How public deliberation helps economic stability

Partisan gridlock, union protests, contentious town hall meetings and seemingly fruitless formal and informal political debates about proposed economic policies frustrate many and raise questions about our ability to govern. Yet such events are endemic to the policy-making process in democracies. As unproductive and inefficient as this policy-making process might appear, such deliberations are the very mechanisms which ensure that countries maintain moderate and stable patterns of economic performance.

In a new article (ungated) in the British Journal of Political Science, we show that these deliberative features that are common to democracies also exist in many authoritarian regimes. Moreover, countries that permit contentious forms of public deliberation — be they democratic or authoritarian — experience an unexpected benefit: stable economic outcomes.

Public deliberation refers to the extensive debates, negotiations and compromises that occur amongst individuals and/or groups in society, such as political leaders, citizens, voluntary associations, labor groups, business representatives and academics. The deliberative process serves governing elites with critical (as well as a diverse array of) information about the pros and cons of proposed policies, and drives them to embrace “safe,” incremental policy proposals to avoid uncontrollable economic outcomes that could jeopardize their incumbency. This process of diversification buffers the economy from the extreme effects that an under-informed and one-sided policy, driven by a single or small group of privileged but self-interested partisans, may produce.

While this informational diversification is commonly present in democracies, some authoritarian regimes also permit a degree of public deliberation, driving them to mimic the characteristic stable and moderate growth performance of democratic regimes. The National People’s Congress in China, for example, often seeks public opinions on bills through workshops, hearings and survey polls, as discussed here. Governments of authoritarian nations such as Zimbabwe, Mozambique and Tanzania invite (or consult with) groups of citizens and civil society organizations to discuss and negotiate government budget-related policies. The government of Singapore recently launched the Singapore Conversation involving over 640 “dialogue sessions” with Singaporeans regarding their views on government policy.

We assess this relationship between public deliberation and economic performance in three steps. We first formally model the deliberation process using insights from portfolio theory in finance. This view emphasizes the benefits of diversification across financial investments to produce stable but positive financial benefits for investors (similar to the kind we might observe with a well-diversified mutual fund). Second, we establish a new measure of economic performance that focuses on growth-adjusted volatility. “Good” economic performance entails levels of volatility that are low and accompanied by relatively high corresponding growth rates. We then focus on measuring deliberative capacity in a variety of ways (e.g., using data from Polity IV on extent of “informal unregulated political participation” and the civil society impact index from John Hopkins University (JHU)), and use a series of advanced econometric techniques to test whether countries with relatively high public deliberation – regardless of regime type — have more stable economic outcomes given a specified rate of economic growth, as we predict.

Our results indicate that public deliberation is indeed a critical political determinant of economic performance. Democratic regimes, which tend to have consistently high levels of (and seemingly burdensome) public deliberation, do not have to sacrifice economic development. At the same time, however, our analysis emphasizes that there is indeed a trade-off between political freedoms — that can engender occurrences like partisan gridlock — and extremely rapid economic growth. Understanding the link between the extent of public deliberation and economic growth and volatility helps illuminate one critical way that governments (often inadvertently) ensure more stable economic outcomes in all regimes, be they democratic or authoritarian.

Nita Rudra is an associate professor in the Government Department at Georgetown University. Siddharth Chandra is director of the Asian Studies Center and a professor of economics at Michigan State University.