Regulatory reform,property rights,and economic development

Overcoming tradeoffs between the social benefits of regulation and the economic benefits of development has never been easy in practice. This article examines the economic development consequences of state and local regulation by developing a framework that provides a theoretical basis for expecting regulatory costs to influence the amount and location of new development. After elaborating the theory, I identify two ways state and local governments may be able to pursue regulatory goals without creating disincentives for economic development. One approach is for state or local government to socialize costs of regulatory compliance through public expenditures or subsidies. A second, and more promising, approach is to pursue regulatory reform which lessens private sector transaction costs by reducing regulatory uncertainty. This framework is illustrated using two cases: state regulation of the chemical industry, and growth management regulation.     

Democracy and economic development

This discussion explains why democracy as is generally understood may not be suitable to meet the challenges of a developing economy and how democratic institutions generally fail to respond to the immediate demands of a population impatient to raise its level of living. It defines the terms economic development and democracy, reviews some theoretical models of democracy which have been proposed in economic theory, proposes an approach to the process of economic development, and considers problems of development. Economic development is a process which calls for huge investments in personnel and material. Such investment programs imply cuts in current consumption that would be painful at the low levels of living that exist in almost all developing societies. Governments need to resort to strong measures, and they must enforce them vigorously in order to marshal the surpluses required for investment. If such measures were put to a popular vote, they would certainly be defeated. Mainstream economic theory assumes the virtues of a market system and the decisions arrived at by the interaction of market forces. This is the economic equivalent of democracy. Yet, mainstream economic theory devotes little attention to the conditions under which a market system generates a just solution. The democratic developing countries have all inherited a class society, with a highly skewed distribution of income. The wealthy minority often seeks to preserve its privileged position and to enjoy the benefits of development. It even seeks the help of the judiciary to preserve the sanctity of private property and to assure that its patterns of conspicuous consumption can continue. This is done in the name of democratic rights. Many developing societies are burdened with outmoded traditions and value systems that are incompatible with the production relations of the new society they hope to achieve. The international exchange of resources is believed by some to be an attempt to control the pace and character of development so that the economic colonization will survive. To end such unfavorable conditions for development, 3rd world governments must demand greater sacrifices from their citizens, and this cannot be achieved by normal democratic means. Recent events in several developing nations illustrate this point.     

Democracy’s effect on economic growth: A pooled time-series analysis, 1951–1980

The relationship between democracy and economic growth has concerned social scientists since the 17th century, but recent democracy movements make this question especially important today. Do poor countries face a cruel trade-off between democracy and growth? Do democracy and growth go together as a “win-win” proposition? Or is democracy irrelevant to growth? Using pooled annual time-series data from 1951–1980 for 106 countries, including 88 non-core countries, we explore long-term and short-term direct and indirect effects of democracy on growth. Little or no direct effect emerges, but positive indirect effects appear via two mechanisms: a marginally significant effect via investment and a robust effect via government expenditure. Democracy also has a robust non-linear effect on economic growth via social unrest, inhibiting growth under non-democratic regimes and furthering it in highly democratic ones. Combining these findings, we conclude that democracy does not significantly hamper economic growth, and under many circumstances slightly boosts it.     

Citizenship,equality, and urban property rights in Latin America: The Peruvian case

Research on liberal democracy in newly developing countries has been hampered by the view of civil society as a bounded realm; by insufficient attention to power, class, and legal-juridical institutions; and by too limited a conception of social movements with democratic potential. In this study of urban migrants’ struggle for property rights, the migrants’ political action is found to be associated with a capitalist social movement. The legal changes that the movement helped institute and the means that it employed have enhanced democracy by extending property rights to the poor and by opening up policy processes to public debate and input. Insofar as liberal reform involves the law and its administration, it requires a positive, facilitative state, in spite of liberalism’s broadly antistatist commitments. The study also reveals that liberal reform can have a popular content even if supported by elites. The findings suggest that the realization of full citizenship rights is, for now, at least as crucial to the future of Latin American democracy as the narrowing of economic inequalities. David G. Becker is associate professor of government at Dartmouth College, Hanover, NH 03755. He is the author ofThe New Bourgeoisie and the Limits of Dependency (Princeton University Press, 1982); a counthor ofPostimperialism (Lynne Rienner Publishers, 1987); and the author of “Beyond Dependency: Development and Democracy in the Era of International Capitalism,” in Dankwart A. Rustow and Kenneth P. Erickson (ededs.),Comparative Political Dynamic (HarperCollis, 1991), in addition to many other articles on aspects of political development. Becker’s current research centers of the nature of constitutionalism and democracy in Latin America. He is preparing a book-length treatment of the rule of law in Latin America, along with an edited book on postimperialism that will present new case studies of a variety of countries and world regions.     

Democracy,economic crisis and the problem of governance: The case of Bolivia

This article examines the political context within which the Bolivian government of Víctor Paz Estenssoro (1985–1989) launched, implemented, and sustained a draconian neoliberal economic stabilization program. The article argues that the key to the successful economic program was the political skill and leadership of President Paz, in particular, his ability to negotiate a political pact with the main opposition party. Finally, the article ponders the tensions and contradictions between neoliberal economic policies and the process of consolidating democracy in a context of extreme economic crisis. James M. Malloy is professor of political science and research professor, University Center for International Studies, University of Pittsburgh, Pittsburgh, PA 15260. He is the author of a number of books and articles on Latin America politics, includingAuthoritarians and Democrats: Regime Transition in Latin America (University of Pittsburgh Press, 1987). He is presently working on issues of regime transition, economic adjustment, and the role of private sector interest groups in Latin America.     

Human Rights and Democracy Promotion: reflections on the contestation in,and the politico-economic dynamics of,rights promotion

This contribution seeks to engender more nuanced reflection on the role of human rights advocacy and specifically its role in democracy promotion. The two agendas have been seen as conjoined and harmonious by most aid donors; yet, interestingly and perceptively, some commentators have recently criticised the notion that they are agendas that are straightforwardly compatible or coherent. I examine here from a theoretical perspective the plausibility and the consequences of the claim that the two agendas share a more complex and controversial relationship than is often assumed. Specifically, I seek to highlight the importance of paying attention to the possibility that rights themselves are inherently ‘contradictory’ in nature and that therein lies their contribution to the democratisation agenda. Indeed, by drawing on Samuel Bowles's and Herbert Gintis's view of rights claims as ‘clashing’ and ‘politico-economically’ grounded, the aim of this article is to argue for a more politicised and openly contradiction-accepting approach to rights and democracy promotion. I contextualise this (theoretically motivated but practically consequential) argument in the context of the EU's human rights and democracy promotion policies.     

Foreign direct investment,financial development and economic growth

This article argues that the development of the financial system of the recipient country is an important precondition for FDI to have a positive impact on economic growth. A more developed financial system positively contributes to the process of technological diffusion associated with FDI. The article empirically investigates the role the development of the financial system plays in enhancing the positive relationship between FDI and economic growth. The empirical investigation presented in the article strongly suggests that this is the case. Of the 67 countries in data set, 37 have a sufficiently developed financial system in order to let FDI contribute positively to economic growth. Most of these countries are in Latin America and Asia.     

Capacity building and the (re)production of intellectual property rights

There is little settled or uncontested about the trips agreement and the global governance of intellectual property rights (iprs). This suggests that the provision of training and technical assistance to build capacity is itself part of the reproduction of the dominant (trips constituted) view of iprs and is therefore a political project rather than merely technical provision. On one side many developing countries' elites and governments are keen to join the international trading community and see the need to adopt the increasingly universalised rules of the system as part of this process. On the other hand, there are vocal constituencies less supportive of an unqualified adoption of trips‐related standards of legal protection for iprs. Given the continuing importance of legal structures to underpin and constitute markets (and this is most especially the case in markets for knowledge and information), the processes by which the trips solution to the question of knowledge ownership is being globalised through technical training needs to be understood and analysed.     

Trade liberalisation,government expenditure and economic growth in Egypt

This article investigates the combined effects of growth in government expenditure, exports, investment and labour supply on economic growth in Egypt between 1955 and 1996. Using cointegration and error correction models, the article finds a long‐run relationship between the variables, but less evidence of one in the short run. To account for the important policy reforms in 1974 and 1991, dummy variables are added which show the reforms have significantly affected the relationship between government expenditure and growth in a positive direction, but have had a negative effect on exports and growth. This conclusion is further supported by the time‐varying coefficient analysis.     

Capitalism,socialism and economic growth: A post-Keynesian pekspective

I thank Robert Dixon for many comments and suggestions and Michael W. Hughey for editorial remarks.     

Public needs vs. private loss: land use regulation and property rights

Property rights and government regulation have been the subject of considerable discussion and controversy in recent years. The issue of “takings” has been raised in most of the state legislatures in the 1990s. Congress has considered legislation as well. Supreme Court decisions, in particular the Lucas and the Dolan cases, have focused judicial attention on the issue in recent years. Local elected officials, planners and local government administrators confront the issue increasingly as they attempt to respond to growth pressures and regulate land use. Unfortunately, a great deal the public's perception of property rights is myth or fable. This article addresses the issue of takings by putting it first into historical perspective. Thus, we see that regulation of private property by government is not new. The concern over “regulatory takings” is explored and traced briefly noting the entry of the federal government into the arena of land use regulation. Legislative responses are reviewed and finally the status of judicial consideration of the issue is brought up to date. The article closes with recommendations for those who confront the takings issue. While caution is indeed called for, regulation of private property is still a fact of life in American public administration and will be for some time to come.     

Country size and economic growth and development

This paper attempts to provide limited empirical evidence on the nature of the relationship between country size and rates of economic growth and levels of economic development, and on the possible effects of trade concentration and dependence on trade on this relationship. It suggests that there is no discernible association between country size and economic development, nor between country size and economic growth, and that neither the dependence on trade of small countries nor their commodity and geographic export concentration are necessarily important factors in economic growth and economic development.     

Democracy, Law, and Comparative Politics

This article offers a revision of democratic theory in light of the experience of recently democratized countries, located outside of the northwestern quadrant of the world. First, various definitions of democracy that claim to follow Schumpeter and are usually considered to be “minimalist” or “processualist” are critically examined. Building upon but clarifying these conceptual efforts, a realistic and restricted, but not minimalist, definition of a democratic regime is proposed. Thereafter, this article argues that democracy should be analyzed not only at the level of the political regime but also in relation to the state—especially the state qua legal system—and to certain aspects of the overall social context. The main underlying theme that runs through this article is the concept of agency, especially as it is expressed in the legal system of existing democracies. I dedicate this article to my daughter Julia, for the metonymy and much love Guillermo O'Donnell is the Helen Kellogg Professor of Government at the University of Notre Dame. He has written many books and articles on authoritarianism, political transitions, democratization, and democratic theory. His latest book,Counterpoints, was published in 1998 by the University of Notre Dame Press. O'Donnell is a Fellow of the American Academy of Arts and Sciences. I presented previous versions of this paper and received useful comments at seminars held in April and May 1999 at the University of North Carolina; Cornell University; Berlin's Wissenschaftszentrum; the annual meeting of the American Political Science Association, Atlanta, August 1999; and in September 1999 at the Kellogg Institute. I also appreciate the comments and criticisms received from Michael Brie, Maxwell Cameron, Jorgen Elklit, Robert Fishman, Ernesto Garzón Valdés, Jonathan Hartlyn, Osvaldo Iazzetta, Gabriela Ippolito-O'Donnell, Iván Jaksić, Oscar Landi, Hans-Joachim Lauth, Steven Levitsky, Juan Linz, Scott Mainwaring, Juan M. Abal Medina, Martha Merritt, Peter Moody, Gerardo Munck, Luis Pásara, Timothy Power, Adam Przeworski, Héctor Schamis, Sidney Tarrow. Charles Tilly, Ashutosh Varshney, and Ruth Zimmerling. I am particularly grateful for the careful revision and editing undertaken by Gerardo Munck and Ruth Collier for the present issue ofSCID.     

Higher education and economic growth in Africa

This paper uses panel data over the 1960–2000 period, a modified neoclassical growth equation, and a dynamic panel estimator to investigate the effect of higher education human capital on economic growth in African countries. We find that all levels of education human capital, including higher education human capital, have positive and statistically significant effect on the growth rate of per capita income in African counties. Our result differs from those of earlier research that find no significant relationship between higher education human capital and income growth. We estimate the growth elasticity of higher education human capital to be about 0.09, an estimate that is twice as large as the growth impact of physical capital investment. While this is likely to be an overestimate of the growth impact of higher education, it is robust to different specifications and points to the need for African countries to effectively use higher education human capital in growth policies.     

Sociological explanations of economic growth

Even if questions of how resources aredistributed within and between societies are our main concern, we must continue to grapple with the issue of the causes of economic growth because economic growth and level of development continue to be among the most important causes of inequality, poverty, unemployment, and the quality of life. This paper’s dependent variable is the economic growth rate of 55 less developed countries (LDCs) during two time periods—1970–78 and 1965–84. The causal model consists of control variables—level of development and domestic investment in 1965—and a variety of independent variables drawn from major sociological theories of economic growth published during the last three decades. Multiple regression analysis shows that, net of the effects of the two control variables, the variables that have the strongest effect on economic growth rates are: (1) direct foreign investment, which has a negative effect; (2) the proportion of the population in military service; and (3) the primary school enrollment ratio, both of which have positive effects of economic, growth. On the other hand, variables drawn from some theories receive no empirical suport. The mass media of communications, ethno-linguistic heterogeneity, democracy and human rights, income inequality, and state-centric theory’s key variable—state strength—all fail to show any significant impact on economic growth rates when the control variables and the significant independent variables are held constant. The theoretical implications of these findings are discussed.     

Privatisation and economic growth in developing countries

This article re-examines the relation between privatisation and economic growth. Previous studies that have attempted to measure this relationship have concluded that privatisation has had a sizeable positive effect on economic growth. Our study uses data for 63 developing countries over the time period 1988–97. It uses the framework of an extreme-bounds analysis (EBA) to conduct a cross-country growth regression analysis. Our findings contradict earlier results, but reaffirm the view that effective competition and its regulation may need to accompany privatisation to make a positive impact on economic growth.