The Trouble With Freedom.(spread of democracy slows international trade)

Byline: Jeffrey E. Garten, Garten is dean of the Yale School of Management.

In recent days, more than 170 million Indians have voted in a multistage national election that will conclude on May 10. On that day, Filipinos will cast final ballots for their president. In July Indonesians will do the same. Taiwan just re-elected its president. South Korea has given its leader's party a majority in Parliament, and Hong Kong citizens are protesting new restraints on their political freedom.

The democratic ferment isn't confined to Asia. British Prime Minister Tony Blair has decided to make approval of the new EU Constitution subject to a popular referendum. Poland and other EU members may well follow suit. In Latin America, despite serious economic and political setbacks in Argentina and Venezuela, and notwithstanding widespread disillusionment with the failure of elected governments to deliver material benefits--the subject of a U.N. report released last week--democracy has clearly trumped military rule. South Africa last week celebrated 10 years of political freedom.

While the global story of the 1990s was the opening of economies around the world, the bigger theme for this decade is the deepening and maturing of democratic movements. Both trends are cause for cheer, but the two may not reinforce one another, especially in the next several years. In fact, the flowering of democracy may slow economic globalization even as it makes it more inclusive and more equitable over time.

The growth of democracy could, for example, slow the expansion of international trade. Reason: a democratic government cannot decree the dropping of barriers but must listen to the views of farmers, workers, manufacturers, nongovernmental organizations and others. In many countries, the voice of public opinion will play a larger role than ever before. At best, this is likely to delay international trade talks as governments attempt to reach delicate compromises among competing interests at home. At worst, it could lead to rising protectionism as anti-trade groups scream the loudest.

Democracies also tend to favor easy money, even when it's not the technically correct prescription for sound economic policies; it's a sure way for politicians to curry favor with the masses. The danger is that when several countries do this, the world economy develops a bias toward inflation--which ultimately is destructive to long-term growth. It is ...