1. Introduction
Most countries have been dominated by kings, dictators or oligarchies during most of written human history. Moreover, in many cases such autocracies were based on ideologies prescribing supreme values to be followed by all believers, so that they were at the same time mature ideoc-racies like for instance theocracies (Flavius Josephus, 1994-1996: 2, 165) or totalitarian regimes (see article on totalitarianism). By contrast, democracy as a political regime has been invented rather late in classical Greece, vanished in the following centuries, and was widely successful only during the last centuries.
This is not surprising, since larger political entities, states, with some exceptions like the Swiss Confederation or the United States of America, were mostly formed by force (Ruestow, 1950), often by "roving" or "stationary" bandits applying force to exploit a subjugated productive population (Olson, 1993; Olson and McGuire, 1998). And why then should rulers give up their privileges for a broader participation in political decisions? Why should they agree even to be bound by their own laws instead of remaining above the law?
2. Economic Development as Rulers’ Motivation to Limit their Discretionary Powers
It is certain that despotism ruins individuals by preventing them from producing wealth much more than by depriving them of what they have already produced: it dries up the sources of riches, while it usually respects acquired property. Freedom, on the other hand produces far more goods than it destroys (de Tocqueville [1835] 1945: 220 f.)
A dictator or an oligarchy afraid of soon losing its power (Olson’s roving dictator) has not much interest in saving the subjugated population from extreme exploitation. It is motivated to get as many spoils as possible and to transfer them to safe places for the time after its fall. Things are different if rulers feel certain that they, and perhaps even their descendants, will remain in power for a long, perhaps an indefinite period (Olson’s stationary bandits). For if they allow people to retain most of the goods they acquire and convince them that there is no danger of irregular interventions into their business affairs, then individuals will be prepared to save, to invest and to innovate, provided that they believe that this policy will be maintained in the future. As a consequence, the amount of goods produced increases, and with it the value of the share reserved by the rulers (see Roll and Talbott, 2001, and Weede, 1986, for the influence of free institutions on wealth). It follows that rulers are motivated, given these conditions, to set up and to be bound by a system of legal rules.
Moreover, because of these relationships, and of their wish not to be endangered by coups d’etat or violent overthrows dictators have reason to increase the probability of staying in office. This can be done by buying the support of the leaders of the armed forces and of important individuals, by trying to create a hereditary kingdom with a hereditary class of supporters (nobles) or by supporting the regime by an ideology legitimising its permanent existence. The more rulers succeed in this endeavour, the more they will be motivated to take the long-term perspective concerning the development of resources.
But as historical experience shows, such a development towards greater security of rulers to be able to maintain their power in the future, and as a consequence the introduction of some rule of law is not a necessary outcome. If no ideology can be created, that is believed also by the immediate supporters of a dictator, his rule is always threatened by the very leaders of the armed forces, by important noblemen, by influential ministers or even by members of his own family, on whose support the ruler depends. As a consequence, more coup d’etats can be observed in history, which have led to a replacement of one autocratic ruler by another, than changes to other, more pluralistic political regimes. On the other hand, if an ideology is present or can be created, which is believed by the members of the supporting elite, this danger is diminished. But at the same time, the supreme values contained in the ideology may be such that they prevent favourable economic developments (Bernholz, 1995).
3. The Importance of Competition among Several Political Units
Now the states are already in the present day involved in such close relations with each other that none of them can pause or slacken in its internal civilisation without losing power and influence in relation to the rest; and hence the maintenance, if not the progress, of this end of nature is,., secure even by the ambitious designs of the states themselves. Further, civil liberty cannot now be easily assailed without inflicting such damage which will be felt in all trades and industries, and especially in commerce: and this would entail a diminution of the powers of the state in external relations . Hence the restrictions on personal liberty of action are always more and more removed,… And thus it is that… the spirit of enlightenment gradually arises as a great good which the human race must derive even from the selfish purposes of aggrandisement on the part of its rulers, if they understand what is for their own advantage (Kant [1784] 1959: 31)
It follows from the conclusions drawn that additional factors must be at work to increase the probability that rulers are prepared to limit their discretionary powers in favor of their subjects. So let us ask again: Why should the ruling elite in an autocracy agree to strong and secure property rights, to minimal state intervention, to limitation of taxes, and thus of its own powers to command and to take away goods at their own discretion? But this time we ask the question by taking into account international relations. Given these conditions, sociologist Baechler (1995) and the so-called ‘New Economic Historians’ have tried to provide an answer (North and Thomas, 1973; North, 1981; Jones, 1981; Bernholz et al., 1998). They stress that ‘European disunity has been our good luck.’ In Europe, feudalism with its many power centers developed during the Middle Ages and a split opened up between religious and temporal powers. Rivalry arose among the many rulers to preserve and to extend their powers by foreign policy and military endeavours. This forced them to become interested in the loyalty of their subjects and in economic development to secure a greater tax base and thus stronger armies. However, economic development itself depended on establishing adequate property rights, a reliable legal system, free markets and limited taxes. Consequently, those states were successful in this fierce foreign policy and military competition in the long run who, by chance or by design, made the greatest progress in introducing such institutions. Thus, competition among states forced on unwilling rulers a limitation of domestic powers. The development of competing legal systems, of the rule of law and of safe property rights was helped not only by interstate competition but also by the increasing separation of church and state, by preventing a theocracy (Berman, 1984). These latter events made it impossible, too, that supreme values embodied in earlier religious thinking, like usury laws or the suppression of developments in the sciences and in technology, put obstacles in the path of economic growth. Because of these developments limited government and a pluralistic society arose in Europe as a pre-democratic achievement. First capitalism and later democracy were their progeny.
From Europe these developments spread to other parts of the world, because other countries tried to imitate the successes reached in Europe and in former European colonies like the USA, Canada, Australia and New Zealand. For international competition among states has remained a driving force for the introduction of free institutions until today, motivating rulers like in Japan in the Meiji Era, or Gorbatchew and Deng in the Soviet Union and China since 1979, respectively, to limit their domestic powers to strengthen their economies as a base of international power. Whether the institutional reforms taken were adequate and thus successful is, of course, another question.
4. From Economic Freedom to Democracy
Until now it has only been shown that it is in the interest of autocratic rulers, especially when fierce international political and military competition is present, to allow free markets, safe property rights and a reliable contract law, and not to burden their subjects too much with taxes and regulations obstructing the free play of markets. This implies a wide extension of economic freedom to subjects and a self-limitation of discretionary powers on the part of rulers. But it does not mean that pluralistic or even democratic rights of participation in political decisions are bestowed on the population. Why then should there be a chance that democratic regimes may emerge out of this long process favouring economic freedoms?
It seems that several factors are working in this direction. First, the further developed an economic system, the more complex it becomes. Consequently, an always better education and greater freedom to take decisions have to be granted to individuals, to allow the process of economic growth to proceed. Second, given this situation, more and more people may ask themselves, whether the ruler and the elite surrounding him have the competence to decide the increasingly complicated questions of economic and social policy. As a consequence, and accustomed to the growing sphere of economic freedom they enjoy, they may ask themselves why they should not be allowed to participate in the decisions of political issues. Fourth, because of the complexity of problems to be solved, the ruler himself is dependent on a growing number of experts. All these factors work together with international military and political competition, to incline rulers or to put them under pressure to grant more and more political rights to a growing number of citizens.
The developments sketched seem to have played an important role in many historical cases. Favourable economic developments have preceded regularly the rise of pluralism and democracy, and the surge in the number of democratic regimes during the last two centuries followed in the wake of the growth of capitalistic economic systems. It should also provide food for thought that in modern complex societies democracies seem to have existed and still to exist only in market economies with extended private property, whereas the opposite is not true.
Still, the chain of events described is not a necessary sequence. Dictators may prefer to maintain absolute domestic power at the cost of unfavourable economic developments and the danger of being threatened by foreign powers, or to be unable to extend their power internationally. For the wealth they want or need personally and for their supporters may be available even if the dominated country remains relatively poor. And the small size of a country they dominate may hinder them anyhow to move to parity with superior foreign countries, however favourably their own economy might develop. Finally, if autocracy takes the form of an ideocracy its supreme values may forbid the move to safe private property rights and towards a decentralized market economy. As a consequence a change to an efficient and innovative economic system may be prevented permanently or for decades even in view of international military and political competition (see article on Totalitarianism). A telling example is provided by the persistence of a Communist totalitarian regime in the Soviet Union for about 70 years, though even this system could not withstand reality in the very long run.
5. Other Factors Influencing the Transition from Autocracy to Democracy
One factor preventing or delaying the transition from autocracy to democracy has just been mentioned: Supreme values of an ideology contradicting the requirements of an efficient and innovative economic regime. The resulting economic and, therefore, fiscal and military weakness may even be compensated for an extended period because of some advantages an autocracy experiences compared to democracies. First, it can make up for its economic inefficiency by enforcing a lower level of consumption in favour of higher investments and a higher share of gross national product devoted to military expenditures. Second, in its foreign policy it can follow a more consistent and, if wanted, more expansionary position than democracies, which are in their policies dependent on and limited by parliaments, political parties, interest groups and the consent of their citizens. Consequently, autocracies may be able to defeat or even subjugate democracies of a similar size in the short run. And if this happens they are able to turn them, too, into autocracies, and later to prevent their transition to democracy. This is especially the case if an adequate ideology is available, which helps to overcome resistance and to maintain dominance.
On the other hand, if autocracies and totalitarian regimes do not succeed in time with such policies, democratic market economies will develop more strongly. This means that they will enjoy greater fiscal and military capabilities in the long run, even though their share of government in gross domestic product is sizeably lower than in these regimes. For the higher investment rate can after some time no longer compensate for the greater efficiency and especially innovative potential (for a comparison of the innovative breakthroughs reached in free market vs. communist so-called planned economies see Kornai, 1971: 271-280).
By contrast, the transition of authoritarian to pluralistic and democratic regimes may be furthered by three other factors. First, they may be defeated in war and democracy may be introduced by the victors (as in West Germany and Japan after World War II). Second, after power has been shared with a wider circle of privileged people in a complex society with a market economy, that is when a kind of oligarchy has been reached, infighting may occur between different groups within this political elite. But then it may happen, that the fighting factions seek the support of other segments of the population by promising them political participation. Third, the rulers may be unable to solve a severe economic or other crisis and helplessly step down in favour of a democratic regime. This has happened several times to military regimes in Latin America during the last decades.
Apart from these three, several institutional factors seem to play a role in determining whether efforts are undertaken to transform autocracies into democracies and whether these efforts are successful (Linz, 1990; Linz and Stepan, 1996). Among them it appears to be important whether the country has had a democracy before, whether co-operation between parts of the old regime and the opposition is possible during the transition process and which form of democratic system is envisaged. The transformation process becomes especially difficult if economic institutions have to be changed at the same time together with the political institutions. For since the beneficial consequences of even well-designed economic reforms materialize only after some time, the costs are felt by a great part of the population very soon. Consequently the reformers lose credit and it is necessary that a functioning opposition exists (mostly related to those members of the old regime who have been prepared to abolish autocracy) who can take over the government, and who are willing to adhere to the tenets of establishing the rule of law and democracy and to the fundamentals of economic reforms.
In totalitarian regimes one of the reasons for changes may also be a weakening of the ideology. This is especially probable if the rulers of the second or third generation after its foundation or rejuvenation do no longer believe in it, but only pretend to do so to maintain their dominance. In this case they may be willing to move towards a free market economy by reinterpreting the ideology because of fierce international political and military competition. And in this case the forces discussed above begin to work. Whether, however, the reforms introduced by the rulers are successful depends on their knowledge of the underlying relationships and on the resistance they meet. There remains, therefore, still the possibility that a totalitarian or ideocratic regime ends up not as a democratic but as a simple autocratic regime.
