Autocracy or democracy?

The Economicst

Mar 27th 2013, 13:07 by L.P. | PARIS

REAL income in East Asia grew sevenfold from 1950 to 2005. Democracy has grown within the
region too, in countries such as Indonesia, South Korea, Mongolia, and the Philippines. Japan
and South Korea, the two Asian economies with the highest income levels and the most
sophisticated technologies, are full democracies (see chart). India, today one of the worlds
most important economies, has been mostly democratic since gaining independence in 1947.

Does economic growth go hand-in-hand with democratic regimes? Not necessarily: correlation
does not imply causation. One group of economists found growth induced democracy in East
Asia; democracy did not lead to growth. They compared North and South Korea, which were
both poor in 1950 and under dictatorial regimes from the end of the Korean War until 1980.
From 1980, per capita incomes diverged. The same year South Korea began democratising.
But South Koreas better institutions developed due to dictators policy choices, they say.
Others, including Daron Acemoglu and James Robinson, attribute this type of growth to
political decision-making. Extractive institutions sometimes develop as elites feel more secure
and seek their own ends, they say. Such growth takes place when elites find it in their interest
to allow new technologies and institutional changes necessary for economic growth.
Paul Collier has controversially argued that authoritarianism can be good for growth. He would
also say South Korean growth was successful due to its homogenous society. Its foreign
immigrant population only reached 1m in 2007, and the majority are Chinese. In ethnically
diverse societies only democracy can work for growth, says Mr Collier, because autocratic
leaders with a narrow support base are otherwise tempted to siphon off national income. That
explains why diverse India, with three major ethnic groups, four key religions, and 15 official
languages, had no choice other than democracy-led growth.
What makes ethnically diverse but autocratic China different, given it has enjoyed rapid growth
for the past two decades? China is rather like several small and tightly controlled states spread
over one giant landmass, says Mr Collier.
Rapid growth is one thing. In 1980, India and China were both in relative autarky. By 2007,
Indias GDP had almost doubled, but Chinas increased seven-fold. Indias growth was primarily
services led; Chinas was industry based. Chinas fast growth owed to state policy, Jeffrey
Sachs and Messrs Acemoglu and Robinson agree.
Whether autocracy-led growth is sustainable is another. South Koreas economic freedoms, a
consequence of dictators decisions, led to demand for political freedoms. Chinas Politburo will
likely face a similar challenge in future. Democratisation has not yet flourished since economic
freedoms are themselves negligible: property rights are lacking.
Asias most successful economies are a mix of flawed democracies and hybrid regimes. Most of
these are moving towards, rather than away from, democratisation. In a study of 100 economies
from 1960 to 1990, Robert Barro found that prosperity tends to inspire democracy. Could China
be next, following South Koreas path? Its new premier last week announced plans to crack
down on corruption, describing this as a self-imposed revolution aimed at curbing government
power. If that pledge is not genuine, Chinas growth strategy may be doomed to failure in the
long termso, at least, reckon Messrs Acemoglu and Robinson.