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Democracy, Political Stability, and Economic Growth in Developing Countries

Mancur Olson has theorized recently that interest groups and “distributional coalitions” are a major factor in the rise and decline of nations. He argues that the tendencies of these organizations to multiply and to support distributive policies lead to economic and political stalemate, particularly in the most stable, democratic societies in which pluralism has its greatest scope. The bulk of evidence for Olson's theory comes from the industrialized world; in this article I test three of its propositions against the experience of seven stable liberal democracies in the developing world. The theory predicts that with time such societies will reduce investment for the sake of consumption, will expand their public sectors, and will grow slowly in economic terms. Economic trends in the sample countries fail to confirm the first two propositions but offer tentative support for the third.