This week we are primarily studying the effect of economic development on democracy, but a country’s overall level of wealth is not the only important economic influence on democracy and dictatorship. This video discusses the relationship between inequality and democracy.
Theories about how inequality affects the likelihood a country will become democratic tend to rest on one core assumption. This is that under democracy, the lower and middle classes can influence tax policy and will have their elected leaders increase taxes on the rich to redistribute some wealth to social service programs that would benefit other classes. Redistribution is usually thought of as raising taxes on the rich, but it could also take the form of land redistribution – breaking up what were essentially feudal estates owned by large landowners and giving smaller parcels of lands to the people who actually farm it.
Carles Boix in Democracy and Redistribution (2003) takes this idea and argues that democratization is only likely at low levels of income inequality – when there is a relatively low difference between the average income of the middle and upper classes, the rich are less likely to oppose efforts to extend political rights to other classes. They have less to lose from the likely tax increase that would follow.
Our friends Daron Acemoglu and James Robinson, authors of Why Nations Fail, have an even more famous theory about inequality and democratization. In the book that made them famous, Economic Origins of Dictatorship and Democracy (2006), they share Boix’ assumption about the motivations of the rich, but add Robert Dahl’s idea of regimes needing to balance the costs of repression and the costs of toleration.
They argue that the relationship between inequality and the likelihood of a transition to democracy is an inverse U shape. At low levels of inequality, dictatorships are not likely to transition to democracy because there isn’t much demand for it. The poor are pretty happy with what they have economically, so they don’t demand more political rights. They offer Singapore as an example here – most citizens are relatively well off under the current system, so it has been able to sustain a single ruling party for a long time.
As inequality rises, however, dissatisfaction with the current regime also rises. Democratic transitions become more likely for two reasons: The poor have more to gain from a democratic transition. And the rich don’t have that much to lose – at mid-levels of inequality, the cost of using force to repress protests is more than what they would lose from slightly higher tax rates. So rather than call out the military to shut down protests, they allow a democratic transition.
At the highest levels of inequality, however, the rich have a lot to lose from democratization. Even though using force against protestors is costly, they would lose even more from redistribution and so they repress demonstrations and are able to avoid a democratic transition.
These theories make logical sense, but don’t actually have a lot of support in actual data or experience. Boix does provide evidence that there is a correlation between inequality and democratization historically – a regression of the Gini coefficient on democratic transitions between 1950 and 1990 shows a negative relationship – as inequality increases, the likelihood of a transition decreases. Acemoglu and Robinson don’t provide any evidence for their extremely influential theory at all.
Other studies don’t find a statistically significant relationship at all (Houle 2009), and qualitative research demonstrates that democratic transitions in countries with high levels of income inequality are not actually driven by issues of class conflict (Haggard and Kaufmann 2012).
In addition, inequality often persists and sometimes expands under democracy – the poor don’t end up successfully “soaking the rich” with new taxes after a democratic transition (Kaufmann 2009). The assumption behind these theories is flawed.
This doesn’t mean that inequality and democracy aren’t related. There is evidence that inequality can undermine democratic stability – it can make democratic backsliding into autocracy more likely. Income inequality reduces the quality of democracy and encourages practices like vote-buying and clientelism. But the relationships aren’t yet clear – we need more research at both the cross-national and regional levels to better understand the problem.