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A Strategic Model of Economic Performance and Democratization in South Korea and Taiwan

Published online by Cambridge University Press:  24 August 2011

O. Fiona Yap
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Abstract

A debate, fanned by the experiences of South Korea and Taiwan, persists over how economic growth leads to democratization. This article provides a theoretical model showing that economic downturns lead to democratization and evaluates the conclusion systematically with data from South Korea and Taiwan. The model and results corroborate the hypothesis that economic downturns motivate government and non-government actors to pursue political reforms and democratization and highlight several contributions. They show democratization as the outcome of strategic responses pursued under weak economic conditions. Further, the findings are robust to alternative specifications of democratization. The results also bring empirics into line with theoretical expectations about democratization while simultaneously revealing that it is not a panacea for lack of support.

Type
Research Article
Information
British Journal of Political Science , Volume 42 , Issue 1 , 01 December 2011 , pp. 213 - 239
Copyright
Copyright © Cambridge University Press 2011

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References

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14 The government and each of the citizen groups are treated as unitary players. This treatment does not impute unanimity within these sets of players; rather it is a simplification to achieve tractability in the modelling. We note that the literature does not consider the simplification restrictive. First, empirical evidence shows that there are dominant leaders who are able to and do articulate or assert goals for the groups so that they act in a united way. See, for instance, Deng, Fang, ‘Information Gaps and Unintended Outcomes of Social Movements: The 1989 Chinese Student Movement’, American Journal of Sociology, 102 (1997), 1085–1112CrossRefGoogle Scholar. Secondly, research also shows a number of strategic solutions – including selective incentives, assurance games, tipping points and leadership – that lead to unitary action. See Moore, Will, ‘Rational Rebels: Overcoming the Free-rider Problem’, Political Research Quarterly, 48 (1995), 417–454CrossRefGoogle Scholar; Van Belle, Douglas, ‘Leadership and Collective Action: The Case of Revolution’, International Studies Quarterly, 40 (1996), 107–132CrossRefGoogle Scholar; Lichbach, Mark, The Rebel's Dilemma (Ann Arbor: University of Michigan Press, 1995)CrossRefGoogle Scholar.

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18 See Skyrms, ‘Presidential Address: The Stag Hunt’; Skyrms, ‘Trust, Risk, and the Social Contract’, p. 22.

19 Skyrms, ‘Presidential Address: The Stag Hunt’, p. 3, notes that the stag hunt differs from the prisoner's dilemma in that the prisoner's dilemma reveals ‘a conflict between individual rationality and mutual benefit’ whereas the stag hunt shows a conflict between ‘considerations of mutual benefit and … personal risk’. We thank an anonymous reviewer for the suggestion to peg the model as the stag hunt. Briefly, the stag hunt game is one where two or more sets of players choose between hunting hare or stag. A successful hare hunt is independent of the other sets of players while a successful stag hunt depends on the other players co-operating to hunt stag. The payoff from successfully hunting stag is significantly higher than that from hunting hare. Consequently, unlike the prisoner's dilemma, there are two equilibria in the stag hunt: one where all hunt hare (the risk-dominant strategy), and another where all hunt stag (the payoff-dominant strategy). See also Skyrms, ‘Trust, Risk, and the Social Contract’; Cortazar, ‘Non-Redundant Groups, the Assurance Game and the Origins of Collective Action’; Osborne, Martin, An Introduction to Game Theory (New York: Oxford University Press, 2004)Google Scholar.

20 Skyrms, ‘Presidential Address: The Stag Hunt’, notes ‘experimental evidence’ that shows that a group may hunt stag even when there is risk that the other group does not (p. 10); importantly, in doing so and because of the magnitude of the payoffs, everyone switches to hunting stag consequently (p. 12). Skyrms, ‘Trust, Risk, and the Social Contract’, develops this further in the context of reinforcement learning where stag hunters learn quickly to find and interact with each other so that, once started, the equilibrium of stag hunting may be achieved ‘right away’ (p. 24).

21 See Deng, ‘Information Gaps and Unintended Outcomes of Social Movements’; Lee, Su-Hoon, ‘Transitional Politics of Korea, 1987–1992: Activation of Civil Society’, Pacific Affairs, 66 (1993), 351–367CrossRefGoogle Scholar; Tong, Yanqi, ‘Environmental Movements in Transitional Societies: A Comparative Study of Taiwan and China’, Comparative Politics, 37 (2005), 167–188CrossRefGoogle Scholar; Prasirtsuk, ‘Thailand in 2008’.

22 See Skyrms, ‘Trust, Risk, and the Social Contract’.

23 See Skyrms, ‘Trust, Risk, and the Social Contract’; Osborne, An Introduction to Game Theory.

24 See Simpson and Macy, ‘Power, Identity, and Collective Action in Social Exchange’; Calvert, ‘Rational Actors, Equilibrium, and Social Institutions’; Skyrms, ‘Presidential Address: The Stag Hunt’; Skyrms, ‘Trust, Risk, and the Social Contract’.

25 In particular, Bates, Markets and States in Tropical Africa, shows how farmers in Africa, without co-ordinating themselves or collectivizing, used the government's agricultural policies against it by changing farm production patterns. See Skyrms, ‘Trust, Risk, and the Social Contract’; Feng and Gizelis, ‘Building Political Consensus and Distributing Resources’; Yap, Citizen Power, Politics and the Asian Miracle; Robinson, James, ‘Economic Development and Democracy’, Annual Review of Political Science, 9 (2006), 503–527CrossRefGoogle Scholar; Prasirtsuk, ‘Thailand in 2008’.

26 See Weingast, Barry, ‘The Political Foundations of Democracy and the Rule of Law’, American Political Science Review, 91, (1997), 245–263CrossRefGoogle Scholar.

27 Skyrms, ‘Trust, Risk, and the Social Contract’, emphasizes that achieving this equilibrium requires ‘little’ in terms of strategic assessment or observation of other players’ actions or payoffs (p. 24).

28 See Feng and Gizelis, ‘Building Political Consensus and Distributing Resources’; Sebastián Etchemendy, ‘Repression, Exclusion, and Inclusion: Government–Union Relations and Patterns of Labor Reform in Liberalizing Economies’, Comparative Politics, 36 (2004), 273–290CrossRefGoogle Scholar; Bates, Markets and States in Tropical Africa.

29 Some scholars trace Taiwan's democratization to changes implemented by then President Chiang Ching-kuo in 1986 and 1987 and, after his death, to President Lee Teng-hui in 1987. However, even these scholars agree that the changes adopted in Taiwan in the 1980s were not institutionalized until 1991, so that reforms prior to 1991 are generally demarcated as political liberalization, while those since 1991 are treated as Taiwan's democratization. See, for instance, Winckler, ‘Taiwan's Transitions’; Yeung, ‘Review’; Chao and Myers, ‘The First Chinese Democracy’; Cheng and Haggard, ‘Democracy and Deficits in Taiwan’; Han, Sung-Joo, ‘South Korea in 1987: The Politics of Democratization’, Asian Survey, 28 (1988), 52–61Google Scholar.

30 See Winckler, ‘Taiwan's Transitions’; Chao and Myers, ‘The First Chinese Democracy’; Han, ‘South Korea in 1987’; Tien, Hung-mao, ‘Elections and Taiwan's Democratic Development’, in Hung-mao Tien, ed., Taiwan's Electoral Politics and Democratic Transition: Riding the Third Wave (Armonk, N.Y.: M. E. Sharpe, 1996)Google Scholar; Billet, Bret, ‘South Korea at the Crossroads: An Evolving Democracy or Authoritarianism Revisited?’ Asian Survey, 30 (1990), 300–311CrossRefGoogle Scholar.

31 See Kim, ‘State and Civil Society in South Korea's Democratic Consolidation’; Yap, Citizen Power, Politics and the Asian Miracle.

32 See Han, ‘South Korea in 1987’; Yap, Citizen Power, Politics and the Asian Miracle.

33 See Han, ‘South Korea in 1987’; Billet, ‘South Korea at the Crossroads’.

34 See Tien, ‘Elections and Taiwan's Democratic Development’; Chao and Myers, ‘The First Chinese Democracy’; Yap, Citizen Power, Politics and the Asian Miracle.

35 See Tien, ‘Elections and Taiwan's Democratic Development’; Chao and Myers, ‘The First Chinese Democracy’; Winckler, ‘Taiwan's Transitions’.

36 See Chao and Myers. ‘The First Chinese Democracy’; Rigger, Shelley, From Opposition to Power: Taiwan's Democratic Progressive Party (Boulder, Colo.: Lynne Rienner, 2001)Google Scholar.

37 See Rigger, From Opposition to Power; Lee, ‘Transitional Politics of Korea, 1987–1992’; Kim, ‘State and Civil Society in South Korea's Democratic Consolidation’; Young, Whan Kil, ‘South Korea in 1989: Slow Progress Towards Democracy’, Asian Survey, 30 (1990), 67–73Google Scholar.

38 Lee, ‘Transitional Politics of Korea, 1987–1992’; Kim, ‘State and Civil Society in South Korea's Democratic Consolidation’; Young, ‘South Korea in 1989’.

39 See Rigger, From Opposition to Power; Yap, Citizen Power, Politics and the Asian Miracle.

40 See Alesina, Alberto, Roubini, Nouriel and Cohen, Gerald, Political Cycles and the Macroeconomy (Cambridge, Mass.: MIT Press, 1997)Google Scholar.

41 The literature on economic voting as well as political cycles generally considers a lag of one quarter between economic conditions and government response to be most useful; however, because of the lack of quarterly data, the convention is to use economic conditions of the same year. See, for instance, Alesina et al., Political Cycles and the Macroeconomy. Anderson, Christopher and Ishii, Jun, ‘The Political Economy of Election Outcomes in Japan’, British Journal of Political Science, 27 (1997), 619–659CrossRefGoogle Scholar; Palmer, Harvey and Whitten, Guy, ‘The Electoral Impact of Unexpected Inflation and Economic Growth’, British Journal of Political Science, 29 (1999), 623–639CrossRefGoogle Scholar; McGarrity, Joseph, ‘Macroeconomic Conditions and Committee Re-election Rates’, Public Choice, 124 (2005), 453–480CrossRefGoogle Scholar.

42 The reason why the coding does not affect more cases is that the government's response generally extends beyond one singular action. As examples, consider the series of government responses to the mortgage crisis in the United States, or the French government's response to the Société Générale crisis. See Yap, Citizen Power, Politics and the Asian Miracle.

43 See Monty Marshall and Keith Jaggers, Polity IV Project (2005), www.cidcm.umd.edu//polity, last accessed 27 January 2009; Calvert, ‘Rational Actors, Equilibrium, and Social Institutions’; Bates et al., Analytic Narratives; Yap, Citizen Power, Politics and the Asian Miracle.

44 Specifically, the debate discusses the robustness versus fragility of findings as a result of the different summary measures, that is, the graded measure versus the dichotomous measure. A more recent debate considers that summary measures may be too blunt to be useful. See Persson and Tabellini, ‘Democracy and Development’; Bollen and Paxton, ‘Subjective Measures of Liberal Democracy’; Coppedge, ‘Democracy and Dimensions’; Casper and Tufis, ‘Correlation versus Interchangeability’.

45 See discussion in section above on the democratization tango in the two nations. See also Chou, Yangsan and Nathan, Andrew, ‘Democratizing Transition in Taiwan’, Asian Survey, 27 (1987), 277–299CrossRefGoogle Scholar; Winckler, ‘Taiwan's Transitions’; Han, ‘South Korea in 1987’; Cheng and Haggard, ‘Democracy and Deficits in Taiwan’. Given that democratization is a process that may continue, stall or reverse – that is, democratic consolidation is not always achieved – we code 1 for democratization for the years during which the institutionalization of democratic processes continues. See Schedler, Andreas, ‘The Menu of Manipulation’, Journal of Democracy, 13 (2002), 36–50CrossRefGoogle Scholar; Carothers, ‘The “Sequencing’ Fallacy’, for discussions of democratization as a process.

46 The other possible dates are 1987, when Taiwan lifted martial law within the nation and allowed for opposition party contestation of elections, and 1996, when Taiwan's presidency was subject to free and direct elections. The results are stable; thus, for instance, if the 1987 date is used in the regressions between economic performance and democratization, the results for inflation and growth are −0.29 and −0.29, respectively (probability = 0.06 for both variables), with a pseudo R 2 of 0.30 and an LR χ 2 of 12.70 (probability = 0.0018). If the 1996 date is applied, the results for inflation and growth are −0.85 and −0.55, respectively (probability of 0.04 and 0.05, respectively), with a pseudo R 2 of 0.49 and an LR χ 2 of 18.76 (probability = 0.0001). Similarly, the results for the regressions of investment are statistically and substantively stable.

47 See Schedler, ‘The Menu of Manipulation’; Carothers, ‘The “sequencing’ Fallacy’; Rose, Richard and Shin, Doh Chull, ‘Democratization Backwards: The Problem of Third-Wave Democracies’, British Journal of Political Science, 31 (2001), 331–354CrossRefGoogle Scholar. We note here that, like the measure of democracy, that for democratization comprises several possibilities, including graded cardinal measures, dichotomous measures or component measures. Our choice of the dichotomous measure of democratization heeds concerns that additive cardinal measures may not be useful until a stronger theory about how the dimensions combine is developed. See Coppedge, ‘Democracy and Dimensions’; Shin, Doh Chull, ‘On the Third Wave of Democratization: A Synthesis and Evaluation of Recent Theory and Research’, World Politics, 47 (1994), 135–170CrossRefGoogle Scholar. The dichotomous measure is consistent with the characterization of democratization in both Taiwan and South Korea by several main political databases – including Freedom House, Polity IV, and the Database of Political Institutions – which do not appraise Taiwan or South Korea as full democracies until 2004 and thereafter. The annual data take into account that economic performance may change quickly; using annual data, then, ensures that the relationship captured between the economy and democratization is robust and not due to selection bias. See Coppedge, ‘Democracy and Dimensions’; Chan, ‘Grasping the Peace Dividend’; Pereira et al., ‘Under What Conditions Presidents Resort to Decree Power?’ and the economic voting studies in Fn. 40 that identify this methodology as a rigorous research design for causal tests. As a further check, we tested the relationship using the most conservative measure of democratization for both nations (1986, 1987, and 1991 = 1 for Taiwan, 0 else; 1987 and 1997 = 1 for South Korea, 0 else). See Chou and Nathan, ‘Democratizing Transition in Taiwan’; Winckler, ‘Taiwan's Transitions’, Park, Tong Whan, ‘South Korea in 1997: Clearing the Last Hurdle to Political-Economic Maturation’, Asian Survey, 38 (1998), 1–10CrossRefGoogle Scholar; and Kie-Chang Oh, John, Korean Politics (Ithaca, N.Y.: Cornell University Press, 1999)Google Scholar. The results remained substantively and statistically consistent (LR χ 2 10.85, probability 0.004 for South Korea; 5.06, probability of 0.08 for Taiwan). We thank an anonymous reviewer for raising this consideration.

48 See Oh, Korean Politics, p. 113.

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53 See Young, Christopher, ‘The Strategy of Political Liberalization: A Comparative View of Gorbachev's Reforms’, World Politics, 45 (1992), 47–65CrossRefGoogle Scholar; Mansfield, Edward D., and Pevehouse, Jon C., ‘Democratization and International Organizations’, International Organization, 60 (2006), 137–167CrossRefGoogle Scholar.

54 See Yap, ‘Non-Electoral Responsiveness Mechanisms’; Bates, et al., Analytic Narratives; Calvert, ‘Rational Actors, Equilibrium, and Social Institutions’.

55 See Yap, Citizen Power, Politics and the Asian Miracle; Wagle, Udaya, ‘The Policy Science of Democracy: The Issues of Methodology and Citizen Participation’, Policy Sciences, 33 (2000), 207–223CrossRefGoogle Scholar.

56 Our operationalization is partly drawn from Yap, Citizen Power, Politics and the Asian Miracle, regarding credible commitment in East Asia. We depart from the work in one respect: Yap's conception encompasses participatory policy making while our conception focuses on political participation and government responsiveness that follows such participation. Our operationalization is used to recode Yap's data and update to 2004.

57 See Lichbach, The Rebel's Dilemma; Ekiert, Grzegorz and Kubik, Jan, ‘Contentious Politics in New Democracies: East Germany, Hungary, Poland, and Slovakia, 1989–93’, World Politics, 50 (1998), 547–581CrossRefGoogle Scholar.

58 See Haggard and Kaufman, ‘The Political Economy of Democratic Transitions’; Zafirovski, Milan, ‘Public Choice Theory for Political Sociology’, International Journal of Politics, Culture, and Society, 12 (1999), 465–502CrossRefGoogle Scholar; Yap, ‘Non-Electoral Responsiveness Mechanisms’; Bellin, Eva R., ‘Contingent Democrats: Industrialists, Labor, and Democratization in Late-Developing Countries’, World Politics, 52 (2000), 175–205CrossRefGoogle Scholar; Jensen, Nathan and Wantchekon, Leonard, ‘Resource Wealth and Political Regimes in Africa’, Comparative Political Studies, 37 (2004), 816–884CrossRefGoogle Scholar; Mark Leier, ‘The Strike as Political Protest’, Center for Labor Studies at Simon Fraser University (2003), http://www.sfu.ca/labour/index.html (accessed 17 November 2009); Gandhi, Jennifer and Przeworski, Adam, ‘Authoritarian Institutions and the Survival of the Autocrats’, Comparative Political Studies, 40 (2007), 1279–1301CrossRefGoogle Scholar.

59 We thank two anonymous reviewers for pointing out the need for a measure of citizen support other than private domestic investment, and preferably a measure that captures the divisions of society, such as rich versus poor.

60 See Bellin, ‘Contingent Democrats’; Jensen and Wantchekon, ‘Resource Wealth and Political Regimes in Africa’; Gandhi and Przeworski, ‘Authoritarian Institutions and the Survival of the Autocrats’; Yap, ‘Non-Electoral Responsiveness Mechanisms’. We note that the economists also consider resource-investments or resource-withdrawals to be useful measures of citizen support. See, for instance, King, Robert and Rebelo, Sergio, ‘Public Policy and Economic Growth: Developing Neoclassical Assumptions’, Journal of Political Economy, 98 (1990), S126–S150CrossRefGoogle Scholar.

61 See Ames, Political Survival; Bates, Markets and States in Tropical Africa; Colomer, Josep, ‘Transitions by Agreement: Modeling the Spanish Way’, American Political Science Review, 85 (1991), 1283–1302CrossRefGoogle Scholar.

62 See Haggard and Kaufman, ‘The Political Economy of Democratic Transitions’, p. 61; Zafirovski, ‘Public Choice Theory for Political Sociology’; Leier, ‘The Strike as Political Protest’; Jensen and Wantchekon, ‘Resource Wealth and Political Regimes in Africa’.

63 See Palmer and Whitten, ‘The Electoral Impact of Unexpected Inflation and Economic Growth’; Siklos, Pierre L. and Barton, Andrew G., ‘Monetary Aggregates as Indicators of Economic Activity in Canada: Empirical Evidence’, Canadian Journal of Economics/Revue Canadienne d'Economique, 34 (2001), 1–17CrossRefGoogle Scholar. Indeed, recent studies establish that measures such as economic equality and income per capita are not useful because they are endogenous to democratization. See Robinson, ‘Economic Development and Democracy’, pp. 517–24.

64 In particular, as the economy equilibrates towards higher levels of production, some inflation is unavoidable. See Kennedy, Peter, Macroeconomic Essentials, 2nd edn (Cambridge, Mass.: MIT Press, 2000)Google Scholar; Ball, Laurence and Gregory Mankiw, N., ‘The NAIRU in Theory and Practice’, Journal of Economic Perspectives, 16 (2002), 115–136CrossRefGoogle Scholar.

65 See de Haan and Siermann, ‘New Evidence on the Relationship between Democracy and Economic Growth’; Doucouliagos and Ulubaşoğlu, ‘Democracy and Economic Growth’.

66 See Baum, Matthew and Lake, David, ‘The Political Economy of Growth: Democracy and Human Capital’, American Journal of Political Science, 47 (2003), 333–347CrossRefGoogle Scholar; Silva, Eduardo, ‘From Dictatorship to Democracy: The Business–State Nexus in Chile's Economic Transformation, 1975–1994’, Comparative Politics, 28 (1996), 299–320CrossRefGoogle Scholar.

67 See Free China Journal, Taipei, Taiwan, 22 June 1996. See also discussion on unemployment in Taiwan in Yap, Citizen Power, Politics and the Asian Miracle, p. 20.

68 See Anderson and Mendes, ‘Learning to Lose’; Schatzman, ‘Political Challenge in Latin America’.

69 See Anderson and Mendes, ‘Learning to Lose’; Schatzman, ‘Political Challenge in Latin America’; de Haan and Siermann, ‘New Evidence on the Relationship between Democracy and Economic Growth’; Doucouliagos and Ulubaşoğlu, ‘Democracy and Economic Growth’.

70 See Mansfield and Pevehouse, ‘Democratization and International Organizations’; Young, ‘The Strategy of Political Liberalization’.

71 Robinson, ‘Economic Development and Democracy’, p. 505; Acemoglu and Robinson, The Economic Origins of Dictatorship and Democracy; Ahlquist, John, ‘Review of Daron Acemoglu and James A. Robinson, Economic Origins of Dictatorship and Democracy’, Comparative Political Studies, 40 (2006), 1026–1029CrossRefGoogle Scholar; dal Bó, Ernesto, dal Bó, Pedro and Snyder, Jason, ‘Political Dynasties’, Review of Economic Studies, 76 (2009), 115–142CrossRefGoogle Scholar.