Democracy And Market Liberalization

Democracy and Market Liberalization

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Democracy and Market Liberalization
The theoretical and empirical literature devoted to the relationship between economic market systems and democracy remains rather inconclusive. Although democracy makes the task of reformers more difficult, with the risk of impeding market liberalization, democracy increases the subjective support to the market. Even if individual income increases democracy, market liberalization is not sufficient to trigger the demand for democracy. Democracy cannot naturally emerge as a by-product of market liberalization but democracy may generate influential support for market liberalization.

The process of democratization is essential to market transition because it creates checks, balances and new norms that help lock in economic reforms (Dethier, Ghanem and Zoli 5). This is better analyzed by the experience of Central Europe where democracy preceded market liberalization and the democracy created the avenue of opportunity for market transition. In 1991, Yeltsin, the then President of Russia, made a mistake by giving the first priority to market issues rather than focusing on building new democratic institutions and democratically conducted elections. Giving democracy the first priority could have made it easier for the country to implement market

In countries where this political issue was not dealt with early on especially during transition, the political leaders continued to have advantage over other interest groups. In the absence of democracy, the political agenda is driven by personal interests of political leaders making it difficult to implement liberalization policies that are aimed at de-monopolizing the economy and opening it up to competition. (Grosjean and Senik 24) Also argues that market liberalization does not reinforce democratic values. The richer, better educated, younger, self-employed citizens, farmers and farm workers are more supportive of democracy contrary to the poor, those who have not completed compulsory education and women. The poor, the uneducated and the women are less supportive of democracy and more likely to declare that the political system does not matter for them. Identically, citizens of countries with less developed markets do not appear to be less supportive of