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Democracy good for economic growth and development – A Norwegian study

Sunday, 25 September 2011
Democracy is a clear winner when it comes to the macro economic tool that can lead to sustained economic growth and development. A clear distinction is seemed where poorer countries and the third world all bask in dictatorship of some sort.

Norwegian researcher, Carl Henrik Knutsen of the department of political science at the University of Oslo, clearly show this is various forms of studies he has carried out for years presented in his PhD thesis.

Knutsen has looked into over 150 countries for a period of 180 years. The result shows that democratically governed states have better growth than dictatorships - specifically 1 to 1.5 percentage point higher GDP per person per year.

Talking to the Norwegian newspaper, Aftonposten, the researcher point to that much of the growth is because democracies have freedoms which allow people to think freely and challenge things they feel don’t work.

They do so and also propose things they feel work better. As such there are higher rate of technological development. There is also a significant bout of transparency which provides better opportunities for free discussion and debate, making it easier to identify problems in economic policy.


Also education and protection of property rights affects growth - to democracies favour:
“If you are not sure you can keep your investment in two years because the political parties would use half of it - then you will be less willing to invest. It is much safer to invest in a democracy, something that also affects the growth of the economy,” said Carl Henrik Knutsen.

In the study Knutsen takes into account several factors, including the country's political history, and the population's income in the year in which research is based on. The result is a triumph for democracies.

“The safest system is democracy. There is rarely a negative growth over time, as is the case in many dictatorships,” he notes.
However, he points out that the differences vary widely between dictatorships.
“The threat against the country is crucial. If you fear that a neighbouring country could invade, you may want to upgrade the industry, which affects growth positively.” Some examples are South Korea and Taiwan.

In Africa, civil strife is common. In such cases, it affects the growth in a negative way as soon as the dictator is pushed aside.
“Mobutu in Zaire bragged about not having built a single road in order to prevent guerrillas to enter the capital,” exemplifies Knutsen.

Economics Professor, Ola Grytten, at the Norwegian School of Economics is surprised about Knutsen conclusions, not over the benefits of democracy - but by how much the form of government actually believed to affect economic development.

According to him, the annual economic growth in the Western world each year has remained around 2 percent of GDP per person - why the figures Knutsen presents may be considered high.

“If his results are correct, democracy is central to economic growth.”
By Team

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    Richest countries in the world
    Rank Country GDP per head US$
    1 Luxembourg 108,951
    2 Norway 84,143
    3 Qatar 74,901
    4 Switzerland 67,778
    5 United Arab Emirates 57,884
    6 Denmark 55,985
    7 Australia 55,671
    8 Sweden 49,183
    9 Netherlands 46,985
    10 United States 46,860
    11 Canada 46,302
    12 Ireland 46,298
    13 Austria 44,988
    14 Finland 44,495
    15 Singapore 43,117
    Source: IMF