28th September 2016
How can a high-growth autocracy become a democracy without derailing growth?
In a previous DLP paper and blog I asked whether governance advisors in high-growth autocracies should seek to promote democracy. The answer was complex, but one of the considerations related to the likely economic effects of the process of transition itself.
In a new paper I delve deeper into this issue by looking at what happens to high-growth autocracies that undergo democratic transition either during, or just after, their economic boom periods. (Low-growth autocracies are, of course, a different kettle of fish.)
I wanted to uncover the conditions in which transition had no detrimental impact on growth, those in which it was associated with a growth fall, and those in which growth actually collapsed. Knowing about these conditions can help policy advisors decide whether or not to encourage democratic transitions, and provide lessons on how to make transitions as economically painless as possible.
Since 1960, 13 high-growth autocracies have made this kind of transition. Four of them managed to sustain growth, but in six growth fell, and in three it collapsed.
Three variables seemed to be key to explaining these differences:
- whether the transition took place while the economy was strong, or during an economic dip;
- whether the transition had strong support from business (which was usually linked to whether the victorious party was pro-business or not);
- whether the transition received strong international support.
The table below summarises how these variables combined to produce particular growth outcomes. Simplifying somewhat, if the economy was strong at the time of transition and supported by a strong pro-business coalition and international actors, sustained growth was the result. If the economy was strong but business and international actors were lukewarm about the transition, reduced growth was the outcome. If the economy was weak, meanwhile, but the transition still had either strong business or international support, or both, the result was also reduced growth. If, finally, the economy was weak and business and international actors unsupportive, the economy collapsed.
What happens to economic growth when high-growth autocracies become democracies?
Economy is strong, and transition is supported by strong pro-business coalition and international actors
South Korea (1987) Chile (1990) Lesotho (1993) Taiwan* (1996)
Economy is strong, but business and international actors are unsupportive
Economy is weak, but transition has strong business and/or international support
Greece (1974) Portugal (1974) Spain (1975) Dominican R. (1978) Indonesia (1998)
Economy is weak, and business and international actors are unsupportive
Ecuador (1979) Bulgaria (1989) Liberia (2003)
*While growth in Taiwan fell, it remained above the level defined in the study as ‘high’.
So what are the implications for our governance advisor in a high-growth autocracy?
Well, the bad news is that a majority of democratic transitions of this sort lead to lower growth. That doesn’t necessarily mean, of course, that our governance advisor shouldn’t advocate democracy, but it’s worth taking into consideration.
The good news is that in only a minority of cases does democratic transition lead to economic collapse (and even then the collapse is time-limited). What’s more, international actors do seem to be able to make a positive difference to outcomes.
So in cases where underlying conditions seem favourable to democracy and governance advisors want to promote it, they and other international actors might want to consider the following emerging lessons:
- Try to nurture business and political support for transition, for example through high level diplomacy, carrots for business (which might include preferential trading agreements or membership of economic blocs) and carrots and sticks for the military (such as the increase or withdrawal of military aid).
- Try to broker coalitions between business and political parties.
- Don’t wait for an economic downturn to act.
A word of caution, however: these lessons apply mainly to countries that have underlying conditions supportive of democracy (income per capita above $2,700, a moderate degree of economic inequality, and comparatively weak ethnic or religious divisions). At least two of the countries in this study, Liberia and Lesotho, didn’t, and in these cases, a more drastic form of international intervention was necessary to support democratic transitions.
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What Happens to Economic Growth When High-Growth Autocracies Become Democracies?Download document