Democracy

Introduction

Democracy originated in ancient Greece. The Greek words demo kratia mean rule or power (kratia) of the common people (demos). For the Greeks, to live in a democracy was to live in a political community (polis, or city-state) characterized by popular rule. Ultimate sovereignty or empowerment was intended to be shared equally among all freeborn citizens of a community. Viewed this way, democracy had—and continues to have—two core meanings. First, it refers to a kind of power or authority exercised equally by all the people of a political community. Second, it refers to a form of government or a particular kind of rule, in contrast to other forms of government such as monarchy, aristocracy, dictatorship, or oligarchy.

Democracy means “rule by the people”. This is an extraordinary idea, a truly revolutionary ideal in the history of human affairs. Imagine: power should be vested in the people, not a hierarchy, not a king, not an elite, but the people. In most complex societies for most of human history this notion would have been viewed as absurd. Government of the people, by the people and for the people -- the ideal is inspiring, revolutionary, emancipatory. But the reality is often ugly, cynical, and manipulative. Instead of political equality and popular empowerment, democracy can become game dominated by the power of elites and dominant classes. Rule by the people becomes largely a symbolic sideshow, while the real exercise of political power occurs behind the scenes. Most Americans are convinced that they live in a profoundly democratic society. Indeed, many believe that the United States is the most democratic society on earth. There are some truths lurking behind these claims: the United States has fairly competitive elections for many public offices; civil liberties are at least loosely protected; public officials are generally constrained by the rule of law and prevented from exercising their power in an arbitrary manner. Life would be very different under a Fascist police state or a military dictatorship. So, the democraticness of American democracy is not an empty ideal.

Discussion

Institutions affect Democracy

It has been already demonstrated that economic institutions (such as property rights, regulatory institutions, institutions for macroeconomic stabilization, institutions for social insurance, institutions for conflict management, etc.) are the major source of economic growth across countries (Rodrik 2007). Among other things, economic institutions have decisive influence on investments in physical and human capital, technology, and industrial production. It is also well-understood that in addition to having a critical role in economic growth, economic institutions are also important for resource distribution.

As a consequence, some groups or individuals will be able to gain more benefits than others given the set of the preexisting economic conditions and resource allocation. In other words, economic institutions are endogenous (Acemoglu and Robinson 2006) and reflect a continuous conflict of interests among various groups and individuals over the choice of economic institutions and the distribution of resources.

The prevailing institutional design of economic institutions thus depends mostly on the allocation of political power among elite groups. Political institutions, formal ...