Explaining the Erosion of Democracy: Can Economic Growth Hinder Democracy?

Abstract

Economic growth has become one of the leitmotivs academicians and pundits ask once and again to assess democratic endurance over time. While large portion of the literature posits that economic growth is positive for democracy (eg. Przeworski et al. 2000), for other scholars it is a profoundly destabilizing force (eg. Olson 1963; Huntington 1968). This paper fills these contrasting views asking whether economic growth can undermine democratic competition. We hypothesize that the relation between economic growth and party competition is mediated by the strength of political institutions and free expression. Economic growth promotes incumbency advantage. Rulers can artificially extend this advantage by narrowing the space for negative coverage and dissident voices as long as they have political room for maneuvering. We leverage exogenously-driven growth in Latin America to test this argument. Over the past two decades, the region experienced accelerated growth as a result of a global commodity boom. Using data for 18 Latin American countries during this period, we show that faster economic growth led to significant increases in incumbency advantage in the legislature only where free speech was under attack. Our findings have important implications for literatures on democratization, natural resources, and economic voting.