Discussion Of Whether Dictatorship Is Good For Asian Economies

Authoritarian countries such as China, Malaysia and Singapore have seen strong economic growth leading to the hypothesis that dictatorships are good for economic development in Asia.

Asia is heterogeneous, culturally and politically. There are various types of political regimes including liberal democracies, autocracies and military dictatorships. Are all Asian dictatorships equal and are any of them better suited to economic management? Why should dictatorships be particularly well suited to Asia? Is it the characteristics of Asian countries; human capital, culture, and resources that promote growth, is it purely the political regime that governs them or are there other factors behind the economic success?

Many different political regimes have existed in Asia over the last century.

Thailand has been plagued by military coups there have been 19 coup attempts since 1932 that have led to military dictatorships. In Myanmar, the 2008 constitution set up a hybrid regime where there are elections, but the military still has significant control. North Korea is nominally communist, but it is run by as a hereditary dictatorship. The Kim dynasty has ruled North Korea for three generations. Hassanal Bolkiah, the sultan of Brunei, considers himself the absolute ruler of Brunei’s monarchic dictatorship. The government of Cambodia has become increasingly authoritarian and Hun Sen has become a quasi-dictator, there is no opposition party. China, Laos and Vietnam are all communist states. Japan, South Korea, Singapore and Malaysia are nominally democracies. “The diversity within Asia – racial, cultural, religious, historical – makes it one of the richest, most fascinating areas of the world, but also seriously complicates the task of defining a discrete ‘Asian’ form of democracy or ‘Asian’ set of values”.

It is inaccurate to categorises a set of values as being uniquely “Asian” as this generalises the diverse values that can be found on a continent that is home to over sixty percent of the world’s population; many “Asian values” exist in the West and many supposedly “Western values” are found in Asia. “Empirical attitudes and values of Asian citizens do not differ substantially from citizens elsewhere, once socioeconomic factors are controlled for”. Every one of these Asian values exist to some extent in the west and the contest between tendencies – “conservative and liberal, authoritarian and democratic – is a struggle within these regions just as much as between them”.

Given the heterogeneous political systems across Asia it is hard to show that dictatorships are the best system for economic success. Even within Asian dictatorships and democracies there is a variety of regime styles. This raises the question, is it the regime type that determines economic success or is it the quality of governance?

<р>There are huge gaps between rich and poor Asian nations that are not aligned with their political regime. Not all Asian countries have thrived under dictatorships; some have done extraordinarily well while others have languished. Laos under communist rule is one of East Asia’s poorest states. Cambodia under the dictatorship of Hun Sen is also one of Asia’s poorest countries. Cambodian GDP has been increasing at a rate of more than 7% but despite this growth Cambodia remains poor, a result of corruption.

Other communist countries such as China and Vietnam have seen significant economic growth. It is not surprising that China should still be growing quickly, “all economies which are behind the world leaders (like the US and Germany) have great potential for catch up growth.” The poorer the countries are the higher the rate of their catch-up growth can become be taking up knowhow and technology from world leaders. Authoritarian countries like Malaysia and Singapore have seen rapid and sustained economic growth but so have democratic countries like South Korea and Japan. Malaysia’s rapid economic growth under an authoritarian regime has not enabled it to catch up to world leaders. Singapore is the only country where growth has been sustained and outstripped other countries. , Japan’s economic model encouraged the other newly industrialising Asian countries of Hong Kong, South Korea, Singapore and Taiwan to take the same path. The mix of results for the varying regimes suggest that “the main factors were their export orientation, good education, macroeconomic stability and strong government leadership” rather than regime type.

Autocratic leaders can be separated into two types. , The first type of autocrat has a long-term vision and a commitment to enacting institutional reforms and policies that are likely to be growth enhancing. , The second type of dictator has a short-term vision, potentially because they find themselves in an unstable political environment where they might lose power, and therefore they engage in kleptocracy and predatory behaviour.

Over a short-term support of economic growth increases the chances of the dictator’s survival. Economic growth and the subsequent rise in the standard of living, boosts the ruler’s popularity, weakening and intimidating potential rivals; by increasing state revenue the ruler can finance patronage and repression. In the long run though, economic growth and better living conditions transforms societies and creates the preconditions for democracy.

Dictatorships can achieve economic growth at a faster rate as there are fewer political hurdles that they need to overcome compared to democracies. The leaders can make their vision happen without any dissenting voices (???????). A leader in a democracy has strong limitations on their power, other players can veto or control outcomes within the political system. Democratic leaders do not have the same freedom to enact development-oriented policies the way a development-oriented autocrat can. The possibility of losing government in a future election constrains the leaders of democracies. They are less willing to take risks with economic policy that is needed for rapid growth compared to the leaders of autocracies.

Kleptocratic autocracies can see rapid economic growth. In these states there is a disconnect between growth and a rise in the standard of living. The leader siphons off any benefit from the economic growth into personal wealth and to support their power base. Rulers who seek only their own survival in power will support economic growth in order to continue their rule.

The suggestion that authoritarian governments can impose policy consensus more easily than multiparty democracies holds some merit. But if that were the whole story, then all dictatorships would be economic powerhouses. The case of Asia’s hypergrowth economies suggests what is important isn’t autocracy itself, but what policies the autocrat chooses to impose – and, more importantly, to whom he listens.

South Korea is a good example of how important good leadership is and who they get advice from. These two factors can have a big effect on economic growth. President Park was no believer in free markets. He oversaw the rapid increase in economic growth through his “guided capitalism.” He enticed the nation’s leading businessmen into his economic development project with cheap finance and foreign technology, protection from imports and foreign investment. Aggressively anti-competitive behaviour and corruption was acceptable if business owners developed industries to lift South Korea’s economic growth. South Korea is still enmeshed in a corrupt government-business network that still operates and is holding the economy back.

By separating Asian authoritarian regimes by type, it is observable that party-based authoritarian regimes always outperform non-party-based, monarchical and military-based authoritarian regimes in their effects on the region’s economic development. In party-based autocracies, leader succession is typically institutionalised within the party structure, leading to a lower uncertainty on what the country may expect when one leader makes way for the next. This also allows party-based autocracies to have long term goals and plans for the state, as the death of a leader does not imply the end of credible commitment from the leadership to a set of policies or institutions. The party based regimes of Malaysia and Singapore saw rapid economic growth and improvements in standards of living of their people. The move to democracy has not seen a decrease in standard of living in Malaysia but there has been a slowing down of growth. Singapore has maintained is rate of economic growth and of all the Asian countries its GDP has outstripped the big western democracies. , How has Singapore managed to increase its GDP? Given the political regimes operating within Malaysia and Singapore are similar what other factors are causing the Differences between them? Malaysia, Thailand and Indonesia showed strong catch-up development like Singapore, Taiwan and Hong Kong but they rapid development was driven by the lower-value-added work that was divested to them from their more advanced neighbours. Space these countries a court in a middle-income-trap because their educational and technological capacities are relatively week they have not invested in human capital through education (Jack Greig).

The GDP of Singapore was 104% of that of the USA. The Economic growth is not from an increase in productivity but from investment and labour capital accumulation. Singapore is the world’s most open economy (John Ross) and has been named the second most pro-business regime by the World Bank. The foreign investment in Singapore produces a huge trade surplus, but most of the money that comes in goes out again, to repay the foreign companies for investing in Singapore. Singapore’s economy is feeding off much larger economies and from providing services their neighbours (Malaysia and Indonesia) will not or because of policy will not perform. The People’s Action Party made a deliberate decision to welcome foreign investment into Singapore. The high GDP is an incongruity caused by the lowering of the corporate tax rate to allow multinational corporations to avoid tax. 12% of Singapore’s GDP can be attributed to tax avoidance of American multinational corporations. Singapore’s GDP does not reflect domestic wealth. , Singaporean personal consumption expenditure has fallen steadily. Singaporeans also work the longest hours in the world. They work 30% longer than Americans and 50% more than Germans. Their standard of living is about the same as their neighbour Malaysia and lower than that of Hong Kong residents.

Given the complexities of the Asian region politically and culturally it would be a gross generalisation to say that anything that happens in one Asian country could be applied across the whole of Asia. The regime type has little to do with economic success. Asian dictatorships rule over countries with some of the lowest GDP in the world as well as Singapore, the country with the highest GDP in the world, higher even than America. , Breaking down the dictatorships it appears that the party-based authoritarian regimes produce the best results, although many of them have GDP results that are the same as Asian democracies. Only one dictatorship stands out as being unique, that is Singapore. The regime in Singapore is not that different to Malaysia so the greater economic success must be a result of decisions made by the party and the leader. Singapore has chosen to operate with a low corporate tax rate that provides a haven for large multinational corporations who want to avoid paying higher taxes in their home countries. Even though Singapore appears to be a great economic success the standard of living of Singaporeans has been falling. Singaporean personal consumption expenditure has been decreasing. Their living standards are much closer to that of Malaysia. The economic growth of Singapore is good and much of the early development was a result of decisions made quickly and easily by an authoritarian regime. The continuation of economic growth is now a reflection of Singapore’s political stability and their willingness to tailor policies to suit the tax avoidance strategies of multinational corporations.

Dictatorship is good for economic development in Asia, but so is communism, military juntas and democracy. Good governance, strong institutions and political stability and the willingness to invest in human capital through education, lead to good economic growth rather than the type of political regime. The effect of regime is mostly on the personal freedoms and living conditions of the people being governed.