We featured an article in last issue of ERT on Globalization, Trade and Democracy that talks about how creating a good environment for trade will also create a good environment for foreign direct investment. Yes, I certainly agree with your statement. These are precisely the same things that foreign investors wish to see in countries where they would like to invest. The key to attracting foreign direct investment is the creation of a stable economy by the recipient country. If, as a foreign direct investor, I have confidence that the government is stable and committed to financial stability, then I am prepared to invest for the longer term.
Investors have confidence in governments that are decisive in policymaking and have legitimacy.
Hence, low political turnover, social consensus and the distribution of income are all relevant characteristics. Stability is more important than democracy. However, for nondemocratic governments to make tough decisions there has to be some degree of popular legitimacy for the policies. China does not have a Western-style democracy but foreign capital is pouring into the country. Because the government is perceived as stable, and there has been continuity since the open door policy was initiated in 1978.