Authoritarianism is not good for growth: AKA Don’t copy China

The Economist are running a debate asking whether China offers a better Development model than the West does.

One thing focussed upon are the advantages of authoritarianism because they allow difficult decisions to be made quickly and decisively. The moderator describes parts of the Chinese model as:

Authoritarianism, one-party rule, a strong state hand on the economic tiller (including control over strategic industries) and a vigorous engagement with the global economy are certainly components.

I am a fan of China in many ways, I certainly think it has produced almost as much poverty-reducing bang for climate-wrecking buck as could be expected.

However, many people fetishise the authoritarian elements of Chinese Capitalism and use it to explain why China has grown so successfully; an iron fist bring velvet capitalism where a democracy would stumble over its foolish electorate.

This is of course nonsense, democracies aren’t just nice, they are the best (least worst) system for economic growth. This makes a lot of sense when you think about it. Dictatorships become insulated from the outside world, either because people are scared to tell the truth or wish to flatter the dictator.

On the other hand, Democracies can make decisions just on the inference of public opinion. Sometimes the public is wrong, but not so wrong as dictators.

Dani Rodrik explains further here.

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.

Authoritarian regimes, by contrast, ultimately produce economies that are as fragile as their political systems. Their economic potency, when it exists, rests on the strength of individual leaders, or on favorable but temporary circumstances. They cannot aspire to continued economic innovation or to global economic leadership.

Whenever you question democracy remember, it has some overwhelming benefits.

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5 thoughts on “Authoritarianism is not good for growth: AKA Don’t copy China

  1. I wasn’t actually attacking democracy per se, more arguing that it had its limitations. I definitely don’t dispute that it has massive advantages too.

    1. Oh of course, I have no doubts you are a staunch democrat like me.

      I had some issue with your piece I was going to bring up, but I haven’t had a chance to write something substantive on it yet, but I thought I’d throw you a link while I could.

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