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Many historians, politicians and economists find a link between the economic success of a nation and its form of government. For example, the idea that the USA's form of government was responsible for its economic success:

America must remain freedom’s staunchest friend, for freedom is our best ally and it is the world’s only hope to conquer poverty and preserve peace. Ronald Reagan

History suggests that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition. Milton Friedman

Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate. Bertrand Russell

Can we cite historical examples of nations or empires that had a distinctly autocratic or totalitarian central government yet still achieved great economic success and dominance with a capitalistic, entrepreneurial economy? Does History confirm that prosperity, capitalism, and some form "democracy" or representative republican form of government always go hand in hand?

One supporting piece of evidence that the two are inexorably linked might be contemporary China: Its form of government has slowly become more open and "democratic" directly in correspondence to its accession as the dominant world economy.

Still, China's form of government is very far removed from anything akin to the western democracies. Does or does not contemporary China refute the aforementioned hypothesis?

( Unexplained down-votes are not constructive. Please state your reason - I often edit or even remove posts in response to comments. Questions, answers, and the site at large, are improved thereby. )

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I'd throw democracy, capitalism, and constitutionally limited government all together into the mix, and I don't think democracy is the most important of the three. Plus, there needs to be a populace that is accepting of those values... culturally ready. – kbelder Sep 20 '13 at 22:21
Well, Chile is often cited as a country where capitalism lead to democracy. And that democracy tends to lead to capitalism is unsurprising. But I do think the link is very tentative, and China seems to do well as capitalism and still have very little indication that it's going to become more democratic soon. – Lennart Regebro Sep 20 '13 at 22:32
Unexplained down-votes are not constructive. Please state your reason - I often edit or even remove posts in response to comments. Questions, answers, and the site at large, are improved thereby. – user2590 Sep 21 '13 at 17:50
Given that the future hasn't happened yet, history cannot confirm that X and Y always go in hand. Disregarding this principal stance for a moment, you will find that there are lots of specific divergent opinions e.g. relating to democracy and economic growth in China. So don't expect any unique answers from history about this. – Drux Sep 22 '13 at 17:51
©Vector I guess I'm discounting that one can derive general statements about events that include future ones with certainty (as in always = 100% certainty). – Drux Sep 23 '13 at 9:50

No. It does not always go hand in hand. In fact, if history is any guide, it tended to be the opposite. There are a lot more successful, stable empires than democracy. Many empires saw long period of peace and prosperity that they were called "Pax something", like Pax Romana, Pax Mongolica and Pax Ottomana. Other than those we also have the Imperial China, the Persian (Achaemenid) Empire, and the Islamic Caliphates. If this list does not convince you, take a look at this wikipedia article and you will find most of them are non-democratic.

In fact, maybe it is harder to find democracies successful enough to rival the above examples. Probably the British Empire (though I'm not sure how democratic it was during its peak) and the contemporary United States and Europe. Many successful modern democracies (e.g. post-war Japan, that you mentioned in the comments) have only been around for a couple of decades, so in historical perspective they have only existed for a small period.

That said, in my opinion there are many problems in using history in comparing democracies and empires. The main one - as you mentioned in the comments is that the modern kind of democracies have not been around for long. Nationwide (as opposed to city-state) elections, universal vote and the secret ballot have all been around only relatively recently. We need more time to fairly judge whether it is more correlated to prosperity than non-democratic empires.

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An excellent answer-did you peek at my comments regarding the Mongols, the Ottomans and the Romans? No matter. I would accept this answer but for two points: ) Not enough numbers and analysis of the political/economic systems of the empires you mentioned. )Highly evolved modern democracies haven't been around too long, so it's difficult to say "the opposite" (BTW you forgot to mention post-war Japan as highly successful democracy with a dominant economy, not withstanding their slide over the last decade). Enough to bring those examples of yours to show that they don't go hand in hand. – user2590 Sep 22 '13 at 5:29
IMO prosperity and success have little to do with the political system-it's about the wisdom of the rulers -you need rulers that engender a political and economic system that allows the development of free markets and an entrepreneurial class. An autocrat can do so with a country of 100 million, 90 million of whom are serfs and slaves, provided he gives the privileged 10 million that ability. When they succeed, the whole nation will prosper, including the serfs (relative to their position) if the government is wise enough to allow them to do so, as in many cases they were. – user2590 Sep 22 '13 at 5:44
@Vector good points, 1) listing several examples doesn't prove that it is the trend, and 2) modern democracies haven't been around too long. I'll try to address that in the answer – Louis Rhys Sep 23 '13 at 3:06
I think in the post WWII world, the vast majority of prosperous, successful economies have been "democracies" - also S. Korea, Brazil, Israel, Australia, Canada... long list I think. But IMO that's just because right now "democracies" are IN, not that their success is because they are democracies. If you have a world that's mostly autocratic monarchies, you will also find many are successful and others are not - as I said, it doesn't depend on the political system per-se, but on the sagacity of the "powers that be", whoever they are, – user2590 Sep 23 '13 at 3:16
-1 - Most if not all of those empires (add in Hapsburgs) were prosperous and successful ONLY because they economically prospered due to expansion and plundering. As a matter of fact, Rome declined in large part because they ran out of expansion space. And Mongols were a lot more "democratic" (full-on meritocracy, freedom of worship, patronage of trade) than many later "democracies". – DVK Sep 23 '13 at 14:29

Heavily revised based on comments

This question is NOT simple; I would argue that it cannot be answered, but I can outline what I think the parameters of the answer might be.

In "The Origins of Political Order", Fukayama makes a throwaway comment that the key is that the government be accountable to the people; democracy is only one of the ways that accountability can be created. He doesn't develop the concept (at least not to the extent that I would have liked), but I suspect it is the key to the answer to this question. Let’s begin by setting some boundaries to make the question reasonable.

  • I’m going to ignore historical examples that are pre-capitalist, because they undermine the assumptions of the question (prosperity, capitalism and some form of democracy) I’m going to arbitrarily set a boundary of 1600CE ; the boundary is arbitrary because justifying the boundary would extend the answer even closer to book length, and I’m going to try to be brief. This also neglects the transitions between mercantilist capitalism, consumer capitalism, managed capitalism (Breton Woods) and post-modern capitalism. I simply can’t explain that briefly.
  • I’m also going to constrain the question to countries where policy choices affect prosperity, capitalism and democracy (this eliminate countries with the Dutch Disease; they are interesting to study, but I believe they’re distinct from the question. Countries cannot fiat the existence or value of natural resources.)
  • I’m going to exclude nations that restrict ownership of property or participation in economic transactions. Nations that permit slavery, or exclude minorities from normal economic activities are exercising policy choices, but I find the choices repugnant. This is a problematic assumption because of the problem of Gastarbeiters in Europe, immigrants in the US, etc. Those are fascinating questions, but I’m already failing at my goal of being brief.

Definition of terms

We need to define democracy, capitalism and prosperity before we can proceed.

Democracy (I’m going to ignore the distinction between democracy, republic, and a couple of others.) is difficult to define because North Korea, East Germany and the United States all claim to be democratic, yet all fall short of the ideal in different ways. For simplicity of argument, let us suppose a bipolar scale with some democratic ideal at one end, and some form of authoritarian regime at the other. I’ll use Linz’s criteria to distinguish – countries on the democratic end have (1) stronger/more effective constraints on political institutions, (2) legitimacy based on something other than emotion, (3) minimal constraints on political mobilization by the inhabitants and (4) formally defined and stable definitions of executive power. Countries on the authoritarian end of the axis have minimal constraints on political institutions, legitimacy based on emotional appeal, strong constraints on political mobilization and informal or unstable definitions of executive power. This is actually the easiest of the terms to define.

Capitalism – I’m going to make the question far harder by including both pure capitalism and welfare state capitalism. This significantly weakens the utility of the answer, but if we restrict welfare state capitalism from the analysis there are a dearth of examples. For simplicity let us ignore the problem of sovereign wealth funds (which significantly weakens the utility of China as an example) and assume that capitalism is correlated with the % of GDP which is in private control vs public control.

Prosperity Nobody is happy with the established definitions of prosperity; they are only distinguished by the fact that they are the least bad of the known alternatives. (I’m going to ignore the Nepalese efforts to measure “Gross National Happiness”, and Marxist exchange entitlements and a hundred other metrics).
We could measure prosperity by long term positive trend in GDP or in long term positive trend in per-capita GDP. I don’t have the numbers in front of me, but I strongly suspect that this choice will define the answer. If we measure by per-capita GDP then I strongly suspect that we’re measuring a participatory measure of economic power against a participatory measure of political power. I am willing to bet my lunch that there is a positive correlation between those two factors. If on the other hand we measure against total GDP, then we have a fascinating question. In fact, I think that is the question that OP is really seeking.

If we proceed on these assumptions (I don’t argue that they’re sound, merely that they provide reasonable boundaries for initial discussion), then I would argue that there is a positive relationship between economic participation, political participation and prosperity. The question is transformed to the Principal-Agent Problem.

If we restrict the discussion to modern consumer capitalism within the context of welfare state representative government, then I submit the correlation will be even stronger. Hayek, Gorbachov and Deng Xioping all agree that prosperity is correlated with the ability of the general population to benefit from prosperity.

It appears that authoritarian governments can employ strong economic policies to kickstart capitalism and raise prosperity. Both Japan and China have done this successfully. Of course the same policy can fail as has happened repeatedly. There are ideological arguments whether that is sustainable – some would argue that the current Japanese economic problems arise from governmental vetoes on normal economic corrective activities. I think there are more developmental economists studying this problem than there are countries in the dataset.

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An "authoritarian" government is by definition not accountable to the people, right? – T.E.D. Sep 23 '13 at 15:35
@T.E.D. Assuming we use Linz's definition of authoritarian. But I think that the practical definition is "My government is democratic and accountable; yours is democratic, and his is authoritatarian." All depends on who defines the terms. – Mark C. Wallace Sep 23 '13 at 16:04
@T.E.D. - IMO not necessarily so. An authoritarian government must also consider public opinion, or they probably will not be in authority too long. They don't consult the people about laws and policies, but public opinion will of necessity be reflected in them. A king inherits his title, but not his kingship. – user2590 Sep 24 '13 at 1:22
I tend to minimize the idea of "accountability"-I have a Platonic leaning to the "Philosopher King" or "Benevolent Despot", although maybe it's a foolish notion (or perhaps the Philosopher King intrinsically understands accountability-I'd have to review my 45 year old study of Plato.). Still, but for the dearth of concrete historical examples, I'd accept this answer because of its scope, and because of its general emphasis on economic policy as opposed to a particular form of government. I'm afraid those I quoted in the question had political agendas that don't pass "historical muster". – user2590 Sep 24 '13 at 1:30

To complement Mark's answer, from the Marxist perspective where "prosperity" could only be viewed as the maximisation of value under bourgeois control.

I was reading an abstract today on the commodity form's [use in human communities, resulting in reflected legal and political ideology as people consider their practice in the light of commodity society, and these relation's production of] conflicting construction of rights doctrines from property. The conflicting constructions require individuals to be able to own property and the state to be able to regulate this ownership in the interests of the general condition of individuals owning property.

Such a society has tended to

  • Recognise individuals before the law
  • Promote free (dispossessed) labour as the general form of labour
  • Deal with the social problems from above by democratisation of the political sphere combined with the dedemocratisation of the economic sphere (chiefly through promoting employer controlled labour markets)

There are strong countervailing tendencies such as the requirement to preserve the commodity form (reaction, fascism, bastard capitalisms like the Soviet Union); or, the opportunities of primary accumulation through enslavement (Federici's Caliban and the Witch); or, the requirement to preserve the commodity form (industrial democracy, works councils).

These effects don't occur at the national level either, but in terms of transnational structures of capital ("imperialism," "the metropole/the periphery"); though obviously capital has been provincial or national at different times.

Any answer to this question will necessarily import a theoretical perspective.

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The trivial thing to do is to look at the list of countries sorted by GDP per capita.

At the top positions of the list one can find several good old oil-rich monarchies. Surely the source of the wealth for those countries is.... democracy?

One can find EU member states deep down in the middle of the list. Can an EU member state be non-democratic?

Now let's look at the very bottom of the list. How many countries there are not trying to be democracies? Not a single monarchy, princedom or a satrapy. They all are Republics.

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I'm ruling out the Arab oil states - see edit. And that list only reflects the contemporary world over a short period - it does not reflect historical trends. Also, a country can call itself a "republic" but that doesn't mean that it actually is. All the totalitarian communist states called themselves "People's Republic". – user2590 Sep 20 '13 at 23:12
+1. Good research and thought process. -1. No perspective for history. Net 0. Sorry. – Apoorv Khurasia Sep 21 '13 at 5:14
-1 For assuming a country is democratic because it calls itself republic. – Lennart Regebro Sep 21 '13 at 5:20
-1, what @LennartRegebro said. The approach is also a bit too flippant for my taste... – Felix Goldberg Sep 22 '13 at 8:15

If you're comparing states with significant amounts of representative action (historially very few) vs those ruled by oligarchies or monarchies, the answer is clearly that prosperity is nearly guaranteed during and after the periods of higher representation.

In comparison, oligarchies and monarchies almost always lead to long periods of stagnation. At best, these arrangements generate short periods of growth before heavy stagnation. I wrote a couple blog entries on ancient representative governments and the rise of modern democracy that give a summary of all the oldest representative governments. They all, without fail, have become prosperous.

Modern "democracies" are murkier because the amount of representation they actually have is often hidden - many places that call themselves democracies or republics are really oligarchies or dictatorships in disguise.

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