EIU says Indonesia tops ASEAN on Democracy; A correlation to economic growth & stability?

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Indonesia tops ASEAN as the most Democratic Nation, with Singapore, Cambodia and Vietnam at the bottom, according to the Economic Intelligence Unit (EIU) 1012 ranking.

For ASEAN, the EIU research gave Indonesia 6.76 score out of 10, with 53rd ranking position globally from 176 countries. Thailand came in second with 6.55 and ranking at 58th. Philippine was next at 6.30 and ranking at 69th. Singapore was next at 5.88 and ranked 81st.  Cambodia was next, at 4.96 and ranked 100th. Lastly it was Vietnam, with 2.89 and ranked 144.

On functioning of government, Malaysia score was 7.86, Indonesia at 7.50, Singapore at 7.50, Thailand 6.70, Philippines at 5.36, Cambodia at 6.07 and Vietnam at 3.93.

On political participation, Indonesia was 6.11, Thailand 5.56, Malaysia at 5.56, Philippine at 5.56, Singapore at 3.33, Cambodia at 3.33 and Vietnam at 2.78.

What is the correlation between democracy and economic growth? There have been many study, mostly not conclusive. However, perhaps there is a correlation with stability.

  • Bloomberg Reports:

Thai Ratings Raised by Fitch on Yingluck Stability

Bloomberg News: By Shamim Adam and Daniel Ten Kate

BANGKOK: — Thailand’s credit rating was restored to BBB+ by Fitch Ratings four years after political turmoil prompted a cut, signaling confidence in Prime Minister Yingluck Shinawatra’s ability to maintain social stability.

The long-term foreign currency-denominated debt was raised one step by Fitch to three levels above junk on March 8, bringing the rating back in line with rankings by Standard & Poor’s and Moody’s Investors Service. The outlook is stable.

Yingluck has sought to avert political tensions since taking power in 2011 by shelving measures that would bring back Thaksin Shinawatra, her brother who was ousted as prime minister in a coup seven years ago.

The upgrade comes as her government prepares a bill to spend 2 trillion baht ($67 billion) by 2020 on high-speed trains and mass-transit networks.

If Democracy and economic growth are correlated, how do we in ASEAN, explain Singapore’s success or Vietnam’s surging economic power? On the other side, Myanmar and Indonesia, seems to be the examples of where Democracy and economic growth are related. As for Thailand, clearly, Establishment vs the prole  politics has the potential to derail all economic growth, as have been demonstrated recently.

The following article from economic times, explore the situation further.

  • The Economic Times Reports:

Democracy correlated with economic growth?

Feb 28, 2012,

By Dheeraj Sharma

With elections on in many parts of India, much is being said about the importance of democracy and how it brings growth and prosperity. Particularly, there is strong criticism of incumbent governments in UP and Punjab by the opposition on the ground that they have been only ‘partly democratic’ during their regime resulting in slow economic growth in these states. However, it remains to be explored if democracy is correlated with economic growth and general prosperity.

In a study published in The American, it was demonstrated that a country does not require democratic government for economic success. The study borrowed from the work of Kenneth Arrow, 1972 Nobel laureate, who said that a government is an institution that makes decisions for citizens who may have different preferences.

In other words, the function of the government is to decide where to allocate state resources for betterment of its citizens and this function can be performed effectively by a democratically-elected government or even a dictator.

The aforementioned study used Freedom House’s measure to rate the level of political freedom of the world’s nations using a reliable and valid psychometric scale. The study compared the economic growth of countries that were both politically and economically (fully-free nations) free to countries that were economically free but were politically repressed (politically-repressed nations). The results of the study were surprising.

Between 1991 and 2005, the countries that were economically free but politically repressed grew at 6.28% annually. Comparatively, the countries that were both economically and politically free grew at 2.62%. In other words, dictatorial regimes make better economic decisions for citizens than democratic ones.

The view promulgated in this study only examines the overall economic growth of countries not the welfare of citizens. Consequently, it would be interesting to examine how politically-repressed nations fared on the welfare of the citizen. One of the best available indicators of welfare and prosperity of citizens of a country is the Human Development Index (HDI). This writer compared the average HDI of ‘totally-free’ nations with the HDI of nations that are ‘partly free’ and ‘totally unfree’ using the Freedom House measure.

The result of the analysis was contrary to the American study. The average HDI of ‘politically-repressed nations’ is much lower compared to ‘free nations’. In other words, on average, politically-repressed nations have low human development. Further examination also showed that the average HDI for ‘partly-free nations’ was even lower than the ‘unfree’ countries.

If these results were to be viewed in conjunction with the results of the study published in The American, one can infer that democratic governments of the world may not bring rapid economic success but at least bring greater human development. However, it would be better to be ‘totally repressed’ than ‘partly free’. In other words, on average, a comparison between ‘partly free’ and ‘totally unfree’ countries would tell us that it is better to be ‘totally unfree’ than ‘partly free’ both from an economics and human development perspective.

The results somewhat concur with ‘conflict theorists’ who argue that a partial democracy characterised by low level of political rights and civil liberties for the general public, thwarts economic growth, particularly in less developed countries. Furthermore, conflict theorists contend that partial democracy enables small societal groups to make bigger demands on the state for particularistic gains that are detrimental to overall growth and prosperity.

Thus, states or/and countries that are partly unfree may experience a dilemma on whether to take the full freedom path or total repression path. If these states or/and countries become totally unfree, it will bring economic rewards at a faster rate but uneven human development.

If they become fully free, it may bring even but slow human development but even slower economic rewards. There are two examples where nations have chosen divergent paths. Pakistan has shown, on more than one occasion, preference for military rule (fully unfree) than democracy (partly unfree). Contrarily, India has shown, at least on one occasion, resistance to emergency (partly free) in favour of democracy (fully free). The dilemma is intriguing.

What one can say is that according to the Freedom House measure, nearly one-third of nations today are ‘partly free’. Hence, the fate of the world can very well be decided by the path these partly-free countries take over the next few years.

(The author is faculty at the Indian Institute of Management, Ahmedabad)

  • EIU Reports:

The Economist Intelligence Unit’s Index of Democracy 2012

Democracy at a standstill

This is the fifth edition of the Economist Intelligence Unit’s Democracy index. It reflects the situation at the end of 2012. In 2012 global democracy was at a standstill in the sense that there was neither significant progress nor regression in democracy in that year. Average regional scores in 2012 were very similar to scores in 2011.

The first edition of the index, published in The Economist’s The World in 2007, measured the state of democracy in September 2006; the second edition covered the situation towards the end of 2008; the third as of November 2010 and the fourth at the end of 2011.

The index provides a snapshot of the state of democracy worldwide for 165 independent states and two territories—this covers almost the entire population of the world and the vast majority of the world’s states (micro states are excluded).

The Democracy index is based on five categories: electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture. Countries are placed within one of four types of regimes: full democracies; flawed democracies; hybrid regimes; and authoritarian regimes.

Free and fair elections and civil liberties are necessary conditions for democracy, but they are unlikely to be sufficient for a full and consolidated democracy if unaccompanied by transparent and  at least minimally efficient government, sufficient political participation and a supportive democratic political culture. It is not easy to build a sturdy democracy. Even in long-established ones, democracy can corrode if not nurtured and protected.

Key recent developments include:

The unprecedented rise of movements for democratic change across the Arab world led many to expect a new wave of democratization. But it has become apparent that democracy in the region remains a highly uncertain prospect.

2012 was characterized by sovereign debt crises and weak political leadership in the developed world.

Popular confidence in political institutions continues to decline in many European countries.

The US and the UK remain at the bottom end of the full democracy category. US democracy has been adversely affected by a deepening of the polarization of the political scene and political brinkmanship and paralysis. The UK is beset by a deep institutional crisis.

In eastern Europe democracy declined in 10 countries in 2012. Had it not been for the significant improvement in the score for Georgia, the regional average score for eastern Europe would have declined in 2012 compared with 2011.

Longer-term trends

The global record in democratization since the start of its so-called third wave in 1974, and acceleration after the fall of the Berlin Wall in 1989, has been impressive. According to the Economist Intelligence Unit’s measure of democracy, one-half of the world’s population now lives in a democracy of some sort. However, in recent years there has been backsliding on previously attained progress in democratization. The global financial crisis that started in 2008 accentuated some existing negative trends in political development.  

A political malaise in east-central Europe has led to disappointment and questioning of the strength of the region’s democratic transition. Media freedoms have been eroded across Latin America and populist forces with dubious democratic credentials have come to the fore in a few countries in the region. In the developed West, a precipitous decline in political participation, weaknesses in the Longer-term trends

The global record in democratization since the start of its so-called third wave in 1974, and acceleration after the fall of the Berlin Wall in 1989, has been impressive. According to the Economist Intelligence Unit’s measure of democracy, one-half of the world’s population now lives in a democracy of some sort. However, in recent years there has been backsliding on previously attained progress in democratization. The global financial crisis that started in 2008 accentuated some existing negative trends in political development.  

A political malaise in east-central Europe has led to disappointment and questioning of the strength of the region’s democratic transition. Media freedoms have been eroded across Latin America and populist forces with dubious democratic credentials have come to the fore in a few countries in the region.

Decline in media freedoms

A noticeable decline in media freedoms, affecting all regions to some extent, has accelerated since 2008. This has affected mainly electronic media, which is often under state control or heavy state influence—although repression and infringements of the freedom of expression have also extended to the print media and, most recently, the Internet.

The reasons for this decline are complex and varied. Underlying negative trends were exacerbated by the 2008-09 global economic crisis. Many governments have felt increasingly vulnerable and threatened and have reacted by intensifying their efforts to control the media and impede free expression. Increasing unemployment and job insecurity have fostered a climate of fear and self censorship among journalists in many countries.

The concentration of media ownership has tended to increase, which has had a negative impact on the diversity of views and the freedom of expression. Advanced nations have become more inward-looking and hence less interested and capable of monitoring and pressurizing emerging market governments to ensure freedom of the press. In authoritarian regimes, which have often become stronger and more confident, state control and repression of any independent media is a given and has if anything tended to get worse, with increasing attacks on independent journalists.

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