Will the democratic crisis be ‘outed’ by the financial crisis?

One of the preoccupations of the development community is the existence of a link between good governance practices and economic growth: the so-called ‘democratic dividend’.  While it is never that simple, the argument goes that democratic and standard economic reforms will be rewarded with investment, aid and ultimately sustained growth.

Some have also argued that people’s adherence to democracy is closely linked to whether they think they derive personal economic benefit from their country’s democratic practices. French academic Jean Pascal Daloz famously quoted a respondent to a survey who asked whether one can eat democracy.

The empirical links between democracy, economic growth and personal welfare remain tenuous and circumstantial. But one of the obvious results of the current financial crisis is that people are paying closer attention to their governments’ accountability, transparency and general effectiveness. When times are good we don’t seem to mind government inefficiency and nontransparency too much. But when the well runs dry, governments come under much closer scrutiny.

In most countries in Europe and America one could argue that the majority of people have derived enough economic benefit to ensure at least their indifference to the governance practices of their country. The financial crisis is however changing all this.   Two recent articles by Naomi Klein and George Monbiot discuss the popular challenges that have been punctuating the media over the last few months: Greece, France, Britain, Latvia, Iceland, South Korea, Thailand  etc. The IHT even reports that Vladimir Putin authoritarianism could be challenged after the dramatic fall of the oil price and everything that that means for Russia. And one can guess that it is only Obama-mania that has saved the U.S. from a larger number public displays of citizen unhappiness.

Klein argues that many people are losing faith in their countries’ entire economic and governance ‘model”. As a result people don’t want a change in their representatives, but rather demand a change in the way in which they are represented. That they have had enough of voting every few years and then allowing their representatives to do as they wish.

Monbiot is even unhappier: “We are trapped in a spiral of political alienation. Politics isn’t working for us, so we leave it to the politicians. The political vacuum is then filled with heartless, soulless, gutless technocrats… Unmolested by the public, corporate lobbyists collaborate with this empty political class to turn parliament into a conspiracy against the public. Revolted by these phantoms, seeing nowhere to turn, we withdraw altogether, granting them even richer opportunities to exploit us.”

The financial tsunami that is washing over Europe and America has not arrived in the South just yet. But all the signs are that imports, aid and investments in developing countries will drop substantially over the next 12 months. Admittedly governments in the South are less important (lower tax/gdp and expenditure/gdp ratios) in peoples’ daily lives than they are in the North. But then again these governments do worse in most indicators of governance. So don’t be surprised if the governments in the South start feeling the heat from disgruntled citizens as well.

The International Budget Partnership’s Open Budget Index provides evidence for what most unhappy citizens know intuitively. Most governments do not release enough information to allow citizens to examine their decisions and actions:

  • Almost all governments produce much more information than they deign to share with the public.
  • Most spending plans don’t give enough detail to allow citizens to see exactly what government is planning to spend.
  • Almost all reports on what governments actually spend are even less detailed than the original spending plans.
  • Audit reports are almost always too late to be of use. And their findings, however incriminating, are almost never acted upon.
  • While some governments consult citizens on their budget decisions, such consultations are almost always of the window dressing variety.

Everywhere it seems that people have had enough of such clandestine government. The cash crunch is putting more focus on the hidden corners of government activity. While we are in for a few tough economic years, we may emerge from the crisis with governments that are more responsive to the needs of the people that they represent.


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