Consider, too, that despite its bucolic image, Mongolia's nomadic economy creates the constant possibility of conflict over prime grassland and scarce water as herds and families change in size and needs. Established arrangements are challenged, and must be renegotiated in a flexible process that aims to keep costly conflict to a minimum. Serendipitously, this type of cooperative give-and-take translates easily into skills useful for market capitalism.
The threat of disaster haunts the nomads. In 2010, a freeze that prevented access to pasture land killed 11 million animals, one -- quarter of all livestock. Tradition dictates that those who are unaffected share their pasture and wells with afflicted herds. And arguably, this facilitated cooperative behavior in the transition decades.
Note, moreover, that Mongolia's eagerness to develop ‘third-neighbors' to counterbalance Chinese and Russian influence were instrumental in attracting aid along with quick entry into the World Trade Organization. Last but not least, keep in mind some more familiar explanations for Mongolia's success. Levels of literacy and education -- notably, female education -- are very high. And both educational attainment and gender equality are good predictors of success in building market democracy.
While the last decade has seen rapid growth in living standards, the development of effective governance institutions has stalled and corruption has increased. The consequences can be seen in the deteriorating performance of its political system.
From 2004 to 2008, a coalition between the MPRP and the new parties ruled indecisively; by no coincidence, it was the slowest period of economic reform to date. The new parties had expected to win the 2008 election, but the MPRP boasted of a landslide victory. Some prominent members of opposition parties claimed fraud (not subsequently substantiated by international observers), and street demonstrations followed. The police overreacted, killing five and arresting 700 people -- a shocking outcome in post-communist Mongolia. All parties chose to step back from the brink, forming yet another coalition government. But it was a sobering experience for the new democracy.
Since 2008, a number of policy decisions have also reinforced concerns that Mongolia's road to affluent democracy will be bumpy. For one thing, governments seem less committed to fiscal prudence. The budget deficit amounted to 5 percent of GDP in 2009, closed to zero in 2010 thanks to strong mineral-revenue growth -- but then opened again in 2011 as the government fulfilled it populist election promises.