Przeworski: Democracy and the market

Przeworski. 1991. Democracy and the market: Political and economic reforms in
Eastern Europe and Latin America (ch 1). New York: Cambridge University Press.

In Brief

The key puzzle: Democracy makes winners and losers. Why would the losers choose
to comply with the results? The key: democratic institutions help give political actors
a "long time horizon. . . They allow them to think about the future rather than being
concerned exclusively with present outcomes. . . . Political forces comply with present
defeats because they believe that the institutional framework that organizes the
democratic competition will permit them to advance their interests in the future" (19).

Two key ideas: institutionalized uncertainty, and consolidation

First, a definition of democracy. Second, the conditions for transition to democracy.

Third, the conditions for consolidation of democracy.

Place in Literature

Compare with Haggard and Kaufman's later work, The Political Econ of Democratic
Transitions; there are many parallels in the two arguments.

Chapter-by-Chapter

Chapter 1

"Democracy is a system in which parties lose elections" (10). Masses delegate their
views to elites who represent them. Interests are thus organized into monopolistic,
coercive groups (coercive because they must be able to keep their members in line,
like in a union or party that has mechanisms for enforcing discipline). Conflicts are
never resolved, only temporarily satisfied. Outcomes are not known ex ante: each
party does the best it can, then rolls the dice to see who will win. "Democratization is
an act of subjecting all interests to competition, of institutionalizing uncertainty" (14).
As Schumpeter argued, the "common will" is by no means constant, if existant at all,
in this process. Through deliberation, in fact, people often change their preferences.

The key puzzle: Democracy makes winners and losers. Why would the losers choose
to comply with the results? The key: democratic institutions help give political actors
a "long time horizon. . . They allow them to think about the future rather than being
concerned exclusively with present outcomes. . . . Political forces comply with present
defeats because they believe that the institutional framework that organizes the
democratic competition will permit them to advance their interests in the future" (19).

Chapter 2

When an authoritarian regime ends, one of five outcomes is possible. Przeworski

focuses on the fifth: establishment of a stable democracy (while also explaning how
we might get one of the others instead). The possible chains of events are on page 62
in a nice flow chart. The situation depends crucially on whether the old regime
extricates itself (negotiates its way out of power) or just falls apart.

If it extricates itself, then the game on pages 69-72 (in tables) is played. There are four
players: hardliners and reformers within the regime, and moderates and radicals
outside it. The version of the game on 69 is only preliminary--he uses it to show that
democratization would never occur if preferences and knowledge were perfect. The
final version of the game (72) shows that limited democratization could occur if the
game were iterated, but it is not. So pages 73-74 discuss two things that could change
the payoffs of the game, allowing democratization. First, radicals could become less
radical; they could agree to accept limited democracy as good enough for now, then
seek to work within the system rather than subvert it and demand more than reformers
are willing to give. Second, moderates could decide that they are more afraid of the
radicals than of the reformers, and could agree to limits on democracy that protect the
reformers undemocratically (e.g. keeping the military independent from civilian
control). Such solutions are inherently unstable, however, because democracy means
these guarantees can be undone later if transaction costs aren't too high (and the
military knows that, so the greater the democracy, the higher the risk of an immediate
coup).

If the regime just falls apart, then one of three situations obtains, based on two key
variables: whether the forces bargaining on the new institutional design are balanced,
and whether the balance is known. If there is a known unbalance, then institutional
rules will favor the stronger group. If there is a known balance, then civil war may
result, so often a "temporary" democracy solution is set up--however, these solutions
are by no means guaranteed to be stable (depends on transaction costs). If it is
unknown, then a more Rawlsian solution is set up, with lots of checks and balances
and majority protections. This is the most stable outcome.