The transparent and stable government built on rule of law and respect for human rights tend to foster settings that are favorable to the establishment of unhindered operation of private businesses. This is clearly shown in the Freedom House’s report and the World Bank’s survey.
Governments that oppress people are more likely to restrict business opportunities. According to Doing Business, regimes that do not uphold human rights build trade barriers, impose more red tape, and fail to enforce contracts. Most authoritarian governments breed corruption and arbitrary decisions because of lack of checks and balances. Most oppressive governments are also more vulnerable to political conflicts than democracies because they limit nonviolent changes of government through elections. All those traits are not helpful to businesses.
Major democracies of Europe, North and South America and South Africa promote regulatory systems that are as transparent as their political systems. Consequently, their economies keep growing. It is evident that democracy is not the only factor that promotes good economic performance but also provides a corrective mechanism and long-term political stability that establish a foundation for steady growth and safe investment.