Does Democracy Make Us Richer and Better Educated? Or Is It the Other Way Around?

It’s one of the ultimate chicken or egg questions: Does democracy lead to increases in education and income, or do education and higher income lead to democracy? It’s a tricky one, considering that over the last 200 years, they’ve essentially moved in tandem across much of the developed world. Seen here in the chart below:

So which is affecting which? A new working paper (full version here) by Fabrice Murtin and Romain Wacziarg attempts to untangle the two to understand whether democracy grows from education and higher income, or vice versa. Their essential question is: “Does education help raise the quality of institutions as well as productivity, or is an efficient institutional framework a prerequisite for expanding education levels and economic growth?”

Using a data set going back to 1870, with statistics from 70 countries, they conclude that education (particularly increases in primary schooling) and, to a lesser extent, per capita income levels, are strong determinants of the quality of political institutions – not the other way around. So education and income first, democracy second.

From the abstract:

Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.

Their findings re-affirm what Joseph Schumpeter declared in his 1942 book, Capitalism, Socialism and Democracy: “Modern  democracy is a product of the capitalist process.” And which political sociologist Seymour Lipset, popularized as the theory of modernization: “[T]he more well-to-do a nation, the greater the chances that it will sustain democracy.”

The authors argue that primary schooling has been a “major trigger” of the democratic transition over 1870-2000, more so than GDP growth. Without getting bogged down in the specifics of their regression analysis, or their use of “modern dynamic panel estimation methods,” I’ll simply post two of graphs that illustrate their point that education is a stronger determinant for democracy than economic growth:

 

(MISAM SALEH/AFP/Getty Images)

So, now that Egypt is less than a month away from its first elections, is there evidence of these findings in the recent events there? It would seem so, considering the advances Egypt has made in education over the last few decades. In 1980, the youth literacy rate (ages 15-24) in Egypt was 52 percent. By 2008, (according to UNICEF) 88 percent of males aged 15 to 24 were literate, while their female counterparts were 82 percent literate. Egypt’s economic development paints a muddier picture. Despite decent economic growth, poverty rates remained stubbornly high as GDP per capita growth lagged behind its regional neighbors.

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  1. Robbert Thurner says:

    Maybe they’re just not considering the right variables: maybe a society’s quality of education, quality of institutions, productivity, and efficient institutional frameworks are all driven by the same underlying variable, namely intelligence. But most economists still fail to include that crucial dimension in their analyses; one hopes the work of pioneers like Garrett Jones will help change that, and the sooner the better.

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    • Menth says:

      I find your views intriguing and wish to subscribe to your newsletter.

      I’ve just downloaded one of his papers and am looking forward to reading it. Sounds like something that would draw out a lot of knee jerk accusations of racism.

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  2. Tom says:

    I wonder if it works in reverse?

    Could the relative decline of ou democratic institutions in the US over the last couple of decades, be explained by the relative decline of our educational system (especially at the high-school level)?

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  3. frankenduf says:

    “Modern democracy is a product of the capitalist process”- heh- well, for 1942 this is seen as quaint propaganda- but read nowadays, this can only be understood as cynical, what with the ows movement and all

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  4. Shane says:

    I believe one of the arguments of neo-conservatives like Condoleezza Rice was that free market dictatorships tended to drift towards democracy, I think because they developed middle classes who would eventually demand greater control of the country’s future. They referenced Greece, South Korea, Taiwan and so on as examples of right-wing dictatorships that would eventually turn democratic.

    So did they have a point?

    Perhaps I go too far in presuming that wealth and education would indeed grow better under a right-wing dictator than under a socialist/communist dictator, however.

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  5. danny says:

    when is this going to apply to China?

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    • stedebonnet says:

      Its happening as we speak. China today, with its increased wealth and education levels, is certainly more democratic than it was 100 years ago (or even 40 years ago). Sure, they aren’t a “democracy,” but it seems pretty clear that this theory already applies to them.

      I think India is the biggest anomaly to this theory. If its education levels and wealth formation that lead to democracy, how can we explain India? They were very impoverished and largely illiterate, yet still managed to form a democracy under these conditions. Some might say it was the British Empire’s institutions that enabled democracy, but then what can we make of Pakistan which presumably had those same institutions?

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      • Erud1t3 says:

        True, but India has gotten a lot more democratic since the economic reforms of the early 90′s, which have created a burgeoning middle class, and a watchdog media that caters tot heir interests. Literacy rates have also increased over that period.
        The legacy of the caste-system and its entrenched inequality is the z variable that has made Indian progress lopsided and the statistics still abysmal, though improving. otherwise, the relationship would be more linear.

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  6. Peter says:

    A similar question was answered in a recent TED talk:
    http://www.ted.com/talks/lang/eng/niall_ferguson_the_6_killer_apps_of_prosperity.html

    He identifies 6 factors which directly correlate to economic prosperity and national vitality. Taken together they provide an explanation for the dominance of European based cultures over the last several hundred years.
    The implication is that democracy is one logical outcome of a culture which includes these factors. I imagine that a high education level would be another.

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    • Robbert Thurner says:

      Niall Ferguson is a smart guy, but he too fails to consider IQ, which makes his observations a bit useless, really. Again, though, people are slowly coming around.

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  7. joman says:

    The sad flip side to this is that this means it is in every tin-pot dictator’s interest to run its people and economy into the ground if they want to stay in power. North Korea, central Asia, and half of Africa aren’t run by insane despots, they’re simply economic agents rationally acting in the way that benefits them most with the incentives presented to them. It would certainly lend some credence to the idea that altruism is irrational when you view at all the dictators who bettered their people with successful economic/social programs as setting the groundwork for their eventual demise.

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  8. crankee says:

    Do they even consider IQ? Garett Jones has published work showing that for later periods, average IQ better explains growth than education levels and low education, high estimated IQ countries (like China pre 1950) did better than much higher education nations with low average measured IQs. It’s hard to disentangle them of course because higher cognitive ability makes greater education easier but to the extent it is possible, the literature tends to favor IQ over education.

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