Explainatory Post One: Investing the Lee Thesis: How Bad is Democracy for Asian economies?

Investing the Lee Thesis: How Bad is Democracy for Asian economies?
By Carl Henrik Knutsen

     In this paper, Knutsen argues against the hypothesis that democracy hurts economic growth and development, with focus in regards to Asia. Known as the Lee thesis, some have argued that more authoritarian governments in Asia have led to the massive economic growth that some Asian countries have enjoyed. It is argued by proponents of the Lee thesis that authoritarian governments in Asia are unique compared to other parts of the world; by the fact that the majority of the leaders in this region concentrate on improving their country rather than ideology or personal wealth. It is a more benevolent form of an authoritarian government and dictatorship that exists in order to improve the country and the life of its citizens.

     The main argument of the Lee thesis is that "democracy hinders economic growth and development". Due to the fact that democracy is a slow, messy process that generates social conflict or political gridlock. Instead "strong, authoritarian leadership is necessary to promote reforms and conduct efficient politics". Authoritarian regimes can generate high levels of investment and ignore special interest groups that can slow down economic development. Lee then points out examples of the Asian Tigers, in which these countries economically boomed under authoritarian rule.

In this paper democracy is operationally defined as "a political regime with a high degree of popular control over political decision making, and a high degree of political equality. Thus in an authoritarian regime, there is small elite group of people that handle the decision making process. Along with this, the decisions they make are shielded from the public.  This allows them to make more controversial and unpopular decisions in order to advance the “good of the nation”. Authoritarian regimes are also able to conduct reforms at a faster pace than in most democracy, due to this same concept.

One of the big points of the Lee thesis is that it differentiates Asian authoritarian regimes from the rest of the world. It is argued by Lee that authoritarian regimes function better than democracies in Asian countries due cultural values. These cultural Asian values include values such as familism, benevolence, national consciousness and etc. Going along with this, there is a strong influence of Confucianism in Asian countries that may make them more accepting of authoritarian regimes. In Confucianism there is a strong emphasis on the traditional hierarchy and patrichial rule. Specifically there exists a special bond and relationship between rulers and their subjects. In which the rulers must act in behalf of the people and take care of the subjects; while the subjects are expected to obey and trust the ruler.

However Knutsen counter argues that this type of thinking is rather ignorant, as Asian countries all have a different culture that does not necessarily conform to this stereotype. He points out studies that show Asians people are not so dissimilar from other people around the world once socio-economic factors are controlled for. Rather this type of cultural stereotype is a form of propaganda that has pushed these notions of Asian values for their own self-interest. For example, Asian dictatorships have always pushed the concept that they are the father of the country and the people are his children. However, this is hardly a cultural thing as dictators all over the world use this type of thinking. From Hugo Chavez to Stalin, dictators have always tried to establish this patrichial relationship to help solidify their rule. So in my opinion, this factor doesn't really explain why authoritarian regimes supposedly behave differently in Asia.

The second factor that proponents of the Lee thesis argue makes Asian autocracies unique is the focus of the government. They classify these autocracies as developmental autocracies.

These are the main features of Asian developmentalist regimes

1.      Economic development as top priority

2.      Commitment to private property rites

3.      Elite bureaucracies as vital for economic policy formulation

4.      States engaged in consultation and coordination with the private sector

5.      Bureaucratic rule while politicians reign

These so called developmental autocracies are considered to be a benevolent form of autocracy. In which the main role of the government is to increase economic growth and prosperity. Lee argues that development and economic growth in developing countries can be better achieved under authoritarian rule than democratic one.

There are three main arguments Lee supporters argue for the economic superiority of dictatorships.

Argument 1-dictatorship and investment

 Proponents of autocratic governments claim that dictatorships are able to direct resources and funds towards productive activities that increase the economic output of the country. For example, they can increase the amount of investment in physical capital that will promote economic growth. In democracies however, the government is vulnerable to the pressure of the public to redirect more resources and funds to things for consumption (more rewards like welfare or social security). A high level of capital investment is crucial for high level of economic growth rates.

Argument 2- dictatorship and state autonomy

The second argument proponents of autocratic governments make is that more authoritarian governments have a better ability to ignore private interest in favor of national interest. In more democratic governments, they claim it is easier for lobbyists to hijack the government in implementing policies that favor their group; that might ultimately harm national interest.

Argument 3-dictatorship and reform

The third argument proponents make is that necessary reforms and changes needed in order to achieve high level of economic growth occur faster in authoritarian governments. This is due to the fact that in democracies there has to be national discussions and debates over these reforms. If a proposed reform is painful, there will likely be major push back from society that will slow down or halt the reform. For example the adoption of universal healthcare in the United States has been greatly slow down by public. In authoritarian governments, the speed of the reform can happen much quicker without the need of input from the public. Sometime necessary reforms but painful reforms take years to occur in a democracy but a matter of months in authoritarian governments.

Knutsen counter argues that the 1^st argument is wrong because more democratic governments attract higher levels of foreign direct investment that trump the higher level of mandatory national investment by authoritarian governments. On the 2^nd argument Knutsen argues that there are none or very few altruistic dictators. Instead dictators have an interesting in pursing growth-enhancing policies to enhance their own survival and the reforms they pursue may hurt the public. For example by violating property rights and under-providing public services like social security. They also have a strong incentive to block reforms or policies that might undermine their political position. Knutsen goes on to further discuss more substantial research done on the democratic growth advantage.

The main quarrel Knutsen has with the Lee thesis is that it is simply a bad case of poor statistic. It makes inferences and generalization by picking out successful cases and limiting the number of cases in the study. By selectively choosing the cases, the Lee thesis appears to work. However by expanding the size and number of the cases, the Lee thesis falls very short of proving or correlating the dictatorships are better for growth. Instead by taking a broader look at authoritarian regimes in Asia, authoritarian governments in Asia the hypothesis that Asian dictatorships are better at generating economic growth than dictatorships elsewhere is not refuted by this empirical exercise. Asian dictatorships may still be considered developmental, but only when compared to the poor performances of dictatorships elsewhere.

Conclusion

There is no substantive proof that democracy is bad for Asian economies. The Lee thesis is a very weak claim because of the limited scope of data he uses as well as general inferences that have very little merit. While countries like China and Singapore have economically benefitted from their authoritarian regimes, there are other countries that haven’t experienced the same level of economic growth. Instead experts may want to examine other factors that have led to the growth of the Asian Tigers besides the government type.

I personally with agree with Knutsen, that there is not enough proof to say that the authoritarian governments in Asia are responsible for the economic growth. For example, with the case in China, while they have been booming for the last 2 decades, one could argue it was making up for growth loss for the 3 decades under the Mao regimes. Furthermore you could argue that it was more the case of general globalization and foreign direct investment that cause the rise in these countries. For example in Japan and South Korea, it was heavy us investment and interest that caused the boom in these countries. In the case of China, they didn't experience rapid level of economic growth until they opened up their economy and welcomed in foreign investment. Looking back a little further into modern history, until WWII the only really economically successful authoritarian government in Asia was Japan. 

Furthermore, there are far more cases of horrible authoritarian governments than benevolent authoritarian ones. For every Lee Kuan Yew there exists  a Pol Pot or Mobutu that tips back the scale. While I am not arguing that democracy is flawless or works in every country, currently on average I would argue democracies have a better track record of providing economic and political growth for countries. 

http://liverpool.metapress.com/content/j00053rm45078487/

This is another article that makes an excellent case for cautioning countries from hoping onto Beijing style economic reform just yet. While currently it looks like an excellent alternative to liberal democratic capitalism especially for failing countries, there has been more emphasis placed on the positive aspects of the Chinese model without taking in regard for the negative aspects. With special regards to maintenance of the system and political "L word" that could drag China and countries down if they fail to continue reforms and address issues like income equality.

My question I  would ask, is it worth it to have a high level of economic growth by sacrificing rights and values? Or little bit more general, why is economic growth so important? I suppose it is easier for people who live in developed countries to answer no to this question, than those living in developing countries.  However it's always prudent to keep in mind why is economic growth important and not remain solely focused on how to achieve it.