"Democracy Is No Enemy of Growth" f

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Subject: "Democracy Is No Enemy of Growth" from FEER

FarEastern Economic Review
October 24. 1996

THE 5TH COLUMN

Democracy Is No Enemy of Growth

By Mark R. Thompson

As Southeast Asian countries debate whether Burma fits into their Asean
circle, it's worth reflecting on their own basic traits: Many Asian leaders
say democracy must never precede development, and they back their words with
actions.=20

The recent suppression of opposition in Indonesia and the clampdown on
Burma's democratically elected forces show how dictatorships hold on to
power in the name of development. From this authoritarian perspective, the
Philippines is an economic laggard because it democratized too early.=20

As Singapore's Senior Minister Lee Kuan Yew told a Manila audience a few
years ago: "I do not believe that democracy necessarily leads to
development. I believe that what a country needs to develop is discipline
more than democracy."=20

This argument is disingenuous in three respects. It can first be asked how
long democracy has to wait until sufficient development has been achieved.
Singapore has already delayed democracy for quite a long time, considering
its level of development. Aside from the oil-producing countries of the
Middle East, Singapore is in per-capita terms the richest nondemocracy in
the world. Malaysia is the second-richest nation to fall short of full
democratic openness.=20

Yet recent successful democratization in newly industrialized South Korea
and Taiwan (and also, at a somewhat lower stage of development, Thailand),
shows that such a change of regime does not necessarily endanger economic
growth. These examples have often been cited by Western observers as
vindication of the dictum that capitalist development will=97 through social
transformation and, particularly, the growth of the middle class=97 lead to
greater democracy. But in Singapore and Malaysia, democracy remains
postponed despite substantial economic development.=20

The second question is whether authoritarianism really does promote economic
development. In the case of the Philippines, it was the strongman rule of
Ferdinand Marcos that wrecked the economy, not subsequent democratic
governments. Modest growth was achieved during Corazon Aquino's early years
in power before military coup attempts undermined it. Now, under the
enlightened leadership of Fidel Ramos, the Philippine economy has rebounded.=
=20

Research has shown (and a quick glance around the world confirms) that while
some authoritarian regimes have done very well economically, others have
performed disastrously. While dictatorship may promote development, it is by
no means a guarantee of growth. It is often argued that interest-group
politics and populism, not to mention corruption, tend to plague democracy's
rule, slowing economic growth in its early stages. But equally, the
concentration of power in an authoritarian leadership can open up even
greater opportunities for graft.=20

In fact, the nature of the state, particularly its degree of effectiveness
and honesty, is much more decisive in determining the prospects for growth.
An efficient state is likely to promote growth even if it becomes part of a
democratic political system. But if a state has been predatory, as the
Philippines has been in the past, rather than developmental, in the manner
of Singapore, then it's preferable to have some democratic constraints on an
authoritarian state that can prey on society at will.=20

This is not to suggest that the World Bank's emphasis on "good governance,"
a diplomatic code word for greater democracy, should be seen as a panacea
for economic ills. But as the Philippine experience shows, democracy can
restrain the worst of a state's depredations and thus allow more space for
growth. This may fall short of an economic miracle, but it is more likely to
avoid disaster.=20
Finally, it should be asked why some Southeast Asian developmental
dictatorships have in fact advanced economically. The role of Japanese
investment and development assistance in the region has been crucial. More
recently, Taiwanese, South Korean, Singaporean, Malaysian and Thai investors
have also contributed to the economic success of some of the poorer
countries in the region.=20

But the political support of Asean has been particularly helpful for
authoritarian regimes in Southeast Asia. Vietnam, despite a poor
human-rights record, was admitted as the association's seventh member last
year, enhancing its prospects of becoming a new "tiger" economy. Rapid
growth in Burma (if official statistics can be believed) has been made
possible, in part, through political support and investment from several of
its Southeast Asian neighbours who seem poised to invite it to join Asean.
As boycotts mount in the West, Burma's dependence on its Asian partners will
increase. By contrast, elsewhere in the world unsavoury dictatorships have
been isolated by regional groups.=20

Apart from the Middle East, Southeast Asia has been the region least
affected by the recent worldwide wave of democracy that has so far reached
only the Philippines and Thailand. Demands for democracy have been fended
off with the warning it would undermine development. But scepticism is
warranted because dictatorships have not always led to development and, when
they have, democracy has been put off indefinitely. It seems that
authoritarian rulers in Southeast Asia are joining forces to justify their
monopoly of power for as long as possible.=20

Mark R. Thompson, author of The Anti-Marcos Struggle: Personalistic Rule and
Democratic Transition in the Philippines (1995), is lecturer in politics at
the University of Glasgow.=20