database”. Social Science Quarterly, 90:2, 231-242, 2009 for the GINI Index, and on the data of the database UDS Index (2010). Pemstein D, Meserve S. A., Melton J., “Democratic Compromise: A Latent Variable Analysis of Ten Measures of Regime Type”. Political Analysis, 18:4, 426-449, 201. For the index of democracy Source: Elaboration on data of the “The UNESCO Institute for Statistics (UIS)” for the Spending on Education, and on data of the Database SWIID 4.0 (2010), Solt F., “Standardizing the World Income Inequality Database”. Social Science Quarterly, 90:2, 231-242, 2009 for the GINI Index

How long does it take to achieve outcomes? The effect on income distribution is long term Measures of democracy are more likely to change quickly (as the introduction of free election or coup d'états) But also the real nature of political systems change gradually over time

The Democratic Deficit Social factors Democracies are mostly immune from severe famines. The freedom of information helps citizens to take decisions and to know what they can do (Amartya Sen) But in some specific non-democratic regimes, i.e. communism, life expectancy are higher than in comparable democracies. Cases: Cuba vs other Latin American countries; India vs China

Colin Crouch: Post-Democracy Reduced participation in the public sphere, at the expenses of participation in the private sphere Individuals are more and more consumers and less and less citizens

The re-emergence of an old issue The division between liberals and democrats Benjamin Constant stressed the difference between Freedom of the ancients, namely to participate to the public life. It was a virtue to take part to public discussions and engagement. Guaranteed through direct democracy Freedom of the moderns, when citizens delegate their representatives to deal with collective problems and can devote time and energy to the private and business life. Guaranteed through representative democracy

Greater role for the company Lower authority of the public sector in giving its function, also because of budget cuts that have lowered the resources available Expansion of its scope also to areas that were traditionally provided by the public sector (e.g. health, public transport, education) First controversy: has the privatization of public activities led to an increase in efficiency and a reduction in costs?

Lower role for the public sector Keynesian intervention in the economy has been reduced. The government is not, for example the provider of anti-cyclical Expansion of its scope also to areas that were traditionally provided by the public sector (e.g. health, public transport, education) First controversy: has the privatization of public activities led to an increase in efficiency and a reduction in costs?

Can we conclude that democratic quality has deteriorated? The quantitative side: number of democracies have increased Does it also mean that the quality of democracy in consolidated democracies has increased? There is no evidence of that: for sure something has changed

How democracy is changing Globalization of the economic sphere has reduced many of the instruments on which the Keynesian compromise was based Protection of the rights has somehow increased but this is more in line with liberalism The retreat of the state has implied that rights are claimed more and more to the business rather than the public sector In turn, the business sector has become more capable to organize its interests against workers and citizens

Prospects for democracy Expand democratic participation beyond borders Increasing controls over the business sector at the transnational level Revalue the importance of civic participation