Economic Reform and Democracy

Over the past two decades, two grand trends have been transforming state structures around the world: the transition to democracy and the movement toward more open, market-oriented economies. In recent years, no issue in comparative politics has received more attention, and been subjected to more vigorous debate, than the relationship between these two transitions. An early "conventional wisdom"—based on the success of economic liberalization in authoritarian Chile, communist China, and semiauthoritarian Mexico—maintained that authoritarian regimes are distinctly advantaged in undertaking macroeconomic stabilization and liberalization, because they are able to ignore or repress opposition from groups that suffer from reform measures in the short run. Recently, this thesis of "economic reform first" has been questioned by a number of scholars who point to the intrinsic difficulties of initiating reform under authoritarian conditions, as well as to the substantial progress of economic reform in many new democracies, including Bolivia, Argentina, Poland, and the Czech Republic.

Given the recent accumulation both of experience with economic reform and of comparative scholarly work on the relationship between economic reform and democracy, we felt it a propitious time for the Journal of Democracy to survey the issues and the evidence. With support from the Carnegie Corporation and from The Hurford Foundation, we commissioned 12 essays addressing the problem from a variety of regional, intellectual, and disciplinary perspectives. Among the issues we asked our authors to address were the following:

• • How does the type of political regime affect the likelihood that economic reform policies will be launched and sustained? Is there a clearly desirable sequence of political and economic transition?

• • What are the principal tensions between economic reform and democracy, and to what extent can these be managed within a democratic framework?

• • Given the circumstances of new or recently established democracies, what pace and sequencing of economic reforms are most likely to produce economically successful and politically sustainable outcomes?

• • How does the quality of governance mediate the relationship between democracy and economic reform? To what extent do political corruption and lack of technocratic capacity constitute serious obstacles?

• • To what extent are generalizations about these issues valid across countries and historical periods?

No one essay could respond to all of these (and other related) questions that we put to our contributors. And no one symposium of this scope could possibly summarize or distill the recent outpouring of theories and empirical findings on these issues. But we believe this collection does represent an important synthesis that advances our understanding in several respects. From a wide range of perspectives, there emerges a surprisingly strong consensus on the need to move beyond the debate over "economic reform first" or "democracy first" to finer-grained questions of the specific institutional arrangements that enable governments to undertake reform, the imperatives and constraints at different stages of the reform process, and the degree to which democratic procedures must be modified in order to facilitate reform.

A theme that resonates through many of these essays is the sharp difference between the first stage of reform, in which economic stabilization (and some initial liberalization) is implemented by a small and typically quite insulated technocratic team, and a second, broader stage of reform that involves more complicated and far-reaching institutional changes and requires the mobilization of significant political support. Democratic governments cannot sustain the reform process in this second stage—which many new democracies have now entered—by using the same methods of secrecy, surprise, and delegation that brought initial success in stabilization. To carry liberalization forward, they must build political coalitions for reform. This requires not only showing some positive results but also educating the public and mobilizing newly emergent beneficiaries of reform. In short, democracies cannot in the long run sustain reform without the use of democratic methods.

These essays also counsel against viewing the state as nothing but a danger to be diminished or contained. One of the ironies of economic reform—and democracy—is that effective liberalization requires not only reductions in the scope of state regulation and employment but also enhancements in the administrative capacity and resources of those who staff the new, leaner...