Boosting GDP calls for emphasis on democratic values
The Jim Crow South in the 20th century functioned as a regional autocracy within a democracy, characterized by an economy that lagged, low wages, poor education, and mass emigration. In contrast, Hungary under Viktor Orbán's leadership has dismantled democratic safeguards, leading to unstable policymaking, corruption, and emigration of talent.
Racial violence during the Jim Crow era suppressed Black patent activity by more than 15% annually, a stark reminder of the detrimental impact of autocracy on innovation and progress. Similarly, Hungary has witnessed a brain drain, with nearly 50,000 people, disproportionately young and educated workers, emigrating in 2019. Notably, doctors have emigrated in greater numbers than new graduates.
Cronyism in Hungary has benefited Orbán's inner circle, friends, and family, who have secured state lands and lucrative EU subsidies. This favouritism is a common feature of autocratic regimes, where taxation and licensing often become tools of punishment, government services are discriminatory, and political contributions can be extortionate.
On the other hand, the economic revival of the South came with the expansion of democracy through New Deal programs, wartime mobilization, and the Civil Rights Movement. Democracies are better at ensuring the provision of public goods, managing markets, and preventing political violence, according to research by Vanessa Williamson.
The case for democracy is not just economic; it is also moral. As John Stuart Mill argued, democracy is essential for the protection and expansion of individual freedoms and rights. Moreover, a study by Acemoglu, Robinson, Suresh Naidu, and Pascual Restrepo found that democracy is associated with increased GDP per capita, with an estimated increase of between 20% and 25% over 25 years.
In recent years, several U.S. entrepreneurs and organizations, including technology companies as leading players, have supported democracy through financial contributions and actions. This support has influenced elections by helping to finance campaigns and develop political talent, contributing to shaping political platforms and candidate competitiveness in electoral processes. However, detailed names of specific entrepreneurs and organizations and their precise impacts require more focused sources.
Business leaders need education to distinguish between ordinary policy disagreements and existential threats to democracy. Revitalized, nonpartisan business organizations are essential to defend democracy by promoting voting rights, safeguarding election integrity, and raising public awareness of democracy's economic value. These organizations can help protect businesses that are particularly vulnerable under autocratic regimes, such as those heavily dependent on government contracts or regulation, those reliant on public investment or services, firms making long-term capital commitments, businesses that require a highly educated workforce, media, entertainment, and communications companies, firms in science, medicine, and education, and in-person services such as tourism.
Populist leadership, whether left or right, has been associated with a 10% decline in GDP per capita over 15 years, according to findings published in the American Economic Review. Autocracy is consistently a burden on the economy, leading to stagnation, cronyism, brain drain, and even violence. Transparency International ranks Hungary as the most corrupt country in the EU, further highlighting the economic and moral costs of autocracy.
In conclusion, the economic success of a nation is closely tied to the quality of its political institutions. Prosperity is the product of inclusive political institutions, as outlined in 'Why Nations Fail'. Businesses and leaders must be vigilant in defending democracy to protect their interests and ensure long-term economic growth and stability.
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