The political economy of development

In a recent public lecture at a private university in Dhaka an expatriate Bangladeshi economist reportedly made a strong case for democracy emphasising that there is a strong co-relation between this popular political system and economic development. According to available report, he admitted that theoretically it remained unresolved whether democracy or autocracy promoted more economic growth. But, he pointed out, the empirical evidence that has emerged from research in the last decade demonstrates that democracy does have a positive effect on growth. He admitted autocracys have sometimes worked through inclusive institutions such as nationalism in East Asia, political Islam in the Middle East and Hindutva in BJP's India but these have a toxic effect of jingoism or hatred towards others on non-conformity.

While critics can point out that political Islam in Middle East is yet to deliver spectacular economic growth and Hindutva policy of the BJP government in India is too early to judge on its economic performance, the focus of discussion with reference to the point at issue now rests on the authoritarian political regimes in East Asia (Asia-Pacific). Analysing the political context in which the four East Asian countries - Hong Kong, Singapore, South Korea, Taiwan - and China made spectacular economic progress may be a repetition of what is already known but becomes relevant with reference to the views expressed by the distinguished visiting Bangladeshi scholar.

The East Asian countries that are often referred to as the Newly Industrialised Economies (NIEs) shot into prominence since 1960s for achieving 'economic miracle' in terms of rapid economic growth transforming their sluggish backward economies. Their success stories immediately drew attention to the political, social and economic factors that they shared in common and which were identified as the contributory factors to the achievement of the 'economic miracle'. For the first factor, it was noticed that all the five countries were authoritarian political regimes ruled by an autocratic strong man or a single political party. Some of these countries went through the motion of periodic elections but they were anything but democratic in the conventional sense. As regards the second factor, all the NIEs had a population that believed in the teachings of Buddhist religion either in the past (China) or at present. Economically at least three countries made a rapid transition from agrarian economy and all the five embarked on a strategy of industrialisation based on export.

'CRUEL CHOICE': The consensus among those analysing the causes behind the achievement of economic miracles by the NIEs focused on the political factor i.e. authoritarian political regime with a thin veneer of elected democracy. This conclusion found its most dramatic form in the words of economist J. Bhagwati who pointed out that developing nations faced a 'cruel choice' between rapid and sustained economic growth and genuine democratic practice (1965). There has been an agreement among economists that for economic growth to take place a country must increase its savings and investment to levels that promote and sustain growth. It is also agreed that growth is measured by the investment-GDP (gross domestic product) ratio divided by the capital-output ratio. So theoretically, a country with higher investment-GDP ratio and lower capital-output ratio would register higher growth than those that fail to achieve the same. Empirical evidences have shown that autocratic regimes surpass the democratic ones in this respect when the economic agenda is followed by the former seriously, consistently and with a high degree of integrity. This is because authoritarian regimes are able to extract a greater surplus (capital accumulation) from their population through taxation and other means of raising state income than democracies which have to think about popular backlash during elections. 'The latter, after all have to persuade voters to pay the needed taxes and make other necessary sacrifices' (Bhagwati, 1995).

The 'cruel choice' hypothesis, however, never implied that the trade-off between democracy and development would be permanent. Once the initial and painful step towards self-sustained growth is accomplished, progressive influences would generate demands for political liberalisation and the system would eventually respond to such demand, a proposition that forms part of 'modernisation theory'. Development first, democracy later, thus became the conventional wisdom among many economists seeing the example of the NIEs.

'ASIAN VALUES': The social dimension of this argument gives emphasis on discipline among citizens and the need to maintain social cohesion as key factors of economic development. As Singapore's strongman Lee Kuan Yew put it, 'What a country needs is discipline more than democracy. The exuberance of democracy leads to widespread and disorderly conduct which are inimical to development (1994). The discipline that Lee Kuan Yew referred to is the much publicised 'Asian values', a generic term that has been used in preference to Confucian values because of political correctness. The thesis expounded here does not pay even lip service to the sequential development of 'economy first and democracy later'. Instead it suggests paternalistic authoritarianism tempered by nominal democratic institutions such as elections, as a permanent political system. The political economy of development here has politics in undisputed command.

Leaving aside the prospects of democratic transition in future after development has taken place, the discipline imposed by Asian values or similar ethos (Ujama in Nyerer's Tanzania) on citizens not only ensures stability and social cohesion but also continuity of the authoritarian political system that may have periodic nominal elections. The authoritarian regime that is perpetuated (permanently for some countries, for the medium term for the others) embarks on the task of capital accumulation through forced savings (scarcity of consumer goods) and taxation to finance investment by government to develop infrastructure and basic industries. Simultaneously, in countries that do not have command economies a pliant private sector is nurtured by the government through granting of oligopolistic power in the market and generous subsidy to make its products competitive in international market. The public-private sector growth strategy promoted rapid industrialisation in the NIEs except China where the public sector ruled the roost until its opening up in late nineties.

As the NIEs took off to sustained economic growth in the middle of the Sixties their main plank was the export-oriented industrialisation that not only called for increased savings and taxation from their people but also belt-tightening among them in a situation of limited disposable income and scarcity of consumer goods. This austerity programme and the sacrifices made by the consumers that it entailed could not be achieved in a democratic polity. Identification of this fundamental principle underpinning political economy of the two stripes where it is in operation in one and absent in the other, is crucial to the understanding of the main cause behind the dynamism of the economic agenda followed by authoritarian regimes like the East Asian countries.

A different way of looking at the strength of authoritarian regimes is to analyse the obstacles to rapid economic growth. Broadly speaking, there are two obstacles to prosperity: a) rent-seeking by profit-oriented private sector and politicians and bureaucrats wielding official power and (b) policy variability and uncertainty. A public-driven policy agenda by a committed autocratic regime has little risk of being subverted by the rent-seeking private sector or by government functionaries. Policy variability and uncertainty are also ruled out in such a regime in the absence of vote-maximising politicians at the helm of state affairs. All these, of course, is based on the premise that authoritarian rulers are deeply committed to nationalist goals, are strictly honest and see to it that the private sectors even with crony capitalists and public servants do not work against the nationalist goal set by the regime. This is a major assumption and makes the difference between kleptocratic authoritarian regimes and those committed to promoting greater national interests.

The above analysis is more or less a reprise of old development discourse. Most importantly, it is not intended to make out a case for authoritarian regimes as opposed to democratic dispensation. The main purpose has been to explain why authoritarian regimes like the NIEs succeeded and at what political price. The analysis has highlighted the advantages of authoritarian regimes in economic management and by extension the disadvantages of democratic polity in this respect. But a nation does not choose a political system based on its promise for promoting economic growth alone. The values of freedom of expression, basic rights and rule of law have been overriding principles cherished by a free people in all countries and at all time even though they may have been denied of the same. It holds true now and will be so for ever as long as humanity exists on earth. Men and women do 'not live by bread alone' is not an empty slogan, it is an article of faith for all who value freedom above everything else. Given the freedom no people will make the 'cruel choice' of preferring development to democratic rights. Even when the trade-off between rapid growth under authoritarian regimes and slow but steady growth under democracy is palpable the choice will inevitably be for the latter. The only qualification here is that it is not democracy of 'form' but of 'substance' that will be of appeal to the people.    

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