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Capdem1 - ISS225 capdem1 March 2005 p.1 Why Does Capitalism...

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ISS225: capdem1 March 2005, p.1 Why Does Capitalism Lead to Democracy? -- A Markets, Efficiency, and Economic Growth 1 Scholars who have studied economic systems based on competitive markets have generally concluded that these market-based systems have two kinds of properties: 2 Market-based systems are better than other kinds of economic systems at producing efficient outcomes: 3 That is, with competitive markets there are relatively few missed opportunities for mutually advantageous trades. 4 Market-based systems are better than other kinds of economic systems at adapting to changing economic conditions. 5 For these two reasons, market-based economic systems can generally be expected to grow more than other kinds of economic systems. 6 It has also been remarked that the economic growth which stems from competitive markets is associated with democracy : 7 In nations which reach a certain level of economic development, pressures from citizens for democracy begin to build up. 8 Currently seeing this in South Korea and Taiwan, two countries which have experienced very high levels of economic growth in the past 30 years. 9 Question is: why is economic growth associated with democracy? Two Major Studies of Economic Growth and Democracy 10 Lecture on: 11 Lipset, “Some Social Requisites of Democracy: Economic Development and Political Legitimacy” (1959) 12 Diamond, “Economic Development and Democracy Reconsidered” (1992) Lipset on the Social Preconditions for Democracy 13 Definition of “democracy”: 14 A political system which provides regular elections in which a large portion of the population can participate in changing government officials. 15 Two major parts to Lipset’s article: 16 First, a general observation: 17 The more economically-developed the nation, the greater the chances that it will sustain democracy. 18 This is a classical argument, which has been made ever since Aristotle:
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ISS225: capdem1 August 21, 2002, p.2 19 Only in a wealthy society, with few citizens in real poverty, could: 20
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