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Thursday, 26 August 2010

The myth of authoritarian growth?

When we look at systematic historical evidence, instead of individual cases, we find that authoritarianism buys little in terms of economic growth. For every authoritarian country that has managed to grow rapidly, there are several that have floundered. For every Lee Kuan Yew of Singapore, there are many like Mobutu Sese Seko of the Congo.

Democracies not only out-perform dictatorships when it comes to long-term economic growth, but also outdo them in several other important respects. They provide much greater economic stability, measured by the ups and downs of the business cycle. They are better at adjusting to external economic shocks (such as terms-of-trade declines or sudden stops in capital inflows). They generate more investment in human capital – health and education. And they produce more equitable societies.
Dani Rodrik on the relationship between income and democratic credentials. I don't think people deny that democracy and prosperity co-evolve along the “virtuous” development path, what they dispute is whether there is any evidence that democracy has a causal effect on income (or indeed vice versa). Some of the evidence appears to show countries have embarked upon different development paths, most likely at some "critical junctures" with diverging paths. My view is that the quest to establish causality between income and democracy is fruitless, better to find unity with Sen’s conclusion that democracy has 'intrinsic value' and important in it's own right.


  1. What Dani Rodrik fails to take into account, is the question: who owns the economy?

    The uniting characteristic between Singapore and the DRC is not that there was no democracy under Lee Kwan Yew and Mobutu Sese Seko, it is that in Singapore, the economy was owned by Singaporeans and directed towards the interest of Singaporeans, and in the DRC, the economy continued to be owned by the Belgians, the Americans and other foreign entities.

    Like so many dictators in Africa, Mobutu was a placeholder for foreign interests.

    I think mainly it is that Europe is scared and will thwart any real development in the only continent it shares a long coastline with. No invasion of Europe from Africa has ever failed. From Hannibal to Montgomery, it has always been proven to be very easy to invade Europe's long mediterranean coastline.

    On the other hand, Europe and the USA have been successfully challenged in Asia, by the power if Communist China, which shares a massive border with the Soviet Union. As such, they have allowed the countries of Asia a lot more freedom to develop their own economies, as a counterweight to communism.

    They never left Japan (or Germany) to be a bombed out crater, even though they destroyed two entire cities in that country. They never demanded that foreign car manufacturers have free access to the Japanese car market - and they don't, to this day, even though Japan has no standing army, and Okinawa is a huge US military base.

    On the other hand, the have assassinated any nationalist leader in Africa - coming back to the example of the DRC, Mobutu was put in place to replace the murdered Patrice Lumumba.

    Is there a lot that can be done by Africans themselves - absolutely. We have to get together through the AU and SADC, and protect our own markets, farmers and manufacturers. There has to be African and democratic ownership of the economies. There can be state led development through parastatals and co-ops. We have to change the national curriculum so children see themselves reflected in their own national histories.

    People should look at Zimbabwe as a process that will meet a lot of resistance and sabotage, but that in the end represents the last phases of the liberation struggle. Remember that when a minister like Caleb Fundanga tries to make fun of Zimbabwe, while presiding over the selling out of his people's natural resources, without them having anything to show for it.

  2. Thank you for drawing attention to 'the myth of authoritarian growth'. There is surely a link between democracy (defined in the Concise Oxford Dictionary as 'a system of government by the whole people, usually through elected representatives') and economic prosperity. Why? Because in most countries political freedom for individuals and economic freedom for those same individuals go together. China is an interesting exception. Politically it remains totalitarian, but the government has given up all-pervasive central planning and now leaves a great deal of economic freedom to individuals. That has made possible the country's recent fantastic economic growth.

  3. MrK,

    "What Dani Rodrik fails to take into account, is the question: who owns the economy?"

    A very valid point. I have to say, I have not seen a coherent framework put forward that examines the relationship between domestic ownership and economic performance. A theory is necessary first - what I know is that current neoclassical theory appear to treat trade openness as a panacea. But we know that when we look at the index of trade openness released by the world bank the poorest countries are the most open e.g. Afghanistan, Iraq, DRC, Zambia, etc.

    My view is that the Chang thesis that development comes from the ability to transform the productive side of the economy lends weight to the idea of selective openness or conditional openness. Domestic ownership may also allow for greater ability to withstand external shocks.

    So you may be onto something, that deserves investigating empirically. I will dig a little and see what the literature says on this.

  4. Murray,

    The literature is inconclusive. The intuition is there but not proven by evidence.

  5. I would like to see an economy guided by local production for local consumption. Of course some things have to be imported, but there should be protection for local producers to minimize imported goods.

    If people actually studied how the Keiretsu of Japan got big, I think we would all learn a great deal.

    There is absolutely nothing neoliberal or free trade in what they did. An economy of geographically restricted vertical monopolies would be a start.


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