Not everyone is convinced of the socio-economic potential of democratic rule; far from it. There are even those who believe that autocratic governments maybe more successful in demolishing barriers to development. The opposite is true, in fact: Democratic rule draws a dividend in the form of development. Its economic advantages are obvious, although it entails enormous challenges, and the ultimate success of democratisation processes is by no means a foregone conclusion. The influence of political and institutional frame-work conditions on the socio-economic development of a society is crucial. Institutions reduce uncertainties. Contractual and legal certainty as well as political stability will boost the economic development of any society. Democratic rule not only promotes the development of a country’s national economy, it also invigorates other factors of development such as, for instance, the quality of public health. The reason lies in the competitive character that is essential to democracy. After all, the mechanisms of democracy aim to regulate the state monopoly on governance in conformance with the rules of competition – an objective that is served by free and fair elections as much as by the freedom of association and the press or the competition among political parties. Autocracies, on the other hand, are not exposed to competition. Instead, they formulate their own economic-policy rules to serve their own interests and generate economic privileges. The lack of any corrective impulse from competing policies that might express the economic interests of the citizens impedes– needless to say – the development of the economy as a whole. There is no dispute that the rule of law as well as democratic structures are capable of promoting socio-economic developments in Africa, Asia, and Latin America. However, consolidating democratic rule is fraught with challenges, and there are many young democracies that show considerable functional defects. Most outstanding among them are those that are illegitimate and characterised by intransparency, corruption, and a total lack of constitutional governance, leaving little room for the development dividend of democratic rule. But if a constitutional democracy is indeed so much more oriented towards the common good than any autocratic rule, and if its economic advantages are indeed as marked as they appear, why is it that the path from autocracy to democracy is so stony? Why are there so many challenges involved in the process of democratisation? Building a democracy calls for coordinating all players in the reform process. What is more, those players should be willing to create new rules for their game. At the same time, the disruptiveness of the coordination issue is enhanced by the problems of distribution that are inherent in any process of democratisation. After all, the groups that are disadvantaged by an autocratic regime will naturally endeavour to secure for themselves a share in there distribution of the economy, while the profiteers of autocracy will just as naturally fight to retain their privileges. If democratisation should be accompanied by decentralisation, similar distribution problems would occur between the central and the subordinate levels of government. Thus, the problem that arises when a pluralist system of interest management is introduced is related to collective action. There is a distinct danger of the players in the game pursuing short-term, particularist objectives instead of agreeing collectively on a set of rules. The consequence would be corruption, legal uncertainty, and intransparency, so that the development dividend of democratisation would fail to materialize. The misdirected developments described above are often most clearly reflected in the functional incapability of the political parties. Normally, it is their duty to represent the particular interests of a specific group, and to cast the interests of a large segment of society in the form of political programmes at the same time. This is exactly where problems arise whenever distribution conflicts increase in intensity. Needless to say, not all processes of transformation end in a defective democracy. Thus, for example, Uruguay, Chile, Botswana, Mauritius, and Taiwan symbolize the successful implementation of democratization processes and their related socio-economic benefits. There are three factors that should be named in this context. First, the intensity of the distribution conflicts that accompany any such transformation depends on the intensity of exploitation and favouritism under the late autocratic regime. Second, the success of any transition process depends on how many ,building sites‘ of reform operate in parallel. And third, the influence of external factors on the process itself should not be underestimated. Such factors include, for example, the inducements offered by the EU, the prospect of EU membership, and the benefits of international development cooperation as such. From all this, it is permissible to conclude that democratic rule promotes socio-economic development, while autocracies, on the other hand, are always confronted by endogenic stability problems, inertia in economic policy, and the reluctance of foreign investors. However, it is precisely the collective benefits of democracy that make related transformation processes so difficult. For the liberties acquired by the citizens in the struggle permit them to articulate their economic rights more extensively which, in turn, leads to disputes over distribution. Coordinating divergent interests becomes a problem, and democracy pays no socio-economic dividend. It would be both meaningful and desirable for the international community to support transition processes. However, any such commitment that is based on relations maintained with still extant authoritarian systems would be harmful; democracy promotion must be credible, meaning that any sanctions should reflect actual political changes but not short-term export-related and/or diplomatic interests. To provide any truly substantial impulses for the transition processes going on in countries that are striving for democracy, the international community would have to enhance the scope of its coordinated efforts far beyond the level shown in the past.