Johan Fourie's blog

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The dangerous appeal of the benevolent dictator

with 2 comments

General Park Chung-hee, South Korean president from 1962-1979

General Park Chung-hee, South Korean president from 1962-1979

Two weeks ago, Alan Knott-Craig Jnr, South African entrepreneur and IT whiz, tweeted the following to his more than 12000 followers:

Young countries are like startups. They need to move fast to find a viable economic model. That’s why dictators are best for young countries.

Dictatorships are appealing. They can transform a country more rapidly than any other mode of government. Consider the widely cited example of South Korea’s General Park Chung-hee. He took over the ineffectual South Korean government in 1962 and imposed a military regime that included giving the president sweeping (almost dictatorial) powers and permitted him to run for an unlimited number of six-year terms. He suppressed the media and instituted morality laws with mandatory curfews and regulations on attire and music. Yet during his 17 years in charge until his assassination in 1979, he oversaw a massive expansion of the South Korean economy, known as the Miracle on the Han River. Relying on cheap wages, South Korea industrialized in the manufacturing of cheap manufactured goods. It invested heavily in new technology and education. Within two decades, the economy had transformed from an impoverished backwater to the host of a very successful 1988 Seoul Olympic Games. Today, Seoul is one of the most technologically advanced cities in the world.

Knott-Craig Jnr is correct that dictators can be best for young countries, as the South Korean example shows. But are they, on average? A new paper by Papaiounnou and Van Zanden shows they are not. The authors build a large database, measuring the length of tenure of each of the heads of states of all countries since 1960. They then regress the length of tenure on the economic performance of a country. Their findings? The longer a president is in office, the worse that country’s economy is doing. They explain:

In all specifications, we find a strong negative coefficient linking years in office to economic growth and the quality of institutions, and a positive coefficient relating years in office and the rate of inflation. In particular, there is enough evidence to suggest that the young states of Africa and the Near East are the ones more severely affected by the ‘dictator effect’. The average country in this region saw its GDP per capita double between 1960 and 2009, implying an average growth rate of almost 1,5% per year; had there been no ‘dictator-effect’ as estimated here, average growth would have at least been 2,38% per year, and GDP per capita in 2009 75% higher than its current level.

A dictatorship is not the way to grow your economy. Sure there are a few exceptions, but they are exactly that: statistical outliers. A country where the president stays in power longer than two terms will, on average, perform worse than had a new president been elected. Perhaps the main issue is that a dictator, even a benevolent one, may do well in his (it is always men) initial few years. His power to affect change becomes an all-consuming drug that can only be appeased by more power. Consider South Africa’s neighbour, Robert Mugabe. Leading the revolution against white rule, Mugabe emerged not only as the hero of the people but also the one to put Zimbabwe’s economy on the path to prosperity. During the early 1990s, the Zimbabwean economy was often growing at more than 5% per annum. Mugabe was praised in his own country and also abroad; he received honorary doctorates from the universities of Edinburgh, Massachusetts Amherst and Michigan State (all since revoked). But Mugabe, like all dictators before him, could not retire and admire their achievements. Instead, he changed the constitution (which is possible if you are widely admired) and remained in power. Zimbabwe’s economy and people have suffered as a result.

The wise Adam Smith, in his lesser-known Theory of Moral Sentiments, writes about this ‘terrible drug’ as Russ Roberts calls it in his new book How Adam Smith Can Change Your Life:

To those who have been accustomed to the possession, or even to the hope of public admiration, all other pleasures sicken and decay. Of all the discarded statesmen who for their own ease have studied to get the better of ambition, and to despise those honours which they could no longer arrive, how few have been able to succeed?

There is no way of knowing what would have happened to South Korea had General Park Chung-hee not been assassinated. My guess is he would have hung onto power, and pulled the South Korean economy down with him. Robert Mugabe stayed on too long, and Zimbabwe are the poorer for it. The lessons are clear: dictators are bad not because they immediately do bad things, but because they become addicted to power. And to hold on to that power, they distort the institutions – an independent judicial system, a free media, regular elections – that are essential for sustainable and shared growth.

2 Responses

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  1. Hi, I came across your site after seeing a post on Facebook.

    Interesting article! It’s true that South Korea’s Park Chung-hee is too often cited as an example of how a dictator can turn around an economy. The problem is that people just cite him as a “successful” dictator, instead of looking at what he specifically did while in power.

    PCH was actually a democratically elected president from 1963 – 1972. It was from ’72 – ’79 (his assassination) that he was a proper dictator. During his administration (or regime), he gave corporations unregulated freedom to conduct business. He also subsidized new startups and rapidly expanded SK’s university system. The US provided much-needed national security (from the North), allowing SK to focus on economic development. On the negative side, he squashed free speech and imprisoned political dissenters.

    His economic policies still have long-lasting side effects that plague SK society. The effect is that a handful of large family-owned corporations (Chaebols) still dominate the economy. Samsung alone accounts for about 20% of SK’s GDP. Small and medium-sized businesses are weak and are often squashed or absorbed by large corporations. There’s also a social notion that the only way to be viewed as successful is to work for one of these corporations.

    Though I disagree with you that had Park lived longer he would have dragged the economy down. His successor, Chun Do-hwan, was basically just a more ruthless version of Park himself. He continued to lead SK until 1988, during which time it’s economic growth was outstanding.

    Michael

    January 26, 2015 at 11:54

  2. Good post Johan. One can even add the argument, like Danny Rodrik has been doing, that the nature of growth has changed. A few statistically outlying dictators may succeeded with heavy industry (the consumer goods came later), but manufacturing is today a high-tech story, part of global value chains and services play a bigger role. Ricardo Haussman has the analogy that more complicated, sophisticated production is like building longer words in scrabble – you need lots of letters / productive capabilities and the open institutions that allow these to develop.

    Waldo Krugell

    December 3, 2014 at 11:06


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