Question

Does the political freedom existing in democracies always aid economic growth? Why?

Answer 1

Abstract

In General, There are five stages of Economic Development: traditional society, preconditions to takeoff, takeoff, drive to maturity, and age of high mas consumption.

Democracy is associated with higher human capital accumulation, lower inflation, lower political instability, and higher economic freedom.

In Following ways political freedom existing in democracies aid to economic growth of country

1. Democracy and economic growth and development have had a strong correlative .Yet, political instability does not affect economic growth in democracies
2. In general, economic develop increases the standard of living in a country.
3. Political factors influence economic development by positively or negatively influencing the process of development.
4. Some important political factors include: Regime type, which is the form of government operating in a country.
5. Political freedom,and institutions allocates resources and generates incentives. Topics include markets, poverty, welfare, inequality, taxation, regimes, transitions, growth, ethnicity, religion, and culture.
6. However democracy does cause growth, and its effect is significant and sizable.

For Example, In India - Political Freedom from Democracies was able to make following type of changes in Economy

• Industrial policy: The system requiring government permission for new investments and for substantial expansion of capacity has been abolished. Very few industries are exclusive to the public sector.
• Capital controls: Both inbound and outbound capital flows have been liberalized and have increased manifold
• Trade: The import control system for inputs into production and capital goods has been discontinued for most industries. Custom duties and tariffs have been radically lowered.
• Exchange rate: The Rupee is now on a floating exchange rate.
• Taxation: Marginal tax rates on individuals and firms, as well as customs and excise duties, have been reduced significantly.
• Finance: Competition has transformed the solutions available in banking, insurance, and investments. Equity markets have undergone a veritable revolution.
• Public sector: The government has divested shares in some public-sector undertakings, privatized some such undertakings or some of their functions, and improved transparency and accountability by listing many public sector firms