Globalization and the Strengthening of Democracy in the Developing World

Scholars and policy makers have long assumed that trade and financial liberalization encourages developing countries to become more democratic; yet no one has developed formal hypotheses about the causal relationship between globalization and democracy. This article shows that these two trends are indeed related, but not necessarily in the direct manner that has commonly been postulated. Combining theories of embedded liberalism and conflict‐based theories of democracy, the model presented here depicts the process that affects decisions to strengthen democracy as trade and capital flows increase. I argue that increasing exposure to international export and financial markets leads to improvements in democracy if safety nets are used simultaneously as a strategy for providing stability and building political support. Empirical evidence is provided by econometric analysis covering 59 developing countries for the time period 1972–97.