Fellows Program on Peace, Governance, and Development in East Asia

AbstractThis paper reevaluates the economic consequences of democratization in young Asian countries. Specifically, this paper asks why democratization results in a more equal distribution of wealth only in some Asian countries but not in others. Meanwhile, this paper asks why democratization fails to clean up money politics in many young Asian democracies. These questions run against the conventional wisdom, as one should intuitively expect a reduction in inequality and corruption when a country transitions from an autocracy to a democracy. This paper develops a three-step argument to answer these empirically perplexing and theoretically puzzling questions. First, it highlights various strategies whereby newly democratized governments employ different legitimation strategies and reconstruct their electoral coalition among the citizenry. Second, it discusses how different selectorate-rebuilding strategies can have profound consequences on income inequality and corruption. Finally, it traces the logical chain and discusses how selectorate-rebuilding strategies can be determined by the condition under which democratization takes place in Asian democracies. This paper contributes to the literature by emphasizing previously unnoticed hazards induced by democratization in Asian democracies. It features a clear micro-foundation of how politicians’ electoral incentives lead to sup-optimal economic outcomes, and it provides a fuller panorama of the relationship between democratization, income inequality, and money politics than was previously available.

Quotes from the Paper

Few would dispute that democracy is a superior form of government when compared to autocracy. While autocracies only reflect the interests of an individual or tiny faction, democracies maximize the representation of all citizens’ preferences in a polity. Importantly, since democratic leaders are chosen by a larger selectorate and from a larger winning coalition, democracies are more accountable and provide more public goods to their electorates than autocracies

……despite its normative appeal, many democratization cases in Asian countries have failed to deliver the promises enthusiastically professed by many democratic theorists. One such failed promise is rampant economic inequality…….the effect of democratization on economic inequality in young Asian democracies is anything but deterministic: while democratization seems to reduce net (post-tax, post-transfer) income inequality in Korea and Thailand (though notice the peak during the mid-2000s), net income inequality has risen substantially in Taiwan since the 1990s and particularly in Indonesia since the post-Suharto era. …….income inequality in some young Asian democracies grew at a much faster rate when compared to their authoritarian counterparts. Indeed, while the decade-average Gini coefficient in Taiwan rises from 26.97 in the 1980s to 30.66 in the 2000s (a 13.68% increase between the two decades), the corresponding figure in Singapore only rises from 38.64 to 40.81, a modest 5.62% increase.

Importantly, I argue that different selectorate-building strategies can have profound consequences on economic outcomes in new democracies. In particular, I suggest that countries where the incumbent prioritizes clientelism over other selectorate-building mechanisms are more likely to experience an increase in economic inequality and political corruption after democratization.

Specifically, many suggest that as a country transitions from an authoritarian to a democratic regime, the introduction of popular and competitive elections in democracies would ultimately reduce economic inequality. In particular, in authoritarian regimes with no or few democratic rights, the state machinery is controlled by a few political elites who can easily increase and retain their wealth through predatory and repressive means. By contrast, as political participation broadens, democracy takes both political power and economic privilege from the few and places it in the hands of the many.

I argue that it is important to distinguish between democratic transition and democratic institutionalization; the former refers to a process that transfers political power from a few elites to the popular masses, whereas the latter denotes the process of engraving democratic accountability into society.

Author
Eric C. C. Chang is Associate Professor in the Department of Political Science at Michigan State University. He came to MSU in the year of 2003 after receiving his Ph.D. from UCLA. He studies comparative political economy, political institutions, political corruption, and democratization in both developed and developing democracies. His research makes use of formal theory and quantitative methodology to analyze substantive political and economic phenomena. His article, “Electoral Systems, District Magnitude and Corruption,” (co-authored with Miriam Golden) won the 2008 Lawrence Longley Award given by the American Political Science Association’s Organized Section in Representation and Electoral Systems, and his other publications have appeared in The Journal of Politics, The British Journal of Political Science, World Politics, Comparative Political Studies, and The European Journal of Political Research. He teaches graduate courses on political methodology, political economy of parties and elections, comparative political institutions, and undergraduate courses on Asian politics.