Mon. Nov 12th, 2018

Economic legitimacy – SUKHDEV SHAH

Most of us must have come across ideas like political legitimacy but may not have heard much of economic legitimacy. I myself had not been aware of this term until some months ago. Then, a strange thought occurred to me, something along these lines: Why, with all the progress humanity has made over past centuries to help solve mankind’s economic problems, over half the world’s population remains mired in poverty?

We do not have to travel far and wide to observe poverty and wretchedness of the life poor people have to live and endure. The Washington Post recently carried a front-page photo of the squatter families in Kathmandu being forced out of the settlements they called home.

Apparently, these poor migrants from countryside had chosen to become squatters for basic survival, after other attempts of earning a decent living had failed. Those of us who are aware of conditions on the edges of Kathmandu’s filthy rivers carrying the city’s untreated sewage and sludge must quickly realize that it is unbecoming of a civilized society to see people driven to such an extent just for survival!

ut then, what do you do about it? The easiest option for politicians and officials would be to sweep the dirt under the carpet—make the squatters invisible by transporting them out of sight and keep them out of mind. This is what the country’s political leadership did to solve the squatter problem which, unfortunately, also happens to be a standard practice in much of the world.

However, a more sensible option would be that government be made responsible for managing poverty and punished for inaction or failure. This is what we may call people’s economic rights—right to basic living—which, in my view, need not be less sacrosanct than, for example, human rights.
Ideally, in any civilized society, both rights have to be observed and respected in equal manner and the government made accountable for ensuring them.


The most appealing feature of Western democracies has been the balance they have tried to maintain between these two types of rights—political freedom along with assurance of basic human living. The underlying theme for such dual commitments has been that political peace is unlikely when there is widespread poverty and unfair distribution of income. If the market and private enterprise cannot ensure basic living for the masses, then the government must make use of taxation and social safety-net measures to protect the poor.

This combination of political freedom and economic protection underlay the stability and prosperity of Western societies and it would be hard to imagine one existing without the other.

Unfortunately, when it comes to devising road-map for improved living conditions in poor and habitually undemocratic domains, Western Governments and institutions tend to overlook the economic side of freedom, with their sole focus on everything political.

Starting with the administration of Jimmy Carter in the 1970s, US government, for example, pushed for human rights all over the world which was later embraced by Reagan Administration in the 1980s. Such intense focus on human rights exacerbated the demise of dictatorships in many countries and hastened the collapse of communism. It was then assumed that political freedom and democracy would automatically lead to economic progress and shared prosperity.

Much of foreign aid and trade concessions given to developing countries were tied to their democratic credentials whereas they were allowed to just walk away from economic accountability.

Predictably, much of the foreign largesse flowed to the upper crust of the society, with most of its constituents sharing links with traditional ruling groups. These regimes assumed democratic appearance but remained far removed from the daily concerns of average citizens for whom the risks of living had increased enormously, more so because the token safety-net cover provided by the dictatorial regime had melted away.

I am not alluding to post-democracy Nepal but this is the experience of most third-world new democracies. Democracy has helped people enjoy political freedom but this hasn’t progressed to offer them a better living. National accounts data, for example, show unchanged or declining living conditions in most of newly democratized societies and a worsening of income disparities.


There has not been much appreciation of the fact that most countries that have been high on the list of economic success stories—rising out of poverty and bleak prospects—were once dictatorships. We talk today of Asian miracle economies of Korea, Taiwan, Singapore, Hong Kong, all of whom, in some measure, had been ruled by autocrats. Other successful economies of the region that have followed in the footsteps of little tigers—Malaysia, Indonesia and, more recently, China—hadn’t been the members of democracy club but have marveled at their economic success. Looking at other success stories; Chile and Brazil experienced long periods of military rule but are now the model economies in the region. At the same time, looking around the world, we can find very few examples of democratically-ruled poor countries turning into economic dynamos!

This is no way to suggest that dictatorships are good for economic success; much less that a prerequisite. In fact, there are many more cases of economic ruins perpetrated by dictatorial regimes, compared to the poor track record of democracies experimented in poor countries.

The path to economic success and prosperity then is not the color of political regime—democracy, dictatorship, or something in-between—but their measurable commitment to economic success. An objective evaluation of political leadership of Asian Tiger economies, for example, would show that all of them heavily emphasized economic success as a route to public approval and political legitimacy. It was much less important for the rulers as well as the general public to consider anything else, including how the political power gets exercised. If this meant a dictatorship and loss of personal freedom, so be it. People would tolerate all types of abuses—limitation on human rights, curtailment of press freedom, censorship, suppression of political opposition—as long as the governing regime showed 10 percent economic growth! No other measure of legitimacy was required.
The path to economic success is not the color of political regime, democracy or dictatorship, but its measurable commitment to economic success.

And the muted acceptance of this particular measure of legitimacy—by the general public as well as the regime—produced miracles in those countries that practiced it. Poverty was eliminated in a generation and there is no limit of how prosperous they would become over the next generations.
Another—and no less important—miracle these countries have experienced is their quick return to democracy that happens to be as clean and representative as anywhere else in the world. Look at Korea, Chile, Taiwan, and Hong Kong, who do not look they have been through worst form of dictatorships. Other new economic power houses—Malaysia, Singapore, Indonesia—are also within the reach of restoring full-fledged democracies, anchored on the economic muscles they have build.

The question then is of interregnum—a trade-off between democracy and prosperity. Most of us would choose prosperity over loss of political rights if there is a measurable commitment for economic success, for example, to bring about 10 percent economic growths. This is what I term economic legitimacy, which can be accepted as a superior mode of governance than traditional democracy that can easily be abused and exploited.

It is now time that we revise our notion of political legitimacy and allow for at least some measure of economic accountability. from Republica

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