Abstract
This paper tries to identify the fiscal sustainability record of democratically and autocratically governed countries by applying various performance indicators (credit worthiness, payment defaults, national debt, foreign assets) and also to clarify what effect the characteristics of a regime have on consolidation efforts in a country. The study identifies two key findings. While in the past, democracies have clearly found it easier to preserve their credit standing and solvency and to avoid government bankruptcy, a similar advantage can no longer be detected for democracies in terms of reducing national debt and foreign debts. Why democracies, in spite of their arrangements with a sensitivity for the public good and for due process, are finding it so difficult to avoid shifting their debts to future generations, to undertake cutback measures and to provide sufficient financial foresight, can in principle be interpreted as the other side of the coin, namely highly presence-oriented interests boosted even further through the short "democracy-specific time horizon".
Highlights
Against the background of the current financial and economic crisis, doubts have clearly increased about the general superiority of countries with a democratic constitution versus autocratically governed countries, in terms of the sustainability of their national finances
This article is grounded in the assumption that important economic, social and environmental challenges of the future cannot be addressed, if long term financial viability is not preserved in a country
The democracies seem to show a slight advantage in the category of lowering national debt [90], but when we look at details, this advantage is noticeably smaller than in the category of avoiding acute payment defaults
Summary
Against the background of the current financial and economic crisis, doubts have clearly increased about the general superiority of countries with a democratic constitution versus autocratically governed countries, in terms of the sustainability of their national finances. The dramatic household situation in several countries on the European periphery (Greece, Italy, Ireland, Portugal, Belgium), as well as other democracies on the globe (Japan, Iceland, USA), raise the question of whether democratic societies may not have systematic deficits in the consolidation of their national finances [1] In comparison, it seems to have been considerably easier in the past for at least some autocratically governed countries (Kuwait, Russia, Saudi Arabia, China) to keep their national debt under control and to make financial provisions for the future. We want to offer a theoretical contribution towards a connection at the interface of regime type and the discourse of fiscal sustainability, as well as providing evidence of existing empirical connections
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