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This paper investigates whether democracy plays a mediating role in the relationship between foreign direct investment (FDI) and inequality in Sub-Saharan Africa (SSA).
Abstract
Purpose
This paper investigates whether democracy plays a mediating role in the relationship between foreign direct investment (FDI) and inequality in Sub-Saharan Africa (SSA).
Design/methodology/approach
The empirical analysis is conducted using fixed effects and system GMM (Generalised Method of Moments) on a panel of 38 Sub-Saharan African countries covering the period of 1990–2018.
Findings
The results find that FDI has no direct effect on inequality whereas democracy reduces inequality directly in both the short run and the long run. The sensitivity analyses find that democracy improves equality regardless of the magnitude of FDI, resource endowment or democratic deepening whereas FDI only reduces inequality once a moderate level of democracy has been achieved.
Social implications
The results discussed above thus have four policy implications. First, these results show that although democracy has inequality reducing benefits, SSA is unlikely to significantly reduce inequality unless the region purposefully diversifies its trade and FDI away from natural resources. Second, the region should continue to expand credit access to reduce inequality and attract FDI. Third, policymakers should undertake reforms that will reduce youth inequality. Lastly, the region should focus on long-run democratic reforms rather than on short-run democratization to improve governance and investor confidence.
Originality/value
Although there are existing studies that examine the association between FDI and inequality, FDI and democracy and democracy and inequality, this is the first study to explicitly examine the effect of democracy on the association between FDI and inequality in SSA, and the first study to separately consider the possible varied effects of contemporaneous democratization versus the long-run accumulation of democratic capital. In addition, rather than measure inequality by income alone, this study uses the more appropriate Human Development Index to account for SSA's sociological, education and income disparities.
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Sean Gossel and Misheck Mutize
This study investigates (1) whether democratization drives sovereign credit ratings (SCR) changes (the “democratic advantage”) or whether SCR changes affect democratization, (2…
Abstract
Purpose
This study investigates (1) whether democratization drives sovereign credit ratings (SCR) changes (the “democratic advantage”) or whether SCR changes affect democratization, (2) whether the degree of democratization in sub-Saharan African (SSA) countries affects the associations and (3) whether the associations are significantly affected by resource dependence.
Design/methodology/approach
This study investigates the effects of SCR changes on democracy in 22 SSA countries over the period of 2000–2020 VEC Granger causality/block exogeneity Wald tests, and impulse responses and variance decomposition analyses with Cholesky ordering and Monte Carlo standard errors in a panel VECM framework.
Findings
The full sample impulse responses find that a SCR shock has a long-run detrimental effect on the democracy and political rights but only a short-run positive impact on civil liberties. Among the sub-samples, it is found that the extent of natural resource dependence does not affect the magnitude of SCR shocks on democratization mentioned above but it is found that a SCR shock affects long-run democracy in SSA countries that are relatively more democratic but is more likely to drive democratic deepening in less democratic SSA countries. The full sample variance decompositions further finds that the variance of SCR to a political rights shock outweighs the effects of all the macroeconomic factors, whereas in more diversified SSA countries, the variances of SCR are much greater for democracy and political rights shocks, which suggests that democratization and political rights in diversified SSA economies are severely affected by SCR changes. In the case of the high and low democracy sub-samples, it is found that the variance of SCR in the relatively higher democracy sub-sample is greater than in the low democracy sub-sample.
Social implications
These results have three implications for democratization in SSA. First, the effect of a SCR change is not a democratically agnostic and impacts political rights to a greater extent than civil liberties. Second, SCR changes have the potential to spark a negative cycle in SSA countries whereby a downgrade leads to a deterioration in socio-political stability coupled with increased financial economic constraints that in turn drive further downgrades and macroeconomic hardship. Finally, SCR changes are potentially detrimental for democracy in more democratic SSA countries but democratically supportive in less democratic SSA countries. Thus, SSA countries that are relatively politically sophisticated are more exposed to the effects of SCR changes, whereas less politically sophisticated SSA countries can proactively shape their SCRs by undertaking political reforms.
Originality/value
This study is the first to examine the associations between SCR and democracy in SSA. This is critical literature for the Africa’s scholarly work given that the debate on unfair rating actions and claims of subjective rating methods is ongoing.
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Redeemer Krah and Gerard Mertens
The study aims at examining the level of financial transparency of local governments in a sub-Saharan African country and how financial transparency is affected by democracy in…
Abstract
Purpose
The study aims at examining the level of financial transparency of local governments in a sub-Saharan African country and how financial transparency is affected by democracy in the sub-region.
Design/methodology/approach
The study applied a panel regression model to data collected from public accounts of 43 local authorities in Ghana from 1995 to 2014. Financial transparency was measured using a transparency index developed based on the Transparency Index of Transparency International and the information disclosure requirements of public sector entities under the International Public Sector Accounting Standards.
Findings
The study finds the low level of financial transparency among the local governments in Ghana, creating information asymmetry within the agency framework of governance. Further, evidence from the study suggests a strong positive relationship between democracy and financial transparency in the local government.
Research limitations/implications
Deepening democracy is necessary for promoting the culture of financial transparency in local governance in sub-Saharan Africa, perhaps in entire Africa.
Practical implications
There is a need for the local governments and governments, in general, to deepen democracy to ensure proactive disclosure of the financial information to the citizens to improve participation trust and eventual reduction in corruption. Effective implementation of the Right to Information Act would also help promote financial and other forms of transparency in the sub-region.
Originality/value
The study contributes to the public sector accounting literature by linking democracy to financial transparency in the local government. Hitherto, studies concentrate on how entity level variables impact on the level of financial information flow in the local government without considering the broader governance infrastructure within which local governments operate.
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Before exploring the political implications of the emerging middle class, best to begin by defining the term. The economists who herald the growth of the middle class in the…
Abstract
Before exploring the political implications of the emerging middle class, best to begin by defining the term. The economists who herald the growth of the middle class in the developing world today largely construe the term solely as an income category. This is in stark contrast to Marx, who defined class in terms of a social group's relation to the means of production, and it is in stark contrast to Weber, who defined class in terms of a group's pattern of consumption. But even if economists agree to conceive of the middle class as an income category, they differ on how to define this category – whether in relative or absolute terms.3 Some, like Lester Thurow, define middle class relationally. People are middle class if their income falls between 75% and 125% of the median income in a given society. Others define middle class in absolute terms. In the case of Milanovic and Yitzhaki, the boundaries of the contemporary global middle class are set between the average income levels that currently prevail in Brazil and Italy (threshold and ceiling, respectively).4 Still others like Diana Farrell define middle class in terms of relative access to discretionary spending. For Farrell, the middle class is distinguished from the poor in that it does not live “hand to mouth.” Members of the middle class are defined as those who have roughly a third of their income left over for discretionary spending after covering the basic cost of food and shelter.
The purpose of this chapter is twofold. First, to show how the financial power of the fossil fuel industries and the prevalence of religious ideology in Congress are the two major…
Abstract
Purpose
The purpose of this chapter is twofold. First, to show how the financial power of the fossil fuel industries and the prevalence of religious ideology in Congress are the two major obstacles preventing the U.S. government from taking action to slow down global warming. Then to evaluate various approaches to ‘satisfying our energy needs’, by showing a crucial dynamic behind our insatiable drive to consume energy, and to propose some ways of circumventing the current obstacles.
Methodology/approach
The approach is through a comprehensive study of the relevant evidence and academic literature, interwoven with philosophical reflections on their significance.
Findings
The findings are as follows: a major root of the current problem is the dysfunctional political system in the United States, which is corrupted by vast infusions of money from the fossil fuel industries and the dogmatic religious beliefs of Republicans in key positions on Congressional committees.
Social implications
The implications are several. The proposed technological solutions to the ‘energy problem’ – nuclear power, carbon sequestration, fracking for natural gas and geo-engineering – only address the symptoms and ignore the dynamic that underlies them, exemplified in the story of Prometheus. If we continue to be driven by the Promethean spirit, we risk being subject to excruciating punishment as a result. The solution to our problems is a transition to clean and renewable sources of energy, accompanied by the kind of reduction in material desires that evidently makes for lives that are more fulfilled.
Originality/value
The value of the philosophical perspective on this topic is that it highlights questions of value that otherwise remain inexplicit.
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Is the need for stability pre-empting the need for democratic values? How can the EU cope with two contradictory security requirements: the need to promote democratic norms and to…
Abstract
Purpose
Is the need for stability pre-empting the need for democratic values? How can the EU cope with two contradictory security requirements: the need to promote democratic norms and to secure geostrategic interests? This paper takes on the security-democracy dilemma in a complex way that transcends the realpolitik frame overshadowing the analysis of the EU’s policy orientation in the Southern Mediterranean while considering its normative role as a fig leaf for security interests.
Design/methodology/approach
This paper investigates the EU’s foreign policy orientation reflected in the ENP in terms of the two logics of action of consequentialism and appropriateness. Tracing changes at the policy level over time between 2011 and 2015, the paper zooms into the implementation of the “new” ENP in the aftermath of the Arab uprisings in Egypt, Libya and Tunisia to highlight additional variation across countries.
Findings
Building on a document analysis of the official declarations for the policy-making level and of ENP action plans for the implementation level, the paper argues that local political dynamics and the level of the EU’s threat perception shape the EU’s response to the partner countries.
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Katherine Beckett and Angelina Godoy
Across the Americas, public discussions of crime and penal practices have become increasingly punitive even as political struggles have resulted in a broad shift toward…
Abstract
Across the Americas, public discussions of crime and penal practices have become increasingly punitive even as political struggles have resulted in a broad shift toward Constitutional democracy. In this chapter, we suggest that the spread of tough anti-crime talk and practice is, paradoxically, a response to efforts to expand and deepen democracy. Punitive crime talk is useful to political actors seeking to limit formal and social citizenship rights for several reasons. First, it ostensibly targets problematic behavior rather than particular social groups, and thus appears to be consistent with democratic norms. At the same time, crime talk often acquires coded meanings that enable those who mobilize it to tap into inter-group hostility, anxieties, and fear. In addition, the emphasis on the threat of crime and disorder offers those seeking to limit democratic expansion a way to legitimate truncated visions of the rights and entitlements of citizenship. Tough anti-crime rhetoric often resonates with those who have experienced or fear the loss of symbolic and/or material benefits as a result of democratic reform. In short, the broad shift toward hyper-penality is, at least in part, a consequence of struggles over political democracy, citizenship and governance across the Americas.