Another China myth?

This one is more dangerous…and one which is obviously seductive to an increasing number of countries across the world. The Myth of Authoritarian Growth, is by Dani Rodrik, who argues 

When we look at systematic historical evidence, instead of individual cases, we find that authoritarianism buys little in terms of economic growth. For every authoritarian country that has managed to grow rapidly, there are several that have floundered. For every Lee Kuan Yew of Singapore, there are many like Mobutu Sese Seko of the Congo.

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

Here is another Rodrik paper where he argues that democracy works better in the long-run – in particular, yielding predictable long-run growth rates; stable economic performance; resilience to shocks and better labour market conditions – all of which contributes to possibly a less-exciting life, but one with greater likelihood for a gradual increase in prosperity. 

But citizens in badly governed democracies must cry foul. It is difficult not to look at China, Rwanda or Singapore and believe that a better standard of living under an authoritarian regime is preferable to being poor in a democracy.  

So here’s Rodrik on China – 

At first sight, China seems to be an exception. Since the late 1970’s, following the end of Mao’s disastrous experiments, China has done extremely well, experiencing unparalleled rates of economic growth. Even though it has democratized some of its local decision-making, the Chinese Communist Party maintains a tight grip on national politics and the human-rights picture is marred by frequent abuses.

But China also remains a comparatively poor country. Its future economic progress depends in no small part on whether it manages to open its political system to competition, in much the same way that it has opened up its economy. Without this transformation, the lack of institutionalized mechanisms for voicing and organizing dissent will eventually produce conflicts that will overwhelm the capacity of the regime to suppress. Political stability and economic growth will both suffer. 

In a previous article, Rodrik had discussed the potential hurdles in China’s path towards global superpower-dom, focusing chiefly on what he thinks is the inherent fragility of the Chinese authoritarian system.  

China’s stability hinges critically on its government’s ability to deliver steady economic gains to the vast majority of the population. China is the only country in the world where anything less than 8% growth year after year is believed to be dangerous because it would unleash social unrest. Most of the rest of the world only dreams about growth at that rate, which speaks volumes about the underlying fragility of the Chinese system.

The authoritarian nature of the political regime is at the core of this fragility. It allows only repression when the government faces protests and opposition outside the established channels.

The trouble is that it will become increasingly difficult for China to maintain the kind of growth that it has experienced in recent years. China’s growth currently relies on an undervalued currency and a huge trade surplus. This is unsustainable, and sooner or later it will precipitate a major confrontation with the US (and Europe). There are no easy ways out of this dilemma. China will likely have to settle for lower growth.


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