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IN A CLASH OF POLITICAL IDEALS, IS AUTOCRACY SUPERIOR TO DEMOCRACY FOR STIMULATING ECONOMIC GROWTH? Yi Song JULY 31, 2016 WILSON’S SCHOOL In a clash of political ideals, is autocracy superior to democracy for stimulating economic growth? Yi Song In a clash of political ideals, is autocracy superior to democracy for stimulating economic growth? In 1989, hundreds of Chinese students protested in Tiananmen Square, Beijing, in an attempt to force the government to concede to democratic reform. They were brutally crushed by the military sent in by the Communist Leader Deng Xiaoping as a means of reinforcing the party’s autocratic rule over China (BBC News). In the same year, a series of revolutions led to the fall of the Berlin Wall and subsequently the reunification of Germany; it marked a huge victory for democracy and freedom, eventually resulting in the dissolution of the Soviet Union and the communist dictatorship that presided over it. These two contrasting events within the same year shows the conflict between political ideologies that have raged on for decades as people pursued a system that could bring lasting success. Autocracy or Democracy. In this essay, I will examine these two broad ideals with respect to economic performance, using case studies, past and present, to determine an answer to this clash of policies which has resulted in so much bloodshed in the quest for prosperity. The two countries: Russia and China, have since diverged in their paths since the events of 1989. China has remained a communist dictatorship whilst Russia, after the breakup of the USSR, has instead embarked on a democratic system of sorts. In 1989, the USSR, of which Russia was the main entity, was the second largest economy in the world (CIA Factbook, 1991), China was not even in the top 10 (IMF, 2015). Fast forward to the present day however, and their economic fortunes have diverged in a similar fashion. China is now the world second largest economy, while Russia is the one to drop out of the top 10 (14th). Both these countries were once communist dictatorships and now, it appears that China, who crushed any inclination towards democracy, made the better decision, enjoying levels of economic growth on an unprecedented level (averaging nearly 10% a year since 1979) far surpassing the comparative ‘snail’s pace’ at which Russia grew. That being said, Russia is not the most suitable case for a comparison of performances between a democratic and autocratic country, given that Russia’s democracy is merely a political façade behind which an autocratic President Putin controls the electoral system as he deems fit. Instead a comparison between China and India provides a better representation of the impact of political systems on economic growth. These two neighbouring countries share a great deal in common, demographics, natural resources to name a few. Indeed they are only separated by an ideological difference, with India adopting a democratic regime after gaining independence in 1947 (Banerjee). Both countries under their respective governments progressed with economic reforms and both posted impressive economic growth figures since 1978. By 2007, India’s GDP had almost doubled, but China’s increased seven-fold (The Economist, 2013). Undoubtedly, China’s regime has been much more successful (the diagram below depicts the huge gulf in growth), as Yasheng Huang explains in his TED talk (‘Does democracy stifle economic growth?’) this can be attributed to the autocratic system in China which can rule above the law and pass controversial policies in pursuit of their long term plan (the One Child Policy for example). Whereas, in India, such sweeping reforms are impossible; public opinion matters. Democratic rule gives people autonomy and a political standing, as a consequence, the degree of control the government has over the economy is diminished, as Vivek Dehejia (Professor of Economics) states “You need to have some sort of political control, you cannot have a free for all, and get marshalling of resources and savings rate and investment rate that high growth demands." Marshall Society Essay Competition 2016 Wilson’s School In a clash of political ideals, is autocracy superior to democracy for stimulating economic growth? Yi Song Furthermore, the ability of autocratic governments to implement necessary reforms much swifter than democratic governments have reaped great success not just in China but in many other countries as well. East Asian ‘Tigers’ such as Singapore and South Korea also benefitted from the one-party governance (similar to China) which brought the countries into economic prosperity within a generation (Vivek Kaul, 2012). Outside of Asia, the ‘Miracle of Chile’ is another example of the merits of having a strong autocratic ruler. In the early 1970s, the economy of Chile was suffering badly, experiencing chronic inflation of around 140% as a result of the socialist government of President Salvador Allende. This provoked a military coup d’état led by General Augusto Pinochet in 1973, which resulted in the establishment of a military junta with Pinochet at the helm. Subsequently, he adopted drastic economic reforms such as liberalising the economy and welcoming foreign investment in an attempt to stabilise the Chilean economy. These reforms occurred against a backdrop of violence as opposition to the party was brutally vanquished. Although at the time his actions were deeply condemned, by 1990, after democracy had returned in Chile, the majority of Chileans agreed that Pinochet’s economic model was necessary; per capita income had increased by 66% since his policies were imposed (Pennar, 1993). From the examples I have outlined, it is clear that an autocratic government with an aim to improve economic growth can firmly propel the economy in the right direction and appears to be far more effective than democratic governments. According to William Easterly (Economics Professor at New York University), fast growing countries are 90% of the time autocracies as well. Autocracies can focus on a longer term economic model, whereas, in democracies, politicians are under pressure to appeal to voters through popular policies which are often short-sighted and ineffective. For example, the ‘Triple Lock’ policy for pensions in the UK, which was wildly popular to the electorate (old people tend to vote more) but came at a huge opportunity cost to the UK government, preventing spending in other critical areas of the economy. To paraphrase Tom Friedman (New York Times Columnist), autocracies can be incredibly successful if led by a driven group of people, imposing politically difficult policies that can bring a society into modern times. However, autocracy is not without flaws and democracy should not be considered a dysfunctional method of generating economic growth. The reason is that despite all the successful examples that are used to justify autocracy there are matching failures of dictatorships. Although South Korea was Marshall Society Essay Competition 2016 Wilson’s School In a clash of political ideals, is autocracy superior to democracy for stimulating economic growth? Yi Song prospered, North Korea faltered; Taiwan succeeded, the Philippines did not (Yasheng Huang, 2011). India may have grown slowly compared to China, but the democratic-led growth was still faster than the vast majority of other autocracies. Africa is filled with dictatorships which have destroyed their respective economies. Whilst autocracies perform well under enlightened leadership, often this is not the case. Autocratic governments have unrivalled control over a country and with such great power comes great responsibility. Unfortunately, the allure of power and wealth is difficult to resist and many governments have succumbed to the temptation and allowed corruption to run rampant. Corruption is a deadly ail to economies, it discourages foreign investment, increases political instability and worsens social inequality. If unsolved, corruption can destroy an economy. In an autocratic government, there is very little government accountability as the public cannot control politicians and influence outcomes (Adserà, Boix and Payne, 2003), this only encourages corruption. On the other hand, in a democracy, such problems are quelled by a democratic system of elections which places the public in charge. In Transparency International’s Corruption Perception Index 2008, which covered 180 societies, 90% of the 60 least corrupt societies in the world are democracies (Pei, 2009). Evidently, democratic countries may not experience the same levels of economic growth as autocratic countries, but they establish much healthier governments, less likely to consist of greedy politicians who lavish at their own wealth. The threat of corruption to autocratic economies can be illustrated by the dictatorship in Zimbabwe under Robert Mugabe which led to negative double digit growth and caused the economy to nearly halve between 2000 and 2008 (World Bank, 2016). In addition, autocracy as a political system is unsustainable and eventually will give way to democracy. The prevailing opinion is that once people reach a certain level of affluence, the pursuit of non-material goods become more important such as political choice (The Economist, 2016). After South Korea enjoyed its economic boom under autocratic rule, the public soon demanded for political freedoms. The other East Asian ‘Tigers’ and Chile have also gone through the same transition as South Korea. China is now at a similar stage. Its average income per capita is at the same level as in South Korea before it became a democracy, and its growing middle class (around 225 million households) are becoming increasing dissatisfied with the lack of political rights and the degree of intrusion into their private lives by the government. As I have already mentioned, previous protests for democracy in China were mercilessly crushed and the public acquiesced to autocratic rule in return for vast increases in wealth. However, China has reached the limits of growth without reform, combined with a growing class of young Chinese who demand more autonomy, there is a building threat to the ‘China miracle’ that was founded upon a one-party dictatorship. As Douglass C. North (Washington University) commented "Over the short run, dictators can always get good growth," the issue arises in the long term, a lack of democratic reform could see political turmoil, protests and a reversal of fortunes. While China begins to face these issues, India, who have already implemented these democratic reforms, maintains the right institutional conditions for lasting economic growth (recently overtaking China in terms of economic growth). The Chinese dragon may have raced into an early lead but the Indian elephant is catching up. Finally, in all the examples of successful or even unsuccessful autocracies I have given, a clear theme emerges: all of them were poor when they adopted autocratic rule. Similarly, when countries have finished developing they adopt democracy. This follows the Classic Modernisation Theory which predicts that democratic systems are more likely to emerge as a country grows richer. This means that autocracy naturally has an advantage; it is generally agreed upon that poorer countries will grow at much faster rates than richer countries due to them having greater potential to exploit capital and their comparative advantages e.g cheap labour. However, in richer countries the impact Marshall Society Essay Competition 2016 Wilson’s School In a clash of political ideals, is autocracy superior to democracy for stimulating economic growth? Yi Song of ‘diminishing returns’ suggests that it is more difficult for them to generate additional output with the same inputs. Autocracy simply sped up the growth process that many poorer countries like China would have gone through regardless, and while it may be useful for economic growth in poor countries, it would be counterproductive in developed nations. Likewise, while democracy may not be suitable for developing nations, research has shown that democratisations are associated with larger increases in GDP per capita in countries with higher levels of secondary schooling which are, by and large, richer countries (Daron Acemoglu et al, 2014). Decades ago, democracy was heralded as the most successful political idea of the 20th century and the notion of a strong autocratic economy would have been ridiculed (A question like my title would not have existed). Presently, the situation is in stark contrast to before, a string of successful economies emerging as a result of autocratic regimes like Singapore and China have pushed for serious consideration as an alternative model to democracy. At the same time, democracy in the Western world has been languishing. Growth in the Eurozone has flat lined and the emergence of characters like Donald Trump in America clearly show the disillusionment many people have with the Western political system. Even though democracy is struggling currently, the prosperity it has brought globally cannot be underestimated. It is estimated the global rise in democracy over the past 50 years has yielded 6% higher world GDP (Acemoglu et al, 2014). Throughout this essay, the merits and flaws of both ideals have been examined and there are successful examples on both sides. Robert Barro, a famous economist, once stated: “The first lesson is that democracy is not the key to economic growth”, I disagree. If economic growth refers to the accumulation of wealth and greater income per capita, than undoubtedly autocracy is a much faster vehicle with which to attain it. However, growth should not simply encompass increased economic prosperity but also sustained economic development: improving the quality of life, security and autonomy of its people. This is still the ultimate goal of all regimes and democracy, albeit with its many flaws, is still the best means we have to reach it. Marshall Society Essay Competition 2016 Wilson’s School In a clash of political ideals, is autocracy superior to democracy for stimulating economic growth? Yi Song Bibliography BBC (1989) 1989: Massacre in Tiananmen square. Available at: http://news.bbc.co.uk/onthisday/hi/dates/stories/june/4/newsid_2496000/2496277.stm (Accessed: 31 July 2016). GDP Million (2003), Available at: http://www.theodora.com/wfb/1990/rankings/gdp_million_1.html (Accessed: 31 July 2016). CIA, The World Factbook, 1991 World Bank,(2016) Zimbabwe overview. Available at: http://www.worldbank.org/en/country/zimbabwe/overview IMF, (2015) Historical nominal GDP Data Available at: http://www.imf.org/external/pubs/ft/weo/2015/02/weodata/download.aspx (Accessed: 31 July 2016). Pennar, K. (1993) Is democracy bad for growth? Available at: http://www.bloomberg.com/news/articles/1993-06-06/is-democracy-bad-for-growth (Accessed: 31 July 2016). Kaul, V. (2012) Would India have grown faster if it wasn’t a democracy? Available at: http://www.firstpost.com/business/economy/would-india-have-grown-faster-if-it-wasnt-ademocracy-542780.html (Accessed: 31 July 2016) Huang, Y. (2011) Transcript of ‘does democracy stifle economic growth?’ Available at: https://www.ted.com/talks/yasheng_huang/transcript?language=en (Accessed: 31 July 2016). Banerjee, M. Available at: http://www.lse.ac.uk/IDEAS/publications/reports/pdf/SR010/banerjee.pdf Pei, M. (2009) Government by corruption. Available at: http://www.forbes.com/2009/01/22/corruption-government-dictatorship-biz-corruption09cx_mp_0122pei.html Daron Acemoglu, Suresh Naidu, James Robinson, Pascual Restrepo, May 2014, ‘Democracy causes economic development?’,http://www.voxeu.org/article/democracy-and-growth-new-evidence The Economist, (2016) DEMOCRACY. Available at: http://www.economist.com/news/essays/21596796-democracy-was-most-successful-political-idea20th-century-why-has-it-run-trouble-and-what-can-be-do The Economist, (2013), Autocracy or democracy? Available at: http://www.economist.com/blogs/freeexchange/2013/03/growth-0 (Accessed: 31 July 2016). Acemoglu, Daron, Suresh Naidu, Pascual Restrepo and James A. Robinson (2013) “Democracy, Redistribution and Inequality,” NBER Working Paper No. 19746. Marshall Society Essay Competition 2016 Wilson’s School