RECENT YEARS HAVE SEEN A GROWING NUMBER OF ACAdemics and policy-makers express considerable optimism that democracy and economic growth are not only compatible but also mutually reinforcing. Democracy, for example, is alleged to provide investors with secure property rights, fostering growth that in turn strengthens domestic support for fledgling democratic institutions. As an example of this view, leading democracy scholar Larry Diamond (who, among other responsibilities, has served as a governance adviser in Iraq) recently told a group of African leaders that “Africa cannot develop without democracy,” while further asserting that the academic literature points “clearly” to “a causal effect of democracy on economic growth…” (Diamond 2005, italics added).

As a consequence of that supposed causal relationship, he urged those who were gathered to shun any thoughts of adopting authoritarian solutions to their economic problems. Diamond said that the East Asian miracle, for example, “took place in a historic and regional context that is unlikely to be repeated” and that it therefore failed to provide a relevant developmental model for contemporary political leaders, despite continued growth in such countries as China and Singapore (Diamond 2005). Democracy was not simply one path to development; apparently it was now the only path.

Diamond's line of argument stands in sharp contrast to a long tradition of research in political economy making precisely the opposite claim: namely that democracy and democratic institutions, including elections and powerful legislatures, provide political incentives that undermine long-run growth (for influential arguments, see Huntington 1968 on developing countries and Olson 1982 on the advanced industrial states).