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25 Jun 07 [21 Jun 07]
Which offer a clearer path to economic success?
What do we make of the argument that, from an economic point of view, dictatorships have been outperforming democracies for many years and that if the trend continues, little incentive will exist to replace autocrats with the rule of law?
The success enjoyed nowadays by autocracies awash in natural resources has reignited this fairly old question. A recent article in the online magazine American.com measures economic performance against the degree of political and civil freedom in various nations.
The conclusion is that in the last 15 years, the economies of nations ruled by despots have grown at an annual average rate of 6.8 percent – 2 ½ times as fast as politically free countries. Those autocracies that have opened their markets in recent decades but continued to restrict or prevent democracy – China, Russia, Malaysia and Singapore, for example – have done better than most of the developed or underdeveloped countries that enjoy a considerable measure of political and civil freedom.
It would be silly to deny that a dictatorship can boast sound economic results. Any political system that removes some obstacles to entrepreneurship, investment and trade and that makes a credible commitment to safeguard property rights will trigger a virtuous economic cycle.
But this is not the end of the story. Of the 15 richest countries in the world, 13 are liberal democracies. The other two are Hong Kong, a Chinese territory that enjoys far greater civil liberties than mainland China, and Qatar, where the abundance of oil and natural gas, and the tiny population, translate into a large per capita income average.
What this picture really tells us is that stability and reliability are most important when it comes to economic prosperity over the long term. When the environment in which the economy breathes depends on institutions rather than on the commitment of an autocrat or a party, stability and reliability generate the sort of results that we call “development.”
Another reason dictatorships are outperforming liberal democracies has to do with the fact that many of the latter countries are fully developed. Once a country starts to move forward, spare capacity and unrealized potential tend to allow it to grow faster than developed nations. Furthermore, if we consider that China is a disproportionately big component of the group of unfree nations outperforming liberal democracies, the growth rate gap is not surprising.
In fact, liberal democracies can compete favorably with dictatorships even in the short term. India, one of the world’s fastest-growing economies, is a liberal democracy. So is Peru, whose economy is experiencing 7 percent annual growth. These are imperfect democracies, for sure, and in the case of Peru there has been little poverty reduction. But the recent success indicates that elections, freedom of the press and freedom of association can co-exist with high economic growth.
From a moral point of view, the relative prosperity that a dictatorship can trigger is a double-edged sword – it brings relief to people who are otherwise oppressed but also serves as an argument for the indefinite postponement of political and civil liberty.
Two things are certain, however. First, history indicates that the combination of political, civil and economic freedom is a better guarantee of ever-increasing prosperity than a capitalist dictatorship. Second, there are sufficient examples – Portugal or the Baltic countries – of underdeveloped countries that have generated stable and reliable environments through political freedom to invalidate the notion that a country should be kept in political and civil infancy until it reaches economic maturity.
Alvaro Vargas Llosa, author of “Liberty for Latin America,” is the director of the Center on Global Prosperity at the Independent Institute. His e-mail address is [email protected]