How ‘Good Governance’ in 38 Countries Affects Living Standards

If you believe that vibrant democracies guarantee good government or that robust economic output ensures a better quality of life for a nation’s citizens, think again.

All over the world, stable economies are facing restive moments. U.S. President Donald Trump was impeached in the House on Wednesday over charges of obstruction and abuse of power. U.K. Prime Minister Boris Johnson could be on the verge of delivering Brexit—three years after voters first chose to leave the European Union—after his Conservative Party won a resounding majority in last week’s general election. In local elections last month, Hong Kong overwhelmingly elected pro-Democracy council members as China seeks to clamp down on protests that have gripped the city for most of the year.

While there is a general correlation between a strong democracy and economic expansion and a better quality of life, research by the Los Angeles-based Berggruen Institute into 38 countries that make up 95% of global gross domestic product shows that’s not always the case. In several of the largest economies in the world—including mature democracies and developing countries—actual government performance is often the decisive factor.

China, which scores low on democracy, has undoubtedly been an economic success story, lifting hundreds of millions of people out of poverty and helping spur the global economy. But it faces a massive debt problem, and is perhaps approaching a ceiling and may need to allow more public participation in running government if it wants to guarantee a better quality of life for its people in the future.

In contrast, the U.S. hasn’t excelled at translating its high gross domestic product growth rate into increases in the quality of life, which has, in fact, decreased slightly over the past 14 years, the Institute said. This is particularly notable in health and education, where the problem isn’t quality, but affordability.

“Growing economic inequality and wealth disparity could be key factors, particularly after the 2007–2008 financial crisis,” according to the report. “Although the economy rebounded after the crisis, the gains were disproportionately concentrated in the top tier of the U.S. population, with 95% of growth going to the top 1% of the households.”

Even in established democracies, actual government performance can trump other factors in determining quality of life. Italy, for example, has a lively democracy, but the responsiveness of successive governments has been poor, and as a result living standards are stagnant at best.

“Italy ranks surprisingly high with respect to quality of democracy scores,” according to the report. “Yet the availability of feedback mechanisms and other democratic processes seems to have no additional impact on the quality of government.”

Social movements that target reform in local and national bureaucracies could help the country escape stagnation, the report found.

A failure of good governance also undermines progress in two middle-income BRICs countries—South Africa and Brazil.

South Africa suffers from world-beating unemployment, high crime and a poor education system that remains skewed along racial lines, some of which can be attributed to the legacy of apartheid. And while it scores relatively well on democracy, its poor performance in addressing inequality—which is higher than at the end of white-minority rule—and corruption may be more a result of the lack of political will than the state’s capacity, according to the report.

Of all the countries that the Berggruen Institute reviewed, perhaps none has backtracked as much as Brazil in the past decade. Once considered the poster-child of a fast-rising BRICs nation, Brazil’s inequality is rising and GDP per capita was lower last year than in 2010. And the deforestation of the Amazon has reached record levels this year, threatening not just that region but the world’s climate.

“Despite innovations in democratic governance, Brazil has done a poor job of translating its novel systems into effective feedback mechanisms, high democratic engagement or low corruption,” the institute said.