Why you should care
Because many countries were never truly democratic during their transformation to a developed economy.
Simonomics: A regular look at the global economy from a former staff columnist at The Wall Street Journal.
There’s nothing like the expectant feeling of hope in the air, and we got a sense of that after a Tunisian street vendor set himself alight and ignited the so-called Jasmine Revolution and then the Arab Spring. Many around the world watched, wishing for better things. And we recently had reason to celebrate when an alliance of civil society groups in Tunisia won the Nobel Peace Prize for helping to build democracy there with a newly adopted constitution. That’s to be applauded. But for another important issue — economic development — things don’t look so rosy.
In fact, Tunisia’s success this month may be one of the things that dog its economic progress in the years to come. Its economic activity has been sluggish since the revolution in 2011 and is expected to slow from 2.3 percent in 2014 to just 1 percent this year, according to the World Bank. Meanwhile, the country’s GDP per capita adds up to only around $4,300 a year, versus nearly $55,000 in the United States. “It has proven difficult, though not impossible, to pass from the emerging-market status to developed status,” writes Marc Chandler, global head of currency strategy at the bank Brown Brothers Harriman, in a recent report.
With very few exceptions, democracy and a transition to a developed economy have not gone hand in hand.
One reason is that Tunisia, a former French Colony, simply doesn’t fit the profile of countries that have emerged with robust economic growth since the end of World War II. Both Singapore and Hong Kong, for example, were former British colonies and are financially much stronger today. The legacy of the British “may have eased the path to modernity,” says Chandler, who notes that people with money to invest usually spoke English. The government was also “non-predatory,” says Robert E. Wright, a professor of political economy at Augustana University, meaning the state focused on serving rather than stealing from its own population. Yes, it’s true the British lifted priceless artifacts from many countries they colonized, but if you owned a business, they normally didn’t take it arbitrarily. Meanwhile, the government’s soft touch when it came to regulation promoted the birth of more businesses, which certainly helped Hong Kong develop, says Chris DeSerio, a transportation development specialist at the World Bank.
Other countries, including South Korea and Taiwan, have benefited from Cold War tensions between the east and west. In 1960, South Korea had an average income-per-head of just $75 to $80 a year — low for anywhere, including Africa. In short, foreign aid and support from U.S. taxpayers helped cover the country’s defense bills, allowing it to put resources elsewhere as it eventually became a major electronics and automotive player.
That brings me around to the really bad news for Tunisia: With very few exceptions, democracy and a transition to a developed economy have not gone hand in hand. Some would even say that the two might be incompatible. Indeed, Hong Kong, Singapore, South Korea and Taiwan were never truly democratic during their transformation. Neither was Britain, nor America, if you go back far enough, because voting wasn’t always a universal right. My guess is that it will take a lot for Tunisia to break the economic mold. Still, the world hopes it will.