This one is hauled from the archives from Aug 2013. Bhagwati on Democracy and Markets. In that post I quote Bhagwati’s three broad lessons that arise from his typology of countries into a democracy-market space.
The first is that where neither democracy nor markets function, incentives for production and innovation will be so weakened as to impair productivity and growth. The second is that markets can deliver growth, with or without democracy. The third is that democracy, without markets, is unlikely by itself to deliver significant growth.
The last proposition, which speaks naturally to India’s postwar experience until the current reforms, is perhaps the most interesting to contemplate further. Why should the relative lack of well-functioning markets nullify democracy’s possibly favorable effects on development?
The answer leaps out from the pages of modern Indian history. Democracy, with its civil and political rights–including freedom to travel, study, and work abroad–has enabled elite Indians, who have had access to modern education for over a century, to master and even improve on innovative ideas and technologies from everywhere.
Worth a read.