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Development Models after Financial Crises

This analysis explores the evolution of democracy and economic growth from 1970 to 2010, highlighting the emergence of over 120 electoral democracies and the rise of a global middle class. It discusses the integral role of middle-class growth in consolidating democracies in emerging markets such as Turkey, Indonesia, Brazil, and South Africa. The impact of middle-class dynamics on the Arab Spring is examined, alongside critiques of authoritarian capitalism in countries like Russia and China. Additionally, the case for economic renewal in the U.S. through energy independence is addressed, emphasizing the importance of quality institutions in managing economic inequalities.

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Development Models after Financial Crises

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  1. Development Models after Financial Crises Francis Fukuyama Stanford University

  2. State of Democracy around the World • The Third Wave • World went from ~35 to over 120 electoral democracies, 1970-2010 • A Global Middle Class • Total world output quadrupled, 1970-2000 • Goldman Sachs: 3 middle income quintiles will rise from 31 to 57% of total income • EISS: global middle class rises from 1.8 (2009) to 3.2 (2020) to 4.9B (2030

  3. Emerging Market Democracies • Middle class growth lies behind consolidation of new democracies • Turkey, Indonesia, Brazil, South Africa • Impact of middle class growth on the Arab Spring

  4. What’s the alternative? • Churchill: “Democracy is the worst system of government, except for all the others” • Authoritarian capitalism: • Russia • China

  5. State of Democracy in the Developed World • European Union • Japan • United States

  6. A Case for Economic Renewal in the United States • Natural gas revolution produced by hydraulic fracturing • Shale gas production increased 19% 2008-2012 • Will increase from 23 to 50% of total production • Domestic oil production also increasing • Went from 5.0 to 6.1 Mb/D 2008-2012 • Share of imported oil fell from 60 to 30% of total consumption, 2005-2012 • US may achieve energy independence in a decade

  7. After the Washington Consensus • What it was • What was right about it: • Openness and competition critical to growth • China, India all benefited • What was wrong: • Free markets are not self-regulating • Unfettered competition produces inequalities • Success depends on quality institutions

  8. Some Implications for Mongolia • Resource curse • Resources are a curse depending on the quality of governance • Norway v. Nigeria or Angola • Need to attend to economic inequality • And hence to social investment

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