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Journal of Democracy, Volume 19, Number 4, October 2008, pp. 57-68
(Article)
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DOI: 10.1353/jod.0.0031
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Poverty, Inequality, and Democracy
WHY DEMOCRACIES FAIL
Ethan B. Kapstein and Nathan Converse
Ethan B. Kapstein is Paul Dubrule Professor of Sustainable Development
at INSEAD in Fontainebleau, France, and Visiting Fellow at the Center
for Global Development, in Washington, D.C. Nathan Converse is pursuing a doctorate in economics at the London School of Economics.
Since the great wave of decolonization began in the 1960s, more than
120 episodes of democratization have taken place in nearly 90 countries.1 Those democracies established since 1980 have survived at higher
rates than democratic regimes founded in the two decades prior to that
year. Yet it is clear that many of today’s developing-world and postcommunist democracies—including those in such countries as Bolivia,
Georgia, Venezuela, and Russia—are backsliding and at risk of reversal,
if this has not already occurred.
New data have the potential to shed more light on the causes of democratic collapse.2 To date, experts have tended to focus on economic performance as the key to whether young democracies live or die.3 But is
this obviously the case? During the early 1990s, the postcommunist democracies of Central and Eastern Europe experienced economic distress
comparable to the Great Depression but did not backslide from democracy. Conversely, years of robust growth in Thailand did not prevent a
military coup there in 2006.
What if institutions—and in particular, political institutions—play
the crucial role in democratic consolidation? The data suggest that this
is so, and further point to institutions that place effective constraints
on executive power as being of special importance.4 When a leader,
whether a president or a prime minister, faces only weak constraints, the
temptation grows to gather economic and political power into executive
hands. As power becomes more concentrated, members of other branches of government, investors, and agents of civil society begin to doubt
whether public policies will promote the general welfare. It is notable in
this context that one of the first things that would-be authoritarian leadJournal of Democracy Volume 19, Number 4 October 2008
© 2008 National Endowment for Democracy and The Johns Hopkins University Press
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Journal of Democracy
ers try to do is roll back existing constitutional constraints. The actions
of presidents Hugo Chávez in Venezuela and Vladimir Putin in Russia
are cases in point.
Historically, data sets on democratization episodes have tended to
lump together democracies founded before 1960 with those constituted
after that date. Our data set focuses exclusively on the latter group, made
up mostly of developing nations. Focusing on young democracies avoids
the problem of weighting the data too heavily with democratizations in
today’s advanced industrial countries. The data set upon which this essay is based is also one of the first to include all cases of democratization in post-Soviet states.5
Beyond the growing availability of data on developing and postcommunist countries, we believe that there are several good theoretical reasons to focus on relatively recent democratizers. First, as Samuel P.
Huntington and more recently Philip Keefer have stressed, the leaders of
young democracies may, by definition, have difficulty establishing their
legitimacy with the electorate and making promises that their constituents consider credible. This suggests that the very youth of a democracy
may cause governance problems that could lead to premature collapse.
As Huntington has written, the world’s “new democracies are, in effect,
in a catch-22 situation: lacking legitimacy they cannot become effective; lacking effectiveness they cannot develop legitimacy.”6
In a similar vein, young democracies are likely to suffer from institutional weaknesses. This is to be expected: Institutions take time to build
and to develop credibility. Central banks need to maintain stable monetary
policies over time if they are to establish their inflation-fighting credentials, and judicial authorities need time to establish that they are independent from political intrusion. Parliaments and executives must shape their
roles and responsibilities so as to forge power-sharing arrangements that
are productive and effective. Political parties also take time to form and
coalesce around particular themes that aggregate the interests of their core
constituents. Not surprisingly then, political scientists have found that the
sheer amount of time that a democracy has existed is positively related to
its chances for survival. In other words, the longer a democratic regime
endures, the less likely is a return to authoritarian rule.7
Finally, recently democratized countries as a group display far more
political and economic volatility than their older counterparts.8 There are
larger swings in economic variables such as inflation, and the chances
of democratic collapse are much higher. Separating these volatile states
into a unique set for analysis may reveal something useful about the particular pathologies that afflict them. To this end, we drew on Polity IV
democracy measures and other publicly available sources of economic,
social, and political data to compile a comprehensive data set of 123
democratizations that took place between 1960 and 2004 in 88 different
countries. Table 1 shows our cases by region and by decade.
Ethan B. Kapstein and Nathan Converse
59
Table 1­— Democratizations by Region and Decade (1960–2004)
1960s
1970s
1980s
1990s
After
2000
Total
Total
26
20
17
52
8
123
Latin America
6
3
11
5
1
26
Western Europe
1
3
0
0
0
4
Eastern Europe
0
0
0
19
2
21
Sub-Saharan Africa
15
6
2
19
4
46
Middle East / North Africa
0
1
1
1
0
3
Asia
4
7
3
8
1
23
Source: Polity IV, authors’ calculations
Of the 123 democratizations, 67 gave rise to democratic regimes that
survived through 2004, while the remaining 56 episodes had ended in a
return to authoritarianism by the end of that year. As Table 2 (on page
60 below) shows, rates of democratic reversal vary widely between regions. While sub-Saharan Africa has been the site of nearly twice as
many democratizations as any other region, 63 percent of democratization episodes there have ended in reversal. Democracy in Latin America
and Asia has also exhibited limited durability, with nearly 35 percent
and 57 percent of all cases, respectively, undergoing reversal. By contrast, more than 90 percent of Eastern Europe’s democratizations had
been sustained as of 2004, which is particularly notable given the economic difficulties and dislocations which swept that area following the
overthrow of communist rule. North Africa and the Middle East have
seen the fewest democratization attempts, sustained or otherwise.
In those cases that ended in reversal, the average length of the democratic episode was just under six years. Almost 68 percent of the unsuccessful democratic experiments ended during the first five years, and
nearly 84 percent failed within the first ten years. Although it is important to note that we find no threshold age beyond which a democratic
government is apparently safe from overthrow (Thailand’s 2006 reversal came after fourteen years of democracy), we focus on the first five
or ten years of democracy in analyzing the factors associated with the
endurance or demise of democratic regimes.
Among those democracies that were reversed, several later underwent
second, third, or even fourth episodes of democratization. Although fewer
than half (47 percent) of the first-time democratizations were sustained,
the survival rate of second-time democratizations approaches two-thirds
(63 percent). Four of the six cases of fourth-time democratization survived
through the end of 2004—only Pakistan and Peru failed in their respective fourth tries at democratization. (Thailand’s 2006 coup represented
another such failure, albeit one not included in our data set.)
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Journal of Democracy
Table 2­— Democratizations by Region and Outcome
Sustained
Reversed
Total
67
56
Latin America
17
9
Western Europe
3
1
Eastern Europe
19
2
Sub-Saharan Africa
17
29
Middle East / North Africa
1
2
Asia
10
13
Source: Polity IV, authors’ calculations
These trends are closely aligned with the improving success rate of
all democratizations over time. Only 11.5 percent of the democratizations that took place in the 1960s were sustained, while 30 percent of
those taking place in the 1970s were sustained. The success rate reached
76.5 percent for democratizations that began in the 1980s before dipping
slightly to 72.5 percent for 1990s-era democratizations. This change in
success rates—mostly upward but with a small downturn more recently—remains to be explained. Leading hypotheses include: 1) actions
that the United States and the European Union have taken to encourage
democratization, with the EU’s role in “locking in” East European democracy being a case in point; 2) the role of globalization and international institutions such as the World Bank and International Monetary
Fund (IMF) in promoting “good governance,” including transparency,
accountability, and citizen empowerment; and 3) the relative success of
many young democracies around the world in bringing both economic
growth and civil liberties to their people.
The Role of Initial Conditions
Certain features of young democracies are frequently cited as possible causes of variation in their economic and political performance. It
would seem fruitful, then, to compare the “initial conditions” (focusing
on socioeconomic as opposed to geographical factors) in democracies
that were reversed with the conditions prevailing in democracies that
have survived. Since an influential body of research in modern political
economy (much of it theoretical) argues that initial conditions determine
how countries develop both politically and economically, it is particularly important to see if this view is supported by the data.9
As scholars since Seymour Martin Lipset in the 1950s have recognized, sustained democratizations have tended to occur in richer countries, with an average per capita income in our data set of US$2,618 (in
Ethan B. Kapstein and Nathan Converse
61
2006 dollars). They were almost three times wealthier than the young
democracies that suffered reversal, for the latter averaged a per capita
income of only about $866. This difference is of particular significance
given the growing number of democratizations that have taken place
in the developing world in recent years, and raises the question of how
poverty and democracy interact. Does poverty make it hard for democratic regimes to consolidate, as modernization theory suggests? Can
democracy help to lift nations out of poverty? If poverty makes it more
difficult for a democracy to consolidate, should foreign aid focus on
promoting economic growth rather than, for example, providing support
for the institutions of civil society?
Comparing average incomes across countries is not enough, of
course, since averages can hide severe inequities of income, assets, and
opportunities within a given society. Such inequities can play a big role
in determining whether a democracy sinks or swims. If large segments
of the populace share only a sliver of the nation’s wealth, they may view
the political order—even if “democratic” in institutional form—as being
unresponsive or even detrimental to their interests. As Larry Diamond
has written, “Economic inclusion is closely related to political inclusion
and, thus, to democratic deepening.”10
Our data show that inequality was indeed significantly higher in democracies that eventually underwent a reversal. Likewise, the poverty
rate (the percentage of the population living on less than one Purchasing
Power Parity-adjusted dollar per day) is on average higher in countries
in which democratization was reversed than in those where it was sustained, with an average of around 40 percent of the population living on
less than a dollar a day in the former, as opposed to just over 20 percent
in the latter. Infant mortality provides another gauge of how broadly the
benefits of economic growth are being shared. The average rate of infant
mortality per 1,000 live births during the first five years of democracy
is fully twice as high in countries where democracy was reversed as in
countries where democracy has been sustained. This stark difference suggests that the extent to which economic development has benefited all citizens may be a key factor in determining how democracy fares; economic
growth alone may not be enough to ensure democratic consolidation.
Some noneconomic divisions in society also appear to play a role in
determining the fate of democracy. For example, ethnic fragmentation
was significantly higher in those cases where democracy was reversed
than where democratic governments persisted through the end of the
period under study. Indeed, democratizations in countries with ethnic
fragmentation greater than the world average were reversed 51 percent
of the time, as compared to 38 percent of the time when ethnic fragmentation was below the average.11
Early indications are, therefore, that initial conditions do significantly affect the survival chances of democratic regimes. Low per capita
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Journal of Democracy
income, high levels of inequality, high rates of poverty, and higher ethnic fragmentation all harm the prospects that democracy will endure.
Yet these relationships are not deterministic. There are several countries
(among them Guatemala and Mozambique) in which initial conditions
were extremely unfavorable, yet where democracy had endured as of
2004, albeit not without difficulties. Moreover, most of the countries
in our data set that suffered reversals in the past have subsequently redemocratized. Again, the relative success of “redemocratizers” poses a
puzzle for those who advocate initial-conditions determinism.
Economic Performance and Political Institutions
More than any other single factor, the literature on the causes of
democratic reversal has long emphasized that democracies are put under
stress by poor economic performance, with the collapse of Weimar Germany during the early 1930s often cited as the paradigmatic case. Our
data suggest that this view needs revising. After all, most Central and
East European democracies have endured despite suffering severe economic hardships during the early 1990s. Conversely, democracy failed
in Thailand, despite robust growth rates from 2000 to 2005, and it is
arguably under threat or has suffered actual reversal by now in Georgia,
Russia, and Venezuela, despite these countries’ recent records of strong
economic growth. Overall, these examples suggest that low economic
growth per se is not a clear sign that democracy is threatened, while high
economic growth provides no guarantee against democratic reversal.
Similarly, the extent to which economic reforms and democratic consolidation are compatible has been a key question for economists and
political scientists studying developing countries. Some have argued
that the two processes are complementary, while others have argued
that “shock therapy” can threaten fragile democratic regimes.
Our research indicates that democratization can facilitate economic
reform and is not threatened by it. Most young democracies have opened
their economies to foreign trade, for example, without suffering a protectionist backlash or political overthrow. On average, trade rises by
nearly 6 percentage points (as a share of GDP) in the five years following democratization. What seems to be more important, however, is the
extent to which the benefits of economic reform are widely shared, giving everyone a stake in the process.
In the face of worries that young democracies are threatened by both
weak growth and the politically destabilizing effects of rapid economic
reform, our evidence suggests that one must look beyond economic variables and consider political institutions in order to grasp what drives
democratic consolidation or its opposite. The literature on democratic
political institutions has most frequently compared parliamentary and
presidential systems, generally finding the former to be more durable
Ethan B. Kapstein and Nathan Converse
63
Figure 1­—Political Institutions and Democratic Reversal
$IFFERENCE
PVALUE
0ERCENTAGE2EVERSED
0RESIDENTIAL
0ARLIAMENTARY
Sources: World Bank Database of Political Institutions; Przeworski et al., Democracy and
Development: Political Institutions and Well-Being in the World, 1950–1990 (New York:
Cambridge University Press, 2000); Polity IV, authors’ calculations.
than the latter, especially in the face of economic crises.12 Parliaments
with dominant parties, it is argued, can more readily take the tough decisions needed to stabilize economies and thus fragile political orders as
well. But does the record actually bear this out? Of the 123 democratizations that we analyze, 81 initially put in place presidential systems and
27 put in place parliamentary systems.13 Of the presidential systems,
nearly 36 percent ended in reversal, while just over half the parliamentary regimes ended in reversal (see Figure 1 above).
Why have scholars (and perhaps policy makers as well) tended to
prefer parliamentary regimes? The reasons most cited include not only
their abovementioned superiority in the face of crises, but also the reputedly better ability of parliamentary regimes to guard against abuses
of executive power. But our data suggest that parliaments in new democracies have not done this particularly well. Presumably, the institutional arrangements characteristic of parliamentarism are not always
robust enough in practice to compensate for a lack of strong opposition
parties, an independent judiciary, or such informal checks on power as
those provided by a free press and dynamic civil society.
Consequently, we turn our attention to a direct measure of constraints on executive power found in the Polity IV data, irrespective
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Journal of Democracy
Figure 2­—Constraints on Executive Power
and Democratic Reversal
$IFFERENCE
PVALUE
0ERCENTAGE2EVERSED
7EAK
#ONSTRAINTS
ON%XECUTIVE0OWER
3TRONG
#ONSTRAINTS
ON%XECUTIVE0OWER
*“Weak” constraints received a score lower than 5 on Polity IV’s scale of executive constraints.
Source: Polity IV, authors’ calculations
of whether the leader is a president or a prime minister. We divide
our 123 cases into two groups. The first group places a higher level of
constraint on executive power, while the second provides a lower level.
This institutional feature does appear to have a significant relationship
with the fate of the regime, as we see in Figure 2 (above). In cases
where constraints on the executive are weak, democracy is reversed just
over 70 percent of the time. By contrast, when constraints on the executive are strong, democracy is reversed only 40 percent of the time. We
therefore stress the importance of assessing the actual balance of power
in new democracies, whether the regime type is parliamentary or presidential.14
Consider this evidence in light of recent democratic backsliding or
reversals in such countries as Bolivia, Georgia, Russia, Thailand, and
Venezuela. Each country had or has a chief executive (sometimes,
but not always, a president) prone to tampering with the constitution in such a way as to increase executive authority, perhaps by
declaring states of emergency (as in Georgia) or by seeking to revoke
presidential term limits (as in Venezuela). What this means is that
both domestic societies and the foreign powers that support young
Ethan B. Kapstein and Nathan Converse
65
democracies must keep a watchful eye on effective constitutional arrangements, and beware of efforts to increase executive authority at
the expense of other branches of government.
Lessons for the International Community
In recent years, “democracy promotion” has risen high on the agenda of
the international community in general and of foreign-aid donors in particular. The newest U.S. foreign-aid program, the Millennium Challenge
Corporation (MCC), for example, includes among its recipients only
countries that “rule justly,” while the funding that the U.S. Agency for
International Development gives out to finance the building of political
parties, the training of legislators and judges, and the expansion of “civil
society” has soared.15 Somewhat more obliquely, the World Bank and
IMF have promoted “good governance” around the world, calling for
greater transparency and accountability by public servants and greater
empowerment of citizens.
Given our findings here, it makes sense to ask what underlying theory
of democratic consolidation guides these efforts. It seems to be the notion
that economic growth will help to consolidate democracy, while greater democracy will provide the institutional underpinnings of sustained
growth. In short, growth and democracy make for a virtuous circle. This
leads to a “two-track” approach by aid agencies: On the one hand, they
promote “Washington Consensus” policies of market-friendly economic
reform; on the other, they provide “democracy-promotion” assistance
(generally focusing on legislatures and civil society).
If sustained economic growth ultimately depends on the quality of a
nation’s institutions, however, the industrial world’s aid programs may
have the causal chain backward. Further, there seems to be little consideration in the policy community of whether the “type” of growth—and
especially the extent to which incomes, assets, and opportunities are
distributed—matters to democratic survival. The distribution of wealth
and opportunities may be thought of as having the same broad goal as a
society’s set of political checks and balances: In both cases, the aim is
to dilute excessive concentrations of power and resources.
In the same vein, it is worth cautioning against the promotion of
“neoliberal” reforms at the expense of institutional development. Russia and several countries in Latin America stand as cautionary tales in
this regard. Donor nations supported Argentina’s Carlos Menem and
Russia’s Boris Yeltsin despite the institutional damage that each was
doing to his country’s governance structures, in no small part because
donors feared that the alternatives to these men would be much worse.
But where will incentives for healthy institutional development come
from if leaders know that international support is guaranteed no matter
what domestic policies they adopt?
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Journal of Democracy
Those in charge of handing out foreign aid should consider the following
policy recommendations regarding both economic policy and institutional
design:
First, democracy assistance must emphasize the crucial role of effective checks and balances—informal as well as formal—in building durable democratic institutions. Informally, a
free press, an educational system that is
tolerant and open to diverse ideas, and a
The bottom line is that
vibrant civil society (including a strong
growth alone will not
necessarily promote the private economy) can all assist the building of a democratic culture. Indeed, these
life chances of all the
informal institutions may encourage the
individuals in a given
rise of independent judiciaries and censociety, and those who
tral banks, among other bodies that proare left by the wayside
vide formal checks on power and prevent
may lose confidence in
abuses of office.
democracy.
Second, foreign donors must confront
problems of income and asset distribution in recipient nations. There is increasing evidence from around the world that globalization and technological
change, for example, are leading to higher levels of income inequality.
As noted above, higher levels of inequality may imperil young democratic regimes. Thus a major challenge of policy reform is to ensure that
growing numbers of citizens have access to education and training programs. Moreover, in certain countries ethnicity may play a role in access
to education and good jobs. The bottom line is that growth alone will
not necessarily promote the life chances of all the individuals in a given
society, and those who are left by the wayside may lose confidence in
democracy. If democracy offers any particular economic benefits, these
should be measured in terms of the opportunities made available rather
than the average growth rate alone.
Third, the international community must support young democracies not just via aid, but also by persuading them to open their borders
to trade, to participate in exchange programs of various kinds (educational and cultural, for instance), and to join international organizations
that can help to “lock in” the political and economic reform process. In
this respect, the protectionist barriers that advanced industrial countries
throw up against agricultural products from the developing world are
particularly counterproductive, for they deny small farmers opportunities for income growth. Again, if donors wish to nurture the world’s
young democracies, this must be done through a battery of policies
whose overriding purpose is to distribute political and economic power
while providing better life chances for all.
Because most young democracies fail during their first five years, as
leaders and institutions struggle to achieve credibility and legitimacy in
Ethan B. Kapstein and Nathan Converse
67
the face of monumental challenges, these years are the crucial period
during which targeted foreign-assistance strategies must be maintained.
These strategies must be aimed at spreading political and economic
power more widely and at augmenting the opportunities for betterment
available to the voting public, particularly those who are least advantaged. In the absence of such policies, short-run economic growth alone
is unlikely to save a young democracy from reversal.
NOTES
The authors wish to thank the Center for Global Development for housing the research
project upon which this essay is based.
1. Our definition of democracy is based on the Polity IV data set, which is available at www.systematicpeace.org/polity/polity4.htm. Briefly, Polity IV assigns countries
scores ranging from -10 to +10 based upon their electoral systems, methods of executive
recruitment, and constraints on the executive branch. For a complete discussion of our
methodology and data set, see Ethan B. Kapstein and Nathan Converse, The Fate of Young
Democracies (New York: Cambridge University Press, 2008). We consider a 6-point increase in the Polity score to constitute a case of democratization and a 6-point fall to
constitute a reversal. Thus, the term “democratizers” rather than “democracies” might be a
more precise description of the countries in our data set. This methodology identified 123
democratizations, with several countries undergoing multiple democratizations in the 45year period of our study. For example, both Thailand and Pakistan went from authoritarian
to democratic rule on four separate occasions between 1960 and 2004.
2. The data set may be found at www.ethankapstein.com. For the regression analyses,
see www.journalofdemocracy.org/articles/gratis/KapsteinGraphics-19-4.pdf.
3. Stephan Haggard and Robert Kaufman, The Political Economy of Democratic Transitions (Princeton: Princeton University Press, 1995); Milan Svolik, “Authoritarian Reversals and Democratic Consolidation,” unpublished working paper, University of Illinois,
2007.
4. For a similar line of analysis, see Larry Diamond, “The Democratic Rollback: The
Resurgence of the Predatory State,” Foreign Affairs 87 (March–April 2008): 36–48.
5. Adam Przeworski and his coauthors were unable to include post-Soviet democracies in their well-known data set, which covered cases only through 1990. See Przeworski
et al., Democracy and Development: Political Institutions and Well-Being in the World,
1950–1990 (New York: Cambridge University Press, 2000).
6. Samuel P. Huntington, The Third Wave: Democratization in the Late Twentieth
Century (Norman: University of Oklahoma Press, 1991), 258; Philip Keefer, “Democratization and Clientelism: Why Are Young Democracies Badly Governed?” World Bank
Policy Research Working Paper No. 3594 (2005).
7. John Gerring et al., “Democracy and Economic Growth: An Historical Perspective,”
World Politics 57 (April 2005): 323–64; Torsten Persson and Guido Tabellini, “Democratic Capital: The Nexus of Political and Economic Change,” NBER Working Paper No.
12175 (2006).
8. Adi Brender and Allan Drazen, for example, find that the economic swings associated with the political budget cycle are found only in young democracies. See Brender and
Drazen, “Political Budget Cycles in New versus Established Economies,” NBER Working
Paper No. 10539 (2004).
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Journal of Democracy
9. Stanley Engerman and Kenneth Sokoloff, “Factor Endowments, Inequality, and
Paths of Development Among New World Economies,” NBER Working Paper W9259
(2002); Daron Acemoglu and James Robinson, Economic Origins of Democracy and Dictatorship (New York: Cambridge University Press, 2006).
10. Larry Diamond, Developing Democracy: Toward Consolidation (Baltimore: Johns
Hopkins University Press, 1999), 85.
11. This difference in reversal rates is statistically significant at the 10 percent level,
with a p-value of 0.073. Studies of ethnic conflict have found evidence that, as fractionalization reaches very high levels, the likelihood of violent conflict falls. See for example
James Fearon and David Laitin, “Ethnicity, Insurgency, and Civil War,” American Political Science Review 97 (February 2003): 75–90. In contrast, our data suggest that the risk
of democratic breakdown continues to rise even as ethnic fragmentation reaches very high
levels.
12. A useful review of the arguments is found in Ko Maeda and Misa Nishikawa,
“Duration of Party Control in Parliamentary and Presidential Governments: A Study of
65 Democracies, 1950 to 1998,” Comparative Political Studies 39 (April 2006): 352–74.
On regimes’ ability to endure crises, see Michael Bernhard, Christopher Reenock, and
Timothy Nordstrom, “Economic Performance, Institutional Intermediation, and Democratic Survival,” Journal of Politics 63 (August 2001): 775–803.
13. No data regarding the remaining fifteen cases were available. Democratic regimes
were classified as either presidential or parliamentary based on data from Przeworski et
al., Democracy and Development, and from the World Bank Database of Political Institutions (DPI). As the Przeworski data end in 1990, democratizations in later years, including
all postcommunist cases, were categorized according to the DPI.
14. Research by Steven Fish and colleagues, using detailed assessments of legislative
power, also reaches this conclusion. M. Steven Fish, “Stronger Legislatures, Stronger Democracies,” Journal of Democracy 17 (January 2006): 5–20.
15. Mitchell A. Seligson et al., “Trends in Democracy Assistance: What has the United
States Been Doing?” Journal of Democracy 19 (April 2008): 150–59.