The Myth of the Authoritarian Advantage

Economic markets are a necessary, though not sufficient, condition for democracy, but is democracy a requirement for efficient economic markets? The first relationship is widely assumed to apply; the second is much more controversial. Skepticism about the economic efficiency of democracy leads to three related theses: that market reforms can be successfully introduced only under an authoritarian regime; that economic reform must precede political reform; and that only when successful economic development has occurred can conditions favorable to the installation and consolidation of democracy emerge. Such views are defended frequently by politicians and political scientists alike. They have been expressed recently by Datuk Seri Mahathir bin Mohamad, prime minister of Malaysia:

In the former Soviet Union and the East European countries, democracy was introduced along with the free market. The result is chaos and increased misery. Not only have the countries broken up, mainly through bloody civil wars, but there is actual recession and more hardship for the people than when the Communists ruled. One may ask whether democracy is the means or the end. Democracy at all costs is not much different from Communist authoritarianism from the barrel of a gun . . . . In a number of East Asian countries, while democracy is still eschewed, the free market has been accepted and has brought prosperity. Perhaps it is the authoritarian stability which enabled this to happen. Should we enforce democracy on people who may not be able to handle it and destroy stability?¹

Unlike Prime Minister Mahathir, many people do indeed think that democracy is an end, not just a means. Setting this consideration aside, however, do theory and evidence really show that the economic efficiency of democracy is less than that of other forms of government? When citizens suffer economic hardship under new democratic regimes, which are often receiving assistance in carrying out needed economic reforms from international organizations, is it reasonable for them to think that they would fare better under an authoritarian regime? Do we have to accept what Atul Kohli has called the "cruel choice" between development and democracy?² Or can democracy also be defended on the grounds of its capacity to promote economic development?

The proauthoritarian theses rest on the argument that dictatorships enjoy a greater political capacity and a higher level of insulation from particularistic demands than do democratic regimes. As Jagdish Bhagwati has noted, this view was initially presented in the context of analyses of development that focused on the problem of how to promote high rates of investment.³ New democracies were seen as vulnerable to demands for immediate consumption because of a collective-action problem: the short-term interest of social groups in turning economic policies into a distributive game would prevail at the expense of the long-term benefits that would eventually have accrued from cooperative sacrifices. The economic results of such vulnerability are an inefficient distribution of income, an increase in consumption and a corresponding decline in savings and investment, expanding budgets, and increasing fiscal deficits. The political result is instability and, very likely, a breakdown of the regime.

Only when a state is insulated from particularistic pressures, it was argued, can it behave as the universalistic agent it needs to be to ensure efficient economic performance. Authoritarian regimes appear to meet this requirement: because they are less dependent on popular support and do not have to concern themselves with electoral cycles, they have a greater capacity to implement policies that may be unpopular. Of course, if the reform process is to be successful, these policies have to be the right ones, and unless dictators are themselves enlightened, their decisions may be the right ones only if the rulers are responsive to enlightened outside pressures (for example, those exerted by international economic institutions).

Successful economic reform would thus require an authoritarian regime that is internally insulated but externally malleable. And it is this paradox that points to the basic problem with the proauthoritarian theses. In general, authoritarian regimes have more limited incentives and more limited access to information than democratic regimes. When the focus of development strategies moved from the accumulation of...