Democracy pays off in the long run...

The following is copied and pasted from NewEconomist's blog. A blog written by someone who describes himself as a London-based economist and policy wonk who lives in London and is an economist by training. He has worked over the years for several governments, an investment bank and a think tank. He currently heads up a team of researchers.

And its a little nice to see others reading my blog and referring to it. The NewEconomist reads as an extremely well written and well researched blog. I have the feeling that I am about to become an avid reader.

Some commentators have also argued that wealth leads to democracy, rather than the other way around. They suggest this justifies a 'realpolitik' tolerance for autocratic regimes on the grounds that they are best able to grow the economy to the point where it is "ready" for democracy.

This patronising view is particularly popular in Asia, where presumably the population are not yet "ready" for genuine parliamentary democracy or freedom of speech (on which, see the remarkable Singabloodypore blog).

New research challenges those arguments. A paper by Dani Rodrik and Romain Wacziarg to the 2005 American Economic Associationlooked at this question using an analysis of within-country variation in growth. The paper, Do Democratic Transitions Produce Bad Economic Outcomes(PDF), concluded that:

The hypothesis that democratization is followed by bad economic performance, particularly inpoor, fractionalized countries, is not supported by our analysis of the within-country variation.

Claims that democratization leads to disappointing economic results are often used to justify calls to delay political reforms in poor, ethnically divided countries until they become “mature enough” for democracy.

...The problem with this view is that it presupposes that autocracies deliver better performance than democracies. We have shown this hypothesis to be false.
Rodrik and Wacziarg make an important point that economists often seem to forget - namely, that freedom and democracy have value in their own right, irrespective of whether they boost economic output or not:

Democratization surely yields benefits - in terms of individual freedom and empowerment - that are valued independently of their consequences for material wealth.

But there are economic benefits too:

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