Economic Perspective on Authoritarian Regimes: Dictators as Unexpected Protagonists

We cannot deny that democracy is probably the most ideal form of government that man has come up with so far. By giving citizens the ability to decide their own fate and having the majority represented by those in power, in theory, you really cannot go wrong. But that is the problem.

"Human nature does not abide by theory."

Throughout the years, humans all over the world have found so many ways to exploit democracy to suit their own interests. Benevolent dictatorships, on the other hand, are a lot more in line with how humans work. In the Park Chung Hee era (1961--1979), for instance, South Korea was transformed from a war-devastated poor country with a corrupt and fragile democracy to an economic powerhouse featuring a highly authoritarian regime.

Economists have long argued that political institutions impact economic growth. Much of the debate has centered on whether economic growth is higher in democracies or dictatorships, but recently scholars have started to look at specific political institutions within democracies, within authoritarian regimes, and across both democracies and dictatorships.

When dictatorships are in power, certain nations' economies rise at astounding rates. Some autocratic regimes have remarkably developed---no, radically transformed---their economies in recent decades despite their grave shortcomings in other domains. The transition from relational exchange, where performance is supported by government action, whether on the basis of the potential for third-party enforcement or by the threat of informal sanctions imposed by the government, has been managed by an autocratic regime at a crucial point in the country's economic development.

Do economically benevolent dictatorships really exist? How does the leader of the regime manage his authority to raise the status of his country? Despite the monstrous act, why do some people support and devote themselves to authoritarians?

Authoritarian, Not Totalitarian

We must be able to distinguish between authoritarianism and totalitarianism before delving further into the subject. Simply defined, there are a few social and economic institutions in an authoritarian society that are not under the jurisdiction of the government. As a result, the authoritarian regime only seeks absolute political authority. On the other side, the totalitarian political system seeks to dominate everything. They start to encroach on everyone they are in charge of's ideas because of a desire for power that transcends governmental control.

The manner their rules are put into practice is another significant distinction. The authoritarian ruler is more focused on individual power, while the totalitarian ruler is more of a charming ideologist who claims to have the best interest of the people or the state in mind. Totalitarian phenomena like "brainwashing," "killing fields," "ethnic cleansing," "mass graves," and "genocide" are well-known. The grim reality of archetypal examples like the USSR under Stalin and Nazi Germany confronted totalitarianism.

In this article, we are referring to authoritarian rather than totalitarian, from an economic perspective.

How Benevolent Dictator, Park Chung Hee, Transformed South Korea

We characterize these regimes as "economically benevolent" autocracies. By this term, we refer to an autocratic regime whose rulers employ the authority of the state to achieve a national economic transformation because their utility functions place a higher value on long-term GDP growth than growth in their Swiss bank accounts. This designation is not meant as a term of praise but rather as a way of distinguishing authoritarian rulers who place national development ahead of personal enrichment.

We recognize that expressing a positive opinion of an autocrat will (and should) at first elicit a visceral negative reaction. Those leaders of the regimes we will describe as economically benevolent very often were not benevolent---indeed, in some cases, they were monstrous---in other dimensions. Moreover, autocracies on average have produced no better (and by some measures worse) economic growth than weak democracies, the only horse in the race. However, not all autocratic governments operate in the same way; for instance, in Korea, Taiwan, Chile, Singapore, and China, their performance was well above average. The regime heads in those nations, maybe by pure coincidence, had various goals, and collectively, they fared considerably better than other autocracies and less oppressive regimes.

Korea was a colony of Japan from 1910 to 1945. Following Japan's defeat and surrender in the Second World War, Korea was divided into two parts. The southern portion, South Korea, was put directly under the control of the American military government until 1948. A South Korean government was established in 1948 under Syngman Rhee, who remained in power until a student revolt forced him to resign and retire in 1960. A military coup in 1961, led by a Major General of the South Korean Army, Park Chung Hee, overthrew the government that succeeded Rhee. Park became president and ruled South Korea as a dictator until his assassination in 1979.

The economic condition of South Korea in the 1950s was dismal. In fact, when Park took over, the economy was passing through a severe crisis with decreasing growth and rising unemployment (Schwartz, 1989). Park initiated and implemented an economic strategy that transformed the economy and achieved remarkable economic progress.

South Korea's fast expansion has been followed, as in industrialized nations, by major structural changes. Around 1960, South Korea's economy was mostly agricultural, similar to that of other Third World nations, with just 1.5 percent of the labor force employed in manufacturing and 68.3 percent of the workforce dependent on agriculture, forestry, and fishing for a living. By the late 1980s, due to quick economic expansion, manufacturing had surpassed agriculture in importance, with the former providing 27.7% of jobs and the latter just 20.7% (Yoo, 1990).

Park gave top priority to economic growth, which was regarded as a chief factor that would legitimize the military regime (Mason et al., 1980). In fact, according to Alam (1989), he stated that "the key factor of the May 16 military revolution was to effect an industrial revolution in Korea."

Park, being a dictator, could use some methods that are not always feasible in more democratic situations. For example, labor activities were carefully regulated in order to guarantee a cheap and disciplined labor force. Labor disturbance was harshly penalized, and unions were weak (Koo, H., 1986). Social development was disregarded as a result of the single-minded focus on economic progress (Cole and Lyman, 1971; Yeon, 1989; Amsden, 1989). For a long time, the government was likewise unconcerned with expenses like inflation.

  

Why Might a Dictatorial Economy Actually Do Well (at Least in the Short Run)?

To start with, let's look at two different sorts of autocrats. The first is a leader that has a long-term outlook and a dedication to implementing institutional changes and policies that are likely to promote growth, like Deng Xiaoping in China. The second kind of leader, like Mugabe in Zimbabwe, has a short-term outlook and exhibits high levels of predation, maybe due to the uncertain political climate where he may lose power.

In an autocratic regime, both types of leaders have limited checks on their power to engage in growth-enhancing or growth-limiting policies (Olsen, 1993). In the first case, a large episode of growth acceleration is likely to result, while in the second case, there is a likelihood of a growth collapse. In contrast, a leader in a democracy has strong constraints on his or her power, with a large number of veto players--political actors who have the ability to decline a choice being made--in the political system (North and Weingast, 1989). This does not allow him or her to enact growth-oriented policies with the same degree of freedom as a growth-oriented autocrat. Moreover, for a leader in a democracy, the long-term benefits of growth-oriented policies and reforms need to be balanced against the possible repercussions that such policies may have for the leader politically if these policies and reforms are seen as being unpopular among the electorate or if the reforms lead to a diminution of the rents that vested interests obtain from the prevalence of previous policies and sets of institutions (Krueger, 1974).

Given the possibility of losing power in a future election, leaders in democracies are less willing to take risks in economic policy that may be necessary for rapid growth to ensue, as compared to autocracies. In contrast, leaders of autocracies may be willing to participate in predation in the knowledge that they will not be in power for very long if they have short time horizons and a high discount rate.

Another reason why dictatorship generates growth faster is the decision-making process. The decision-making process in a dictatorship is far shorter and therefore more efficient. Instead of being bogged down by rival parties, the dictator can simply exercise his authority, which is especially important in times of crisis. After the 2008 crisis, for example, China was able to react far quicker and more decisively than the U.S. China's stimulus package as a percentage of its GDP was three times larger than the U.S. fiscal stimulus. As a result, China bounced back quickly, leaving the U.S., Japan, and many other countries behind.

So if dictatorships can actually do well in crises and are well known for short-term growth, why is it that this cannot be translated to long-term economic growth as well?

 

Dictatorship's Ephemeral Longevity: Why Its Legacy is Fading in the Long Run

We can be assured that, in some cases, dictators do have a positive impact on their countries. But those impacts are often short-lived. Why? The answer may be as simple as saying that benevolent dictators cannot live forever. Thus, what happens when they die? As long as a benevolent dictator is in power, they may be weakened, if not eliminated. There is a possibility for any democracy or opposition to challenge their authority. This means that when a benevolent dictator dies, another dictator, of whom we cannot be sure will be as compassionate as the last, will hand over the nation on a gold platter. This is what gives rise to the immoral and corrupt dictators that every country wants to avoid.

In democracies, when the government is pursuing the wrong policy or one that is for the benefit of the governing parties at the expense of the government, election cycles are the way to hold politicians accountable. Citizens vote for the party that governs out of pure self-interest out of office. The Kim Jong Il regime in North Korea, for example, would have been voted out years ago. However, in dictatorships, the wrong policies are allowed to persist for long periods of time because the government rules by force.

These explanations alone are sufficient to say that dictatorship is not a recommended form of government. So, why should we still consider the idea of dictatorship as something good?

 

Behind the Enigma of Support and Adoration for Authoritarians

According to research from the London Business School, people living in zip codes with a history of economic hardship were more likely to support authoritarian qualities in their local leaders. This finding is consistent with a three-decade study analyzing the values and opinions of people around the world. That study shows that when a group feels economic uncertainty, they are not only more likely to favor more authoritarian leaders, but they are also more willing to suspend democratic norms and excuse unethical behavior.

What is interesting about these studies is that the correlation holds true regardless of political ideology. As long as they were experiencing economic hardship, people who considered themselves liberal or conservative were equally likely to increase their support for authoritarian-type leaders. Researchers believe that economic and social instability triggers a feeling of powerlessness that makes people look to strong men as a source of safety and strength. Authoritarian leaders are usually pretty good at giving people the impression that they are going to fight on their behalf.

"Growth is not the only thing that matters in the world". You can easily say that if you are from a developed country to begin with. Sometimes, especially in the early stages of development, a nation's economic progress requires an autocratic rule. They only have time to reflect on other issues, like the importance of democracy, once the basic requirements of society have been satisfied. It is more likely that economic growth will lead to uprisings and democracy, not the other way around.

By Aiko Putri Fauzi | Ilmu Ekonomi 2022 | Staff Divisi Kajian Kanopi FEB UI 2023

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