CGD Workshop Explores Economic Performance of the World's Youngest Democracies

Twenty experts in development from the academic and policy communities gathered at CGD on Monday 12 June to assess the economic performance of the world’s youngest or “third wave” democracies. The purpose of the discussion was to consider under which economic conditions these democracies are most likely to consolidate--or to backslide and even reverse--and to discuss what the international community can do to support these new democracies.Views ranged from the position that “young democracies are fragile, particularly during their first five years” to “we must discard the assumption that young democracies are fragile.” Indeed, the academic research to date can be used to support both positions, although it does seem apparent that strong economic performance is preferable for democratic consolidation. The research presented suggested that leaders of the world’s third wave democracies may face trade-offs over time between their political and economic objectives, in that the “political business cycle,” or pre-election manipulation of the economy, appears particularly acute in newly democratic states. That effect appears strongest in Latin America, leading several participants to focus on the role of “macroeconomic populism” in that region.During the discussion the gap between public officials who focus on democracy promotion and those who focus on economic growth was brought into sharp relief. An important issue concerns the extent to which those two “worlds” can or should be bridged. While the group did not seek to achieve a consensus on foreign aid policy, it did seem that most participants would agree that a tighter strategic integration between those working on democracy promotion and those working on economic reform within the aid community would be desirable, particularly with respect to the many “hard cases” of post-conflict democratization that are now critical to public policy. A plausible model of such integration was provided by the Millenium Challenge Account, which provides aid only to countries that “rule justly.”