This essay will present some recent numbers on
the status of democracy and on corruption for a selected group of countries,
covering the BRICS and other emerging markets of systemic importance. The
analysis is descriptive, comparing 2015 with 2005 data on country rankings
provided by the Bertelsmann Foundation,
the Economist Intelligence Unit and Transparency International. It also
explores the interaction of (subjective or impressionistic) measures of
democracy and perceived corruption by looking at rank correlation coefficients.
Shifting Wealth (defined here[i])
has been in decline. Income per head convergence, social inclusion and the
accumulation of foreign assets have slowed down or even reversed in the BRICS
and other emerging countries. Nobel laureate Michael Spence has recently
attributed the BRICS slowdown to external factors[ii]:
“Developing countries are facing major obstacles – many of which they have
little to no control over – to achieving sustained high growth. Beyond the
headwinds generated by slow advanced-economy growth and abnormal post-crisis
monetary and financial conditions, there are the disruptive impacts of digital
technology, which are set to erode developing economies’ comparative advantage
in labor-intensive manufacturing activities.”
Other observers have stressed governance
issues. Corruptions scandals involving the political leaders in Brazil,
Malaysia and South Africa; the strengthening of authoritarian rule in China, Russia
and Turkey; and the lack of social inclusion fanning internal conflict top the
list of concerns. The Guardian[iii]
has recently concluded:
“To take their rightful place in the
21st century, the Brics countries must create more open, accountable, and
trustworthy systems of governance. This is a challenge of leadership, not
profit and loss.“
Both democracy and corruption can matter for
sustaining growth and development, although the relationship is much more
complicated than many governance zealots would have us believe.
Barro (1996)[iv]
has analysed growth and democracy (subjective measures of freedom) for a panel of about 100 countries from
1960 to 1990. His findings suggest a nonlinear relationship in which more
democracy enhances growth at low levels of political freedom but depresses
growth when a moderate level of freedom has already been attained. He also
finds that improvements in the standard of living—measured by GDP, health
status, and education—substantially raise the probability that political
freedoms will grow.
The Transformation Index of Bertelsmann
Foundation (BTI) includes ´democracy status´. This political component tries
to quantify an unweighted composite of measures for stateness; political
participation; rule of law; democratic institutions; political and social
integration. Table 1 reports for the five BRICS (in bold) and seven relevant
emerging countries how country rankings have developed in the past decade, from
2005 to 2015.
Table 1: BTI Status
Index 2015 v 2005
Country
|
Change
|
Rank 2005
|
Rank 2015
|
Brazil
|
+
|
20
|
19
|
China
|
+
|
85
|
84
|
India
|
-
|
24
|
28
|
Indonesia
|
+
|
52
|
39
|
Mexico
|
-
|
27
|
41
|
Morocco
|
-
|
79
|
94
|
Nigeria
|
-
|
66
|
85
|
Russia
|
-
|
46
|
81
|
Saudi Arabia
|
-
|
93
|
100
|
South Africa
|
-
|
16
|
26
|
Singapore
|
-
|
22
|
25
|
Turkey
|
0
|
34
|
33
|
For the majority of countries, Barro´s earlier finding
that economic progress furthers democracy (´freedom´) is not confirmed. Western
press sentiment that the BRICS have failed to become democratic during their
Golden Age seems to be confirmed. Country rankings (for a sample of 130
countries) deteriorated (and in most cases the index scores) in eight of the twelve
countries selected here. But not always where some would expect it. Sure,
Russia scores the worst decline but it is fairly closely followed by OECD
members or darlings Mexico and Morocco. Among the BRICS, only China and India kept their ranks, albeit at grossly different levels. The only major emerging
country to rise markedly in the BTI rankings over the period is Indonesia.
Table 2: EIU Democracy
Index 2015 v 2005
Country
|
Change
|
Rank 2005
|
Rank 2015
|
Brazil
|
-
|
42
|
51
|
China
|
+
|
138
|
136
|
India
|
-
|
35
|
37
|
Indonesia
|
+
|
65
|
49
|
Mexico
|
-
|
53
|
66
|
Morocco
|
+
|
115
|
107
|
Nigeria
|
+
|
124
|
108
|
Russia
|
-
|
102
|
132
|
Saudi
Arabia
|
0
|
160
|
160
|
South Africa
|
-
|
29
|
35
|
Singapore
|
+
|
84
|
74
|
Turkey
|
-
|
88
|
97
|
Source: http://www.yabiladi.com/img/content/EIU-Democracy-Index-2015.pdf; http://www.economist.com/media/pdf/DEMOCRACY_INDEX_2007_v3.pdf
Table 2 presents the Economist Intelligence
Unit (EIU) Democracy Index ratings, again for the thwelve selected countries
and the ranks in 2005 versus 2015 for 167 countries. The EIU Democracy Index is
based on five categories: electoral process and pluralism; civil
liberties; the functioning of government; political
participation; and political culture. Based on their scores on a
range of indicators within these categories, each country is then itself
categorised as one of four types of regime: “full democracies” (20 countries
only); “flawed democracies”; “hybrid regimes”; and “authoritarian regimes”.
(Note that France is now considered a ´flawed democracy´ by the Economist…).
Among the BRICS, the EIU finds only Russia (??)
to have slightly move up in the democracy rankings, from extremely low levels. The
score in the other four BRICS deteriorated, as it did in OECD members Mexico
(confirming the BTI) and Turkey. (What has the OECD Governance directorate been
doing in all those years?). Strong improvements are found over the past decade
in Indonesia (BTI agrees), Nigeria, and – WTF! – Saudi Arabia.
Sustained growth can also be endangered by a
rise in corruption. Mauro[v]
has found some subjective indices of corruption to lower investment, thereby
lowering economic growth. According to the media, corruption scandals involving
the presidents of Brazil, Russia and South Africa as well as anti-corruption
drives in China suggest this is indeed a problem in most BRICS. Transparency
International produces a Perceived Corruption Index, again a subjective index
(Table 3).
Table 3: TI Perceived
Corruption Index 2015 v 2005
Country
|
Change
|
Rank 2005
|
Rank 2015
|
Brazil
|
-
|
70
|
76
|
China
|
-
|
70
|
83
|
India
|
-
|
70
|
76
|
Indonesia
|
+
|
130
|
88
|
Mexico
|
-
|
70
|
95
|
Morocco
|
-
|
79
|
88
|
Nigeria
|
+
|
142
|
136
|
Russia
|
+
|
121
|
119
|
Saudi
Arabia
|
+
|
70
|
52
|
South Africa
|
-
|
51
|
61
|
Singapore
|
-
|
5
|
8
|
Turkey
|
-
|
60
|
66
|
Popular and press sentiment about corruption
seem confirmed by the TI index. All BRICS recorded deteriorating country
rankings in a sample of 167 countries, except Russia (sic!). OECD members Mexico
and Turkey dropped sharply in the corruption rankings, as did Morocco. Strong
improvements, by contrasts, were noted in Indonesia and Saudi Arabia.
Table 4: Rank Correlation BTI, TI, & EIU
2015
-
Spearman´s Rho (p-value in brackets)-
Year
|
BTI 2015
|
TI 2015
|
BTI 2015
|
/
|
/
|
TI 2015
|
0.43 (0.165)
|
/
|
EIU 2015
|
0.76* (0.004)
|
0.18 (0.58)
|
*denotes significant by normal
standards.
Rank correlation
measures (Spearman´s ρ) do not indicate a significant relationship between the
two democracy measures (BTI, EIU) and the TI corruption rankings. The
relationship between democracy and corruption is complicated, as suggested by a
vivid debate in India, for example. The only significant relation noted in
Table 4 is among the two subjective democracy measures provided by Bertelsmann
and The Economist.
Some tentative
conclusions: The BRICS have mostly receded in international country rankings on
subjective measures of both democracy and corruption. But this finding would not
necessarily imply that this undermines long-term growth. The link between more ´democracy´
(as Bertelsmann and The Economist understand it) and more economic prosperity
seems weaker than often thought, both over time and across countries. After
all, Singapore´s authoritarian capitalism and China´s market socialism have
gone a long way along rising wealth. The relationship between corruption and
democracy seems weak as well. Or should we say: it´s complicated Maybe the, say, Brazilian corruption scandals
will reinforce its independent judiciary and hence democracy in the end.
[i] ShiftingWealth Blogspot, “Defing
Shifting Wealth”, 4 April 2011.
[ii] Michael Spence, “Growth in a Time of Disruption”,
Project Syndicate 27th July 2016.
[iv] Robert J.
Barro, „Democracy and Growth“,Journal of Economic Growth,
March 1996, Vol 1, Issue 1,
pp 1-27.
[v] Paolo
Mauro, „Corruption
and Growth“,The Quarterly Journal of Economics, Vol. 110, No. 3
(Aug., 1995), pp. 681-712.
