Advancing a Free Society

Democracy or Autocracy: Which is Better for Economic Growth?

Sunday, October 10, 2010

The Economist in its October 2-8 issue has a cover page with the title: “How India’s growth will outpace China’s”. One of the main reasons they give for this claim in their leader on this topic is that India is democratic while China is autocratic. The other is that India has higher birth rates, and hence a younger population. Both arguments can be questioned, although I concentrate my discussion on whether democracies favor economic growth.

Visionary leaders can accomplish more in autocratic than democratic governments because they need not heed legislative, judicial, or media constraints in promoting their agenda. In the late 1970s, Deng Xiaoping made the decision to open communist China to private incentives in agriculture, and in a remarkably short time farm output increased dramatically. Autocratic rulers in Taiwan, South Korea, Singapore, and Chile produced similar quick turnabouts in their economies by making radical changes that usually involved a greater role for the private sector and private business.

Of course, the other side of autocratic rule is that badly misguided strong leaders can cause major damage. Mao’s Great Leap Forward is one prominent and terrible example, but so too are Castro’s forcing Cuba into a centrally planned government-controlled inefficient economy, or Iran’s mullah-led government that created monopolies controlled by religious foundations and other groups.  The overall effect of autocratic governments is some average of the good results produced by visionaries, and the bad results produced by deluded leaders.

Continue reading Gary Becker at The Becker-Posner Blog