As I pointed out in Chapter 1, despite the obvious relevance of the historical approach in understanding the problems of development in our time, surprisingly little work has adopted it. This aberration is even more serious in the area of institutional development.[6] This chapter tries to fill this important gap.
In section 3.2, I examine how various institutions that are currently regarded as essential components of the ‘good governance’ structure evolved in the NDCs when they were developing countries themselves, mainly between the early nineteenth and early twentieth centuries. I look at six broad areas – democracy (section 3.2.1), bureaucracy and judiciary (section 3.2.2), property rights (section 3.2.3), corporate governance (section 3.2.4), private and public financial institutions (section 3.2.5) and welfare and labour institutions (section 3.2.6).
In section 3.3, I discuss how institutional developments achieved in NDCs in the past compare with those of today’s developing-countries at similar levels of development. The first subsection (3.3.1) shows NDCs in the process of institutional evolution in earlier times by offering three ‘snapshots’ (1820, 1875 and 1913). Section 3.3.2 discusses how the process of institutional development in the NDCs was ‘long and winding’. Section 3.3.3 compares the level of institutional development in the NDCs in the past with that of today’s developing countries, and shows that, at comparable stages of development, the former actually have much higher levels of institutional development than those achieved by today’s NDCs.
3.2. The history of institutional development in the developed countries
3.2.1. Democracy
There has been a particularly heated debate on the relationship between democracy and economic development.[7] In the early post-war period, there was a popular argument that developing countries cannot afford ‘expensive’ democratic institutions. Today, the dominant view in the IDPE is that democracy helps economic development and therefore has to be promoted as a precondition for development.[8] However, still others point out that democracy is more of an outcome of, rather than a precondition for, development, and is therefore not really a variable we can manipulate, whether or not we think it is good for development.
No attempt is made here to settle this difficult and long-standing debate. However, the historical experience of developed countries in this regard tells us an interesting story that should make the reader pause before readily buying into the current orthodoxy that democracy is a precondition for development.
When voting was first introduced in the NDCs, it was confined to a very small minority of property-owning males (usually aged over 30), often with an unequal number of votes apportioned according to a scale based on property, educational achievement or age.
In France between 1815 and 1830, for example, the franchise was granted only to males above 30 who paid at least 300 francs in direct taxes, which meant that only 80,000-100,000 people out of a population of 32 million (that is, 0.25-0.3 per cent of the population) could vote. Between 1830 and 1848, there was some relaxation of franchise requirements, but still only 0.6 per cent of all French people could vote.[9] In England before the 1832 Reform Act, which was the watershed event in the extension of suffrage in the country, it was widely agreed among contemporary observers that landlords could decide 39 out of 40 county elections through their influence on the tenants, bribery and patronage.[10] Even after this act, voting rights were only extended from 14 per cent to 18 per cent of men, partly because many craftsmen and labourers with no or little property were disenfranchised as a result of the act, which established a closer link between property and enfranchisement. In Italy, even after the lowering of the voting age to 21 and the reduction of tax-paying requirements in 1882, only around two million men (equivalent to seven per cent of the population) could vote, due to lower but still extant tax payment and literacy requirements.[11]
It was not until 1848, the year that France introduced universal male suffrage, that even limited forms of democracy began to appear in NDCs. As we see in table 3.1, most NDCs introduced universal male suffrage between the mid-nineteenth century and the first couple of decades of the twentieth century. However, even this process was not without reversals.
| Table 3.1 | ||
|---|---|---|
| Introduction of Democracy in the NDCs | ||
| Country | Universal Male Suffrage | Universal Suffrage |
| Australia | 1903 [1] | 1962 |
| Austria | 1907 | 1918 |
| Belgium | 1919 | 1948 |
| Canada | 1920 [2] | 1970 |
| Denmark | 1849 | 1915 |
| Finland | 1919 [3] | 1944 |
| France | 1848 | 1946 |
| Germany | 1849 [2] | 1946 |
| Italy | 1919 [4] | 1946 |
| Japan | 1925 | 1952 |
| Netherlands | 1917 | 1919 |
| New Zealand | 1889 | 1907 |
| Norway | 1898 | 1913 |
| Portugal | n.a. | 1970 |
| Spain | n.a. | 1977 (1931)** |
| Sweden | 1918 | 1918 |
| Switzerland | 1879 | 1971 |
| UK | 1918 [5] | 1928 |
| USA | 1965 (1870)* | 1965 |
Sources: Therborn 1977 and Silbey 1995 for democracy indicators. Additional information from Foner 1998 on the USA and Carr 1980 on Spain. For more details on the introduction of universal suffrage, see table 3.2.
1. With racial qualifications.
2. With property qualifications.
3. Communists excluded.
4. With restrictions.
5. All men and women over 30.
* Universal male suffrage was introduced in 1870, but reversed between 1890 and 1908 through the disenfranchisement of the blacks in the Southern states. It was only restored in 1965. For further details, see the text.
** Universal suffrage was introduced in 1931 but reversed after General Franco’s military coup in 1936. It was only restored in 1977, following Franco’s death in 1975. See the text for details.
For example, during the late nineteenth century, when an electoral victory by the Social Democratic Party became a possibility, at least in local elections, Saxony abandoned the universal male suffrage that had earlier been adopted, moving over to the Prussian-style three-class voting system (which Prussia itself used from 1849 to 1918).[12] In this system, each of the three classes (classified according to income) elected the same number of delegates to the parliament, which meant that the top two classes (accounting respectively for 3-5 per cent and 10-15 per cent of the population) could always outvote the poorest class. In 1909, Saxony moved still further away from democracy by giving voters between one and four votes depending on their income and status. For example, those with a large farm gained three additional votes, while additional ballots were allotted to the well-educated and those over 50 years of age.
6
Crafts 2000 is a notable exception, but it only covers the UK experience and is focused on financial and corporate governance institutions.
7
Bardhan 1993, is a concise review; Rueschmeyer, Stephens and Stephens 1992, provides a comprehensive review; see also Przeworski and Limongi 1993.
8
Even Rodrik, who is known for exposing the intellectual weaknesses of the IDPE, agrees with this orthodoxy and goes as far as to argue that, as the ‘meta-institution’ that helps us build better institutions, democracy is the only appropriate ‘institutional conditionality’ that IFIs may attach to their financial assistance (see Rodrik 1999b).