Maybe Democracy is not the key to economic success

There was a really interesting NPR story this week comparing the economic growth in India as compared to China, and the “China envy” experienced in India.  Here’s the rub:

In the middle of the last century, India and China were in the same place economically. Now China is three times richer. Its childhood malnutrition rate is far lower than India’s.

Yes, Indians are free, Thapar says — free to be poor.

Partha Sen, director of the Delhi School of Economics, says that “democracy in an everyday sense, in terms of getting things the poor need, has clearly not functioned. Somehow democracy has failed us.”

Democracy moves slowly. People debate things. Infrastructure — roads, water, power — remains underdeveloped.

The Chinese government doesn’t have endless parliamentary debates and legal battles. It doesn’t ask a lot of questions. It does things — builds roads, trains, power plants.

Here’s the really interesting kicker:

“We economists think that a benevolent dictator — a benevolent dictator with a heart in the right place — could actually do a lot of good,” Prasad says.

The problem, he says, is that the economic record of dictators and single-party states is not very good. China seems to be an exception.

In many ways, the government of China is abhorrent, but when it comes to policies that create economic growth and raise living standards, the government really does function as a benevolent dictator.  And, if you are actually pursuing smart policies, being a dictator is way more efficient. Of course, most dictatorships don’t pursue the right policies, and here’s the genius of China’s leadership– maintaining dictatorial control, while putting the power of markets to work.  Ezra Klein explains:

As I understand the Chinese model, it goes something like this: The failure of central planning was that the people with the power didn’t make very good decisions, at least not when compared with the market. On the other side, the difficulty of democracy is that it’s slow, and the cacophony of voices can lead to paralysis and social breakdown. China’s approach has been to marry market planning with state control. It brings in private companies and then uses the government’s power to build the infrastructure they ask for. It lets private banks purchase up to 20 percent of state banks so that it gets private-sector expertise without relinquishing the public sector’s control. It lets people buy shares of their financial institutions so it can get the oversight of the market, but it doesn’t ever hand the market the reins. It uses the market to help plan, but it uses the state to act on those plans far faster and more decisively than the market ever could.

I don’t think that’s an easy model to emulate, and we should not too lightly gloss over the human rights abuses that come with this type of government, but it is a really fascinating success story.

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

5 Responses to Maybe Democracy is not the key to economic success

  1. FENG says:

    Hi,
    It’s really a difficult model to emulate.
    My English teacher is an Indian, there was this occasion when I was discussing the China model with her and she offered some insights on India’s situation: Indians are willing to grow at a slower rate so long as their freedom is secured.
    In the case of China, I guess it has been historically ruled in an authoritarian way, although not all rulers are benevolent. One of the main problems the Communist party face is the lack of incentives to reform the party, to make bolder social and political changes. Some critics argue that implosion is imminent.

    • Steve Greene says:

      It definitely is an interesting trade-off. I suspect, most Indians (and most people) would be willing to accept the level of loss of freedom entailed in China in exchange for the improvement in living conditions (at least among those living in abject poverty). Of course, it is somewhat of a false dichotomy, as the problems in India’s democracy are not necessarily inherent in all democracies. All that said, I’m shamefully ill-informed about both India and China, but found this comparison quite interesting.

  2. Brett Little says:

    Good insight, I like it.

  3. saideman says:

    The existing lit, as far as I remember it, basically argues that democracy and wealth are highly, highly correlated. Not that you cannot have one with out the other, as outliers always exist, but either China’s wealth is likely to end up producing some democracy, or its authoritarianism might get in the way of growth down the road.

    • FENG says:

      China’s GDP is mostly driven by export and foreign direct investments, it will take some time before wealth actually reach the grassroots level. As of now, the central government is looking into raising the wages yet there has been a lot of resistance from the MNCs.

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