Featured: Strongmen Lead To Trouble

In a world still struggling to recover from the global financial crisis, many countries are turning to or at least tolerating strongmen rule, in the belief that a hard hand is necessary in tough times.

This faith helps explain the enduring popularity of autocrats such as Recep Tayyip Erdogan of Turkey and Vladimir Putin of Russia, since many of their countrymen believe their economic decline would be even sharper under weaker leaders. It may help explain Donald Trump. Perhaps nowhere does the aura of the autocrat remain brighter than in China, however, where the government’s tightening grip on free speech and free markets has done little to diminish its popular support.

Indeed, admiration of autocrats is rooted in China’s long economic boom, which helped spread the myth that autocracies are better than democracies at generating steady growth. In an analysis of The New York Times stories on autocratic governments between 1960 and 2008, economist William Easterly found 40,000 stories on autocratic successes, and just 6,000 on their failures. This media focus on autocratic triumphs may have reinforced the view that authoritarian capitalism is a worthy model for developing countries, particularly in hard times, since China was widely credited for weathering crises that felled other countries, including the one in 2008.

In 2009, after decades of steady free market reform, China reverted to its old model of state-directed capitalism, injecting easy money into aging industries to hit official growth targets that are no longer achievable, particularly when the rest of the world economy is slowing. Since 2010, China’s growth rate has popped up when the leaders deliver new infusions of debt, only to fall to an even lower level. Growth has dropped, step by step, from more than 10 percent in 2010 to less than 5 percent today, according to independent analysts.¹ Worse, the forced expansion of debt now threatens to accelerate the slowdown into an outright financial crisis, such as a meltdown in the currency or the bond markets.

China’s return to state control over the economy does not diminish the fact that its leaders did engineer 30 years of double-digit growth, lifting a nation that harbors one of every seven humans out of poverty. But an exceptional streak does not make a nation exceptional forever, and China is now succumbing to the basic laws of political decay. Even the most reform-minded rulers run out of ideas and momentum the longer they stay in power: China’s post-Mao Communist Party is now four decades in power, and its increasingly autocratic obsession with hitting high growth targets shows it no longer has a clear idea of how to manage the next steps in the economy’s development.

In fact, the worst kind of stale leadership is the authoritarian kind. On average, fast growth is as common under democratic regimes as under authoritarian ones. Going back to 1980, and isolating every case in which a nation posted growth faster than 5 percent for a full decade, we found 64 of these fast-growth periods under a democratic government, and 60 under an authoritarian government.² So there is no reason to assume that autocrats have an advantage generating fast growth.

However, because autocrats face no check on their powers, they can hang on to office indefinitely, and get stuck on a risky policy path with no one to set them straight. Looking at records going back to 1950 for 150 countries reveals 43 cases of superfast growth, in which the economy grew at an average annual rate of 7 percent or more for a full decade.³ In 35 of those 43 cases, the economy was run by an authoritarian government. These cases include the postwar “miracle economies” such as Korea, Taiwan and China that managed to keep rapid growth alive for several decades. But it also includes many vanishing acts that grew superfast one decade only to disappear the next, including Venezuela, which vanished in the 1960s, Iran in the 1970s, and Syria and Iraq in the 1980s.

This tendency to extreme outcomes is a big flaw of autocratic nations, which also saw many more long slumps than democratic rivals. In the same group of 150 countries, there have been 138 cases of extremely slow growth, in which a nation posted an average annual GDP growth rate of less than 3 percent for a decade.⁴ And 100 of those 138 cases unfolded in nations under authoritarian regimes, ranging from Ghana in the 1950s and 1960s to Uganda in the 1980s, Saudi Arabia and Romania in the 1980s, and Nigeria in the 1990s.

Autocrats and Extreme Economic Outcomes

In contrast, democracies dominate the list of countries that since 1950 have registered the fewest years of extreme growth. Together, for example, Sweden, France, Belgium and Norway have posted only one year of growth faster than 7 percent.⁷ However, these four democracies have all seen their average incomes increase five-to six-fold to a minimum of more than $30,000, in part because they rarely suffered full years of negative growth.⁸ This is the stabilizing effect of democracy at work, and it has also worked in emerging democracies such as Colombia and South Africa, which have experienced relatively few years of extreme growth.

Stable growth occurs more often under a democratic leader who lacks the power to engineer spectacular runs of success, or of failure. Even successful reformers often become aggressive defenders of the status quo over time. This is why so many democracies impose term limits, in order to prevent initially promising regimes from entering a stagnant third or fourth term, as Putin and Erdogan have done. One overlooked reason why China continued to function smoothly after Deng Xiaoping left office, two decades ago, is that Deng understood the problem of stale leadership and instituted the rules that now prevent Chinese leaders from hanging on for more than two terms.

In recent years, however, China has been moving away from the pragmatic commitment to reform that it adopted under Deng, embracing instead an ideological commitment to growth at any cost. Once an exceptional success, it is starting to display the classic authoritarian tendency to get stuck on a self-destructive policy path. Since 2008, China has built up the biggest credit binge ever in the emerging world and the biggest investment binge ever in a major country⁹—in the past, such binges have always ended badly. This should give pause to any nation, rich or poor, still looking for a strongman to save them from the global slowdown.