Economies perform better in democracies eventually

ByUzair Ali

He is in the finance sector


August 7, 2022

Economies perform better in democracies

In the end the Economies perform better in democracies previous PMLN government, the Business Confidence Index stood at 14 percent; quite a high degree of trust despite the muddled performance of the government. Comparing it with the hybrid regime one can clearly discern the qualitative difference between both the types of governance. The increase in economic confidence has given rise to the debate again about the proclivity of better economic performance in democratic environment or otherwise. Pakistani economists are well equipped to offer their views as the country has seen both democratic governance and dictatorships.

The general perception is that economic growth took giant strides during autocratic governments in Pakistan as compared to the performance of democratic dispensations but surprisingly the business sector has shown more confidence in democratic administrations. The business community prefers democratic governance for economic sustainability and growth momentum.

It is generally observed that the fast decision making process in dictatorships considerably aids business but the problem in such a model is the yawning gap between the perceptions of free dealing business professionals and tight-laced soldierly understanding about economic matters. In a dictatorial dispensation a sharp economic opportunist like Shaukat Aziz could sway the view of the ruling coterie to utilise fast-shrinking natural gas resources for running transport that caused quite a crisis in the country but Shaukat Aziz ran away scot-free. On the other hand business circles constantly monitor rates of gas and fuel and put pressure on government to reduce its financial profit from them.

Business community enjoys very good access to the political government and its finds it easy to communicate with it. Democratic government is never an insular process that guards its privileges and it is usually amenable to listen to opinions of the businessmen. In fact, many functionaries of a democratic government are quite adept at economic matters and provide their input after remaining in constant touch with the business climate.
In democratic dispensations the business class is permitted to use all levers of commerce and trade to convey its points of view and it is always successful to obtain necessary feedback. The bargaining tools available with the business sector are successfully employed by it to emphasise its priorities and a democratic government is quite receptive of such tactics as its members have deep-seated roots in the public including personnel working in trade and industry.

In democratic atmosphere there is a close liaison between business and politics. Different chambers of commerce and industry usually stay in close touch with the ruling administration. There is a continuous contact between political bigwigs and entrepreneurs that results in mutual cooperation on various economic matters. Democratic governments keep on the process of dialogue with business community throughout the year and such interactions reach their peak during the budget sessions.

Business community quickly adapts to the change in government after elections and knows that it will last for certain tenure. It is quite aware of its ability to impress upon it the economic perspective it considers appropriate. Democratic governance also concedes the point that it has to keep a good relationship with business circles to provide better economic output.

The business feels confident that a democratic administration usually focuses on harmonizing policies across different federal and provincial jurisdictions, supported by visible improvement in good governance and a policy framework which is progressive, transparent, consistent, and predictable to achieve the much higher potential of economic growth. It knows that as elected entity it is mandatory on it to support all sectors of economy equally.
Democratic governments are great believers in plurality and venture to provide chance to every business venture that supports to strengthen plurality. They are the product of an open electoral system and realise the value of free and fair business practices. They believe in a balancing act aimed at providing necessary wherewithal to all avenues with potential to generate economic resources.

Democratic governments are civic minded and tend to accord higher priority to public welfare projects. They encourage foreign direct investment and keep little check on where it is coming from. They encourage industrial development and provide all possible assistance to businessmen willing to engage in it. They venture hard to remove bottlenecks hampering industrial development.

The monetary and fiscal policies of a democratic government usually favour all sectors of economy. Such governments woo private sector by including it in economic decision making process directly and do not need the role of intermediaries to facilitate the process. The closed governance apparatus relies heavily on intermediaries who emerge from nowhere and usually control information flow to the ruling cabal. They also paint a rosy picture to the rulers and refrain from making them aware of economic pitfalls.

Democracy delegates power and accordingly suits business activity. It caters for maximum inclusivity and avoids paying undue attention to entrenched economic sectors. It is business-friendly and accords due value to entrepreneurial spirit. It is expected that the continuation of democratic process in Pakistan will augur well for its business sector. TW


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