From 1995 to 2002, however, the average annual growth rate was 3.5 percent in the countries of the former Soviet Union. Further, some countries experienced high rates of economic growth. Estonia, Latvia, and Lithuania reported average annual growth rates after 1994 of 5.0, 4.9, and 4.1 percent, respectively. Even countries not commonly thought of as economic success stories experienced respectable growth rates once the first three years of transformation are excluded. Between 1995 and 2002, Kyrgyzstan and Uzbekistan grew at an average annual rate of 3.4 and 3.0 percent respectively. However, Ukraine did not record positive annual growth until 2000.

Can democracy account for this variation in economic growth? The answer seems to be no, at least not directly. Democracy’s relationship to economic growth in the post-communist world is much weaker than it is to economic reform. The simple correlation between the Freedom House scores of political rights and annual rates of economic growth indicates that there is no direct relationship between democracy and economic growth in the countries of the former Soviet Union. Certainly there are many difficulties in measuring both democracy and economic growth, but these errors are not likely to be sufficient to account for weakness of this correlation. Measures of economic growth that are adjusted for the size of the informal economy or that rely on changes in electricity usage also reveal little relationship between democracy and economic growth in the former Soviet Union. The correlation increases only modestly by excluding countries, like Belarus, Uzbekistan, and Turkmenistan, where concerns about the quality of economic data are well founded.

A possible link between democracy and economic growth may occur via democracy promoting economic reform, which in turn promotes economic growth. Brunel University political scientist Jan Fidrmuc makes this case on the basis of a cross-national statistical analysis. However, identifying the links between democracy, economic reform, and economic growth in the region is clearly an area for more research.

Democracy and the Economy in Global Perspective

The weak direct relationship between democracy and economic growth in the post-communist world should not be too surprising. Based on data from Latin America over the last quarter century, Duke political scientist Karen Remmer found little relationship between democracy and economic growth. In addition, Przeworski and his co-authors examined more than 140 countries from 1950 to 1990 and found that, once increases in population are taken into account, democracies and non-democracies grow at about the same rate.

One puzzle that merits more attention is why democracy and economic reform have moved hand in hand in the post-communist world but not in Latin America. It may be that the relatively stronger labor movements of Latin America hindered economic reform. This suggests that democracy and economic reform may be mutually supportive where labor is weakly organized as in the former Soviet Union but not where it is more strongly organized as in Latin America. Alternatively, the differences may be attributable to the much lower level of marketization in the former Soviet Union at the start of the transformation. Perhaps the impact of democracy on market reforms is strongest at lower levels of economic reform. The differences may also be attributed to Latin America’s previous experience with democracy. This is a topic for future research.

Conclusion

Despite the predictions of many observers at the start of the transformation, democracy has helped to promote economic reform in the former Soviet Union. Controlling for a range of factors, higher levels of democracy are associated with higher levels of economic reform. This is an important finding that flies in the face of evidence from other regions and time periods. More broadly, however, democracy is not a panacea for economic ills and there is a need to keep perspective on what democracy can do. Democracies can have high levels of income inequality, slow growth, and vast corruption.

One danger in promoting democracy as a motor of economic reform and economic growth is that this slogan makes support for democracy dependent on economic outcomes that can be influenced by many factors. An average Russian may question why he or she should support democracy. Russia’s economy declined under the relatively democratic Yeltsin government and boomed under the relatively authoritarian Putin government. This reasoning is flawed but understandable. Given these variations, it is clear that democracy is important in terms of economic benefits. But democracy is a value to be promoted for its own sake, not only for possible economic benefits.