The relationship between democracy and economic growth

The Relationship Between Democracy and Economic Growth

Does such a relationship exist? If it does, what is the nature of this relationship and how can one justify it? Intuitively speaking, one would expect a better economic growth during democratic regimes as opposed to military (dictatorship) regimes. The democratic regimes have many incentives to work towards economics growth, the main incentive being winning the next elections. For, military regimes this incentive is not applicable. For democratic regimes there is accountability for corruption due to transparency, free press, and opposition forces. In the case of Sudan, democratic governments have always been coalition governments (two or more parties) and they were short-lived. As such, there has been always a lag in implementing development projects. These lags result from opposing views and or political gains within the government and also the time it takes for the parliament to approve the projects. Despite all these, it is interesting to notice that the average growth during the last democratic regime was much higher than the average growth rate during the regimes before and after (May and June military regimes). These observations are based on the data published by the International Monetary Fund (IMF) for the period 1971-2004. I looked at the average Gross Domestic Product (GDP) annual percent change at the constant price for the periods 1971-1985, 1986-1988, and 1989-2004. These periods represent Nimiri’s regime, Elsadig Elmahdi’s regime, and Elbasheer regime. Here the findings:

Average annual GDP percentage change for 1971-1985 = 2.94 %
Average annual GDP percentage change for 1986-1988 = 6.93 %
Average annual GDP percentage change for 1989-2005 = 4.63 %

If we take the two military regimes together, the average growth rate becomes 3.79%.
It is also interesting to notice that the highest annual growth rates during the entire period 1971-2004 were 15.7%, 12.5% and 9.9% and these occurred in 1976, 1974 and 1986 respectively. The highest growth rate during the current regime was 9.3%.

Despite the fact that the democratic regime lasted only three years and the other two regimes lasted over 10 years each during the period of our analysis, we see that the overall growth rate was higher in the democratic era. In order to make apple to apple comparison in terms of the period, I take the last 3 years of Nimeri’s regime and the first three years of Elbashir’s regime. I exclude the year 1985 in which there was a transitional government. Here is what I see:

Average annual GDP percentage change for 1982-1984 = -1.0 %
Average annual GDP percentage change for 1986-1988 = 6.93 %
Average annual GDP percentage change for 1989-1991 = 3.10 %

For these periods the average inflation rates were as follows:

Average inflation rate for 1982-1984 = 30.3 %
Average inflation rate for 1986-1988 = 49.8 %
Average inflation rate for 1989-1991 = 84.7 %

Unfortunately, there is no data for the earlier periods in order to include earlier democratic eras. Therefore, I can not claim that these observations provide a conclusive evidence that there is a positive relationship between democracy and economic growth.


Data source: IMF - The World Economic Outlook (WEO) Database April 2003.

(Edited by Mohamed A. Salih on 04-08-2005, 02:34 PM)
(Edited by Mohamed A. Salih on 04-08-2005, 02:37 PM)
(Edited by Mohamed A. Salih on 04-08-2005, 02:46 PM)

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