Relationship Between Economic Development and Political Democratization


Political development is related to economic development. According to the structural theory of democracy, capitalism is essential for democratization. Capitalism does not depend on the coercive powers of the state in order to survive like does the aristocracy according to some scholars. The growth of the civil society, middle class, and the professional group on which democracy rests is initiated by economic development through a market economy. Economic development is a precondition for political liberalization and democratization (Beetham, 1997; qtd. in Bunbongkarn, n.d.). Every case of political democracy has been a market economy according to Berger (1992; qtd. in Bunbongkarn, n.d.)

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According to Chen (2002), China’s capitalism was largely invented by the government. China differs from Europe where commercial capitalism preceded and helped the emergence of the centralized kingships and unlike many Third World countries did not inherit the economic legacy and the state power was restructured or redirected and did not discontinue capitalist development. Thus, the commercial classes of China may go for long without experiencing political influence. Democratic developments are favored by the values that ensure separation of economic and political powers, individual choice, and peaceful competition in the marketplace (Chen, 2002). The growth of the People’s Republic of China’s (PRC) economic development was the best in the 1980s and moved to the world’s third after mid-1990s followed by the United States and Japan. Although economic development can be linked to political development, reports indicate that the political system in China lagged behind the socioeconomic change at one time.

This is because the Chinese Communist Party (CCP) had maintained its political activity with repressive tools seeking to crush activities of political freedom. Two sources of political changes; intentional and unintended changes have been discussed. The relationship between the political and economic development in China can be viewed in the light of taking measures to adapt the political system to the new social and economic conditions. This could be seen in the increase in the role of the National People’s Congress, village elections, and the growth of the legal system. The social and economic development in China has had an impact on the political system with, for example, the battering of China’s Leninist political system. The monopoly of power was being sapped by the availability of alternative careers and the sharp decline of the regime’s capacity to monitor and eliminate defiant behavior (Walder, 1994).

In China, political change has been reported as lagging behind the social and economic changes because of falling below the levels of development attained by examples of Taiwan and South Korea at the time of democratization in the ninetieth century. The strength of various governments has been affected by many years of international war, foreign encroachment, civil conflicts, and disorder, and rebellion in the country. Industrialization was affected negatively because of lack of political stability or adequate it, and industrialization occurred in relatively secure locations such as Shanghai, Tianjin and Manchuria.

The control over the land that was exercised by the Communists was important for the organization of the country for development and effort to make the country socialist as well as one with great industrial power. The leaders considered the nation’s industrialization and reconstruction of the society along socialist lines as congruent. China’s commitment to industrialization, which was maintained through the Mao period even during the Great Leap Forward and the Cultural Revolution when the economy was severely affected by the campaigns of ideological revitalization and the utopian visions, may have been influenced by the threatening international environment where China had the Soviet Union as the only friend.

Failure to centrally control the activities of China’s myriad small enterprises led to the decentralization. The small and medium-sized enterprises were in 1957 handed over to provincial and sub provincial administrative units. A cycle of decentralization and recentralization happened as a result of the need to recentralize control because the aforementioned decentralization led to the accretion of economic power in the hands of local parties and government officials. As compared to the stifling effects of Soviet centralization, decentralization spurred local initiatives and innovations from 1979 on. Imposition of the American embargo to China after its participation in the Korean War contributed to their isolation from the west. China also opened up to the Soviet block in 1950s. The Maoist politics carried out frequent campaigns of economic, social, cultural, political and ideological manner but their power to mobilize the country went far beyond the rationality of the goals themselves because of the coercive pressures generated by the mobilization campaigns and the erratic policies of Mao Zedong. Questioning the practicability or the goals would lead to suspicion of undermining socialism.


An economic crisis was experienced in South Korea in 1990s, and which linked to the political system and the governmental policies. Corruption, mismanagement of banks, highly leveleged chaebol and government allocation of credit has been linked to the economic crisis. The government did not adopt the currency devaluation as would have been expected due to market pressures as a result of sluggish exports and surging imports, but chose to adhere to a strong won policy. Other than devalue the currency to enhance the international competitiveness, the government chose to accomplish this mission through corporate restructuring. The country gave price stability a priority since experiencing an inflation-generated social and political trauma in 1989-1990 and in 1993-1994. The devaluation was delayed because of the political lobbying and vested interests achieved from the strong won by the state enterprises, big businesses and financial sectors because they would borrow foreign capital with low interest rates and thus get large profits.

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The government of the South Korea can be blamed in its responsibility for economic crisis for failing to initiate reforms even after identifying the challenges. Although there were reforms undertaken in the labor sector especially in 1997, other issues including laws regarding layoffs were left unresolved. It has been evidenced that labor, chaebol and financial reforms had been high on national economic agenda (Mo, 1998a; Moon 1998a; Judd and Lee, 1998) according to Mo & Moon (1998). Financial liberalization and deregulation measures were undertaken by the government as a result of international pressures but there was still insulation and restriction of the Korean financial markets by the international standards. The government failed to use market principles to carry out reforms and instead commanded and controlled the type of regulations to contain the expansion of the chaebol for example specialization of business lines and the forced dispersion of ownership (Moon, 1998b; qtd. in Mo & Moon, 1998).

There has been incoherence and inconsistence in the government policies (Mo, 1998a; qtd. in Mo & Moon, 1998) with administrative and electoral cycles having an impact on the reform efforts. For example, Presidents Roh Woo and Kim Sam formerly espoused and tolerated reformist labor policies but finally reverted to pro-business positions. The troubling aspect of the political process under democracy was reflected by the top-down approach to some reform processes. For example, the real name financial transaction systems were proclaimed typically with executive order without much deliberation and debate. This style may have as a result of the failure of negotiating an agreement among the groups who had stakes in the outcome of reform. Labor and management could not reach an agreement even after the government tried more than one way to foster dialogue and cooperation between them (Mo, 1998b; qtd. in Mo & Moon, 1998). Viable chaebol policy was not reached even after ten years, and lasting reforms were never produced by the commissions set up to facilitate compromise and agreement in the financial market reforms (Jeong and Mo, 1997; Lee and Lim, 1998; qtd. in Mo & Moon, 1998). Mo and Moon argue that the powerful groups play against the opponents who seem to threaten their effort to maximize private interests whenever those interests are threatened. They argue that Korea had failed to reform its economic system because of the failure of dispute resolution which has featured in the country for a long.


The impact of the market in Thailand and the accompanying economic growth has happened in stages, in the consideration of the history of this country. The country’s economic take-off occurred in the 1980s after stagnation from 1932, and after take off, its initial impact was to stimulate the rise of the urban middle class and mainly the business people and the intellectuals. These pressed the regime for more liberalization. The growth of liberal forces was experienced as the economy continued to expand during the late 1980s and early 1990s, and there was the reinauguration of a formal democratic regime in 1992. The economic development however resulted in some of the things that made it hard to sustain it afterwards. For example, for the Thai society, the economic development produced a widened gap between the rural poor masses and the expended middle class (Laothamatas, 1996).

Other issues include materialism that has eroded Thai values, corruption and vote buying which have debilitated the political parties. The economy of Thailand had been developing since 1957 despite dictatorial rule and the Communist insurgency. A short democratization period was experienced in 1974 to 1976, a diversion from the dictatorial rule by the military in the 1960s and 1970s. The development of the roads and power supply among other economic infrastructure, encouragement of foreign investment and the introduction of an economic development plan by Marshal Sarit Thanarat played an important role in the growth of the economy. Although there were policies that favored the growth (for example the education policy) the governmental intervention in the economic sector was limited. The country experienced an open economic system based on a free market mechanism. The government was unable to readjust the financial and the economic structures because of the results of political instability brought about by military coups in 1971, 1976 and 1977, the downfall of two Marshals Thanom and Prapas and two short-lived democracies, and the protests held between 1974 and 1976 by farmers and labor protests. There was also the assassination of a number of student leaders and socialist politicians, which led to more violence. The economic prospects for 1980s appeared dim. During the semi democratic regime of General Prem Tinsulanond, the country realized an inflation rate of about 4.6% per year (Bunbongkarn, 1996; qtd. in Bunbongkarn, n.d.).

The government devalued the baht in November 1984 as the situation went worse and the economic depression in the first half of the decade. The country implemented a cautious external debt policy, a budget ceiling and cut on unnecessary expenditures and increased efficiency in tax collection in an effort to restore economic stability, increase its export capacity and productivity, and foster its economic competitiveness in the world economy. In addition, they were meant to reduce deficiencies developed in the 1970s (Muscat, 1994; qtd. in Bunbongkarn, n.d.). The growth of the economy from 1986 and its sudden jump in 1988 can be attributed by the export promotion campaigns and the export-led growth strategy as reflected in the devaluation of the baht in 1984 by the government. The private sector’s ability to respond to governmental strategy and the political stability under the Prem administration has been linked to the economic success of the late 1980s.

This leader, who practiced semi open politics was able to enforce drastic monetary and fiscal measures, and enjoyed the support of the military, parties and the palace. The economic success was due to the work of a number of technocrats, namely, the National Economic and Social Development Board (NESDB), Prem’s economic advisers, the Ministry of Finance and the Bank of Thailand, who participated in the economic policymaking. These technocrats were the top decision-making body thanks to the quasi democracy. The success, however, favored expansion of the private sector and increase in political influence which in turn led to deterioration of the influence of technocrats. Demand for a full-fledged democracy increased with the economic growth, and the political parties and the elected House of Representatives were able to institutionalize their role and gain public recognition. The democratic norm among the urban middle class was facilitated by the continuity of the House of Representatives and the political parties during the quasi democratic times.


The fact that this country is rich and at the same time with an autocratic feature, may signify that practice of liberal democracy could as well be disassociated with developed economies. The growth of the economy of this country is driven by the state and state-driven explanation can serve this case well as compared to society-driven. The situation in Singapore where the civil society is weak and the state strong, is not favorable for democratization because of sustained state-led economic growth. Singapore’s well educated group, the wealthy, the burgeoning middle class and the mobile workforce were yet to pressure for greater liberalization according to Peng (n.d.).

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The strong economic growth underpins the authoritarian tendency of the state and strengthened the legitimacy of the People’s Action Party (PAP). The position held by the modernization theory that economic growth drives social, political change and democratization, may not be conclusive enough, with an indication from this case that the process could further be more complicated and often contingent on the intervening role of the state. Political transition could occur as a result of transformation of class structures and mass value and the rise of a civil society that is pluralistic, competitive and complex, but the PAP does not allow autonomous growth of the civil society which may challenge its political dominance.

There has been no credible ideological challenge to the Singapore government after the collapse of the Fascism and the Communism and thus the government rejects the view that Western liberal democracy is superior (Fukuyama, 1989). The government was of the position that evolution of political liberalization must occur within the framework of an “Asian democracy” which features support for dominance of one political party, respect for authority, observance on formal procedures of electoral democracy, and one that emphasizes consensus rather than contention (Chan, 1995).

The exit of Singapore from the Malaysia in 1965 was probably the most democratic era in the history of the former (Khong, 1995; qtd. in Peng, n.d.). The Barisan Sosialis (BS) was supported by certain sections of the civil society especially the Chinese cultural groups and trade unions. Although there were leftist radicals in the PAP, the party (after winning 73% of the seats in the 1963 election) pursued macroeconomic policies within a capitalist framework instead of a social welfare approach despite the high levels of poverty and unemployment. This laid a foundation for the countries political economy and also wanted to manage and improve the economy and have the majority of the voters have a hope for better material life. The party avoided corruption and nepotism to maintain the integrity of the bureaucracy, took care of the material interests and social status of the civil servants and had top bureaucrats recruited for the top positions. The civil servants were also given educational support to align them with the PAP visions and to gain their understanding and support (Peng, n.d.).


Korea, Japan and Taiwan followed a similar democratization process where economic transformation followed the shift of power (Shen, 2004). Civil society development has played a role in the democratization of Thailand and China (Porio, n.d.).

Democratization in South East Asia has been affected by more or less similar challenges – military rule and authoritarian governments. Democratization in some countries has been held back by the politics of the countries. Long-dominant political parties with political machinery have remained to hold parliament in Singapore and Malaysia, although they have been holding competitive elections. The military rule on and off (until 1992 elections and return of it in 2006) in Thailand may have as well led to disrupted democratization in the country (Bangkok, 2009).


Bangkok Bayron. (2009). Southeast Asia struggles with democracy. Web.

Bernstein Thomas. China: Growth without political liberalization.

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Bunbongkarn Suchit. Thailand: Democracy under siege.

Chen An. Capitalist development, entrepreneurial class, and democratization in China. Political Science Quarterly. (2002). Web.

Cho, Yoon Je and Joon-Kyung Kim. Credit Policies and the Industrialization of Korea. World Bank Discussion Papers 286, 1995.

Gerald L. Curtis. “A “Recipe” for Democratic Development” Journal of Democracy 8:3. (1997). pp.139-145.

Jeong, Kap-Young and Jongryn Mo. “The Political Economy of Corporate Governance Reform in Korea.” Global Economic Review, 26: (1997). 59-75.

Moon, Chung-in (ed.). Government-Business Relations in the Democratic Era. Seoul: Orum Press, in Korean, 1998a.

Moon, Chung-in. “Democratization and Globalization as Ideological and Political Foundation of Economic Policy,” in this volume, 1998b.

Moon, Chung-in and Kim, Song-min, forthcoming, “Democracy and Economic Performance in South Korea,”in Larry Diamond and Byungkook Kim (eds.), Democratic Transition and Consolidation in Korea. Baltimore: Johns Hopkins Press.

Moon, Chung-in. 1995. “Government-Business Relations in South Korea,” in Andrew McIntyre (ed.), Government-Business Relations in Industrializing Asia. Ithaca: Cornell Univ. Press.

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Porio Emma. Civil society and democratization in Asia: Prospects and challenges in the new millennium. Web.

Shen, W. (2004). “East Asian Democratization and Economic Voting: Comparing Japan, South Korea and Taiwan”. Paper presented at the annual meeting of The Midwest Political Science Association, Palmer House Hilton, Chicago, Illinois Online. Web.

Yoo, Seong Min and Lim Young Jae. “Big Business in Korea: New Learning and Policy Issues.” An Agenda for Economic Reform in Korea: International Perspectives, eds. Kenneth Judd and Young-Ki Lee. Hoover Institution Press, 1998.

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