Essays in Honor of Lance Taylor
Edited by Amitava Krishna Dutt
Chapter 5: The political economy of exclusion and inclusion: democracy, markets and people
5. The political economy of exclusion and inclusion: democracy, markets and people Deepak Nayyar* I INTRODUCTION As we enter the twenty-ﬁrst century, market economy and political democracy are buzzwords: not only in turbulent Eastern Europe attempting a transition to capitalism, but also across a wide spectrum of countries in the developing world from Latin America through Africa to Asia. This is partly a consequence of the collapse of planned economies and excessive or inappropriate state intervention in market economies. And it is partly attributable to a concern about authoritarian regimes, particularly in countries where there has been no improvement in living conditions of the common people, but even in countries where economic development has been impressive despite which there is no movement towards a democratic polity. Consequently, the mood of the moment is such that markets and democracy are perceived as both virtue and necessity. In this process, some countries are in search of new models of development, while others are attempting to adapt their erstwhile models of development. The theme of this chapter is that, contrary to the ideology of our times, markets and democracy may not ensure prosperity for everyone but may, in fact, exclude a signiﬁcant proportion of people, particularly the poor, from the process of development. Section II explains why markets and democracy provide no magic wand. It stresses that market economy and political democracy are not separate worlds but are closely interconnected. Section III analyses how markets exclude people. It shows that exclusion...
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