Appearance and Reality? – or what does the economy have to do with democracy?

ricardo-hausmann_1Interview with Venezuela’s former Minister of Planning – Part 1

Ricardo Hausmann, former Venezuelan Minister and Professor at Harvard University, claims that in the long term, countries are not able to prosper without Western style democracy.

In his interview to, he suggests that the economic developments in dictatorships, semi-dictatorships, and fake democracies do not result from authoritarianism but from the favorable changes in the global economy. However, the reason for the economic recession and impoverishment – that, by definition, will sooner or later occur – is interpreted remarkably similarly: as foreign influence.

Zentai Péter: You gave up your government job, your political carrier in order to work as an economist and researcher and in order to prove that the rich countries succeeded only due to democracy. Is this statement going to be valid in the future, as well? We can already see that the opposite is true in some Asian and Arab countries – and as many seem to think in Russia, too.

Ricardo Hausmann: It is incontrovertible that the preponderance of true, well-functioning democracies is much greater among the rich, developed countries than among the poor countries. In academic circles, however, there is more and more debate going on about whether democracy is little bit like a luxury that these countries can afford because they are rich or it helped them to get rich. My research shows that past a certain level of economic development, the expansion and maintenance of a Western style democracy is essential in sustaining prosperity and in further improving. As a country develops, governments become more complex to be run without very strong feedback and participation from the society. As the quality and efficiency of the government is a determining factor in generating prosperity, those countries advance where the society participates in the identification and nomination of problems, in the work around solutions, and in the monitoring of government activities. If the government is autocratic in the sense that it does not consult with society, the quality of the government tends to be lower and the economy suffers accordingly.

This contrasts with the example of a lot of rich and successful Asian countries and the Gulf Arab states…

Why is it a high art that Saudi Arabia or Qatar became one of the richest countries in the world? What made those countries rich is not the autocratic government but the oil. The economy is limited to a small percentage of the labor force. They only have to manage the the relationship with a very few oil producers, for which they do not need a complex society. That is not a replicable model, therefore, cannot be used as an example.

What is very interesting is Korea or Taiwan – the sustainably successful, rich, and quite rich Eastern Asian countries. After being relatively autocratically ruled until the 1980s, they saw increasing social tensions. They addressed these problems by deepening their democracies. Right now, Korea and Taiwan are functioning democracies, which could not have continued to progress without systematic democratization.

The loss of faith in the Western style democracies has led to increased centralization and an increased role of the government in some Eastern European countries, such as Russia. Most of the people think that they the Western methods only served the colonization ambitions of the West and were alien to their national characteristics. Maybe, the Western style democracies are only effective in those countries where they match the historic, cultural roots.

I understand this to be manipulative because arguing against democracy is arguing against empowering your own citizens, against giving full rights of participation to the people. It is told in Latin America (this is also true in my own country Venezuela), in Russia, in Eastern Europe, in Turkey, or in China – independently of the geographical, geopolitical, historic, or cultural differences – by people who want to monopolize power. They portray democracy – that would enable the society to control those on power – as alien and try to paint this argument in the colors of nationalism to their own ends.

I still believe that sometimes better economic results can be achieved in an autocratic regime and in a democracy. The Russians are more satisfied and better off with the Putin’s system than with the Gorbachev’s or Jelcin’s democracy.

You are talking about countries that cannot demonstrate any essential economic development besides the export of oil and other energy sources. The fundamental reason why the Russian were living worse than they are living now is not that the authoritarians have increased the well-being of people while democracy was causing problems but that the world price of a barrel of oil was 10 to 15 dollars in the past decade, while it is 100 dollars right now. This has nothing to do with the internal political situation or the efficiency of authoritarians.

In the second part of the interview, the interviewee talks about the specificities of Venezuela.