The Role of Democracy in Economic Development: A Case Study of South Korea and India

Abstract

India and South Korea both began their paths to development at around the same time using the same strategy (import substitution). Today, the GDP per capita in South Korea is over sixteen times that of India’s. So how did one achieve such higher growth than the other? While South Korea was under authoritarian rule for the forming years of its development, it became successful because of the economic freedom it provided and its more liberal trade policies. India, despite its democratically elected government, created high barriers to entry for new competitors which stifled their innovation and growth. However, when India began to liberalize their trade policies in the 1980s, their economic growth rate improved. While there are many explanations, this paper will focus on the role of democracy in terms of legitimacy and economic freedom as the driving force of change. This idea is supplemented by the trade strategies used and economic theory to explain the growth.