Democracy is neither a necessary, nor a sufficient, condition for having free markets. At best, we can argue that in the long run, liberal democracies may be more likely to sustain free market economies.
. . . , as the free market and autocrats gained power in the Caucasus, Central Asia, Latin America and Russia, the initial optimism about democracy’s sure-footed march faltered. Some scholars pointed out that the American experience, where democracy and capitalism arose at the same time, was not so much a model for the rest of the world as an anomaly. “Capitalism came before democracy essentially everywhere, except in this country, where they started at the same time,” said Bruce R. Scott, an economist at Harvard Business School who is finishing a book titled “Capitalism, Democracy and Development.”
“In the rest of the world, it took 100, 200, 300 years before they got to where they could manage a democracy,” Mr. Scott said. A big mistake, he said, was assuming that “all you had to have was a constitution and an election and you had a democracy; that was really stupid.”
Joseph E. Stiglitz, a Nobel laureate now at Columbia University, agrees that one of the biggest changes since the early 1990s is an appreciation of the complexity and limits of democracy.
As more fledgling democracies fail, various theories have surfaced to explain the appearance of democracy and elections without real freedom.
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