(Edward Hadas writes about macroeconomics, markets and metals
for Reuters Breakingviews. The opinions expressed here are those
of the author.)
By Edward Hadas
Aug 15 Are authoritarian governments bad for the
economy? Turkish voters do not seem to think so. On August 10,
Tayyip Erdogan won an absolute majority in the country's
presidential election. Observers say that the country's
increasing prosperity is a big part of his AK Party's appeal.
Erdogan is not the only popular authoritarian around. Viktor
Orban, who reportedly endorsed "illiberal" government, wins
similar majorities in Hungary. If Russia had an election today,
President Vladimir Putin would win big. And Xi Jinping, who
seems to be making one-party rule in China more authoritarian,
would undoubtedly triumph if the government bothered with
The success of such leaders irritates many Americans and
Western Europeans, who believe that genuine multi-party
democracy is the natural political arrangement in the modern
world. Clearly, though, most voters in some countries want
authoritarian leaders who tolerate no effective opposition and
who impose their vision on the nation.
Many economists think modern industrial prosperity
ultimately requires a strong civil society, which can only
really thrive in a democracy where parties vie for votes on the
same footing. In other words, they think authoritarian economies
are inherently unstable. If only it were that simple.
True, the authoritarians of the previous century mostly
adopted an ultimately disastrous economic approach. Communists
and fascists believed in tight state control. It seemed to work
for a while in the Soviet Union, but ultimately collapsed.
Modern authoritarian economics has moved on. It gives business
enough freedom to prosper. The state does not smother the
economy, just tries to guide it closely enough to ensure that
the government and the nation are well served.
The execution is deeply imperfect, but certainly not
disastrous. GDP growth has been extraordinary in China and
pretty good in both Turkey and Hungary, where leaders of small-
and medium-sized businesses are among the governments' most
fervent supporters. Businesses may be less enthusiastic in
Russia, which is especially corrupt, but even there the economy
has clearly done better than in the old Soviet days.
It is true that the big companies in these states must work
more closely with the political authorities than their corporate
peers in genuine multi-party democracies, but the similarities
are greater than the differences. In all modern nations, the
government sits at the centre of the economy. Its dictates and
desires cannot be safely ignored, and its favour vastly
increases the chance of economic success.
Indeed, while the new authoritarianism offers a clear
political contrast with liberal democracy, the economic models
are not as distinct as the system's critics might like. Relative
to the way things work in the United States or a European
nation, the new authoritarian approach has both advantages and
The ultra-heavy-state's main business plus is the weakness
of political opposition to helpful economic change. In poor
countries, traditional local authorities often hold back helpful
development. Vested interests can also be an economic problem in
richer democracies - just ask anyone who has tried to build a
new airport or urban rail link. Strong governments can override
As long as the authoritarian government is reasonably well
intentioned and competent, its ability to act can make a big
economic difference. Much of China's widening economic lead over
India can be traced back to the differences in political style.
Corruption is rampant in both countries, education is about
equally prized and local authorities have roughly the same
amount of autonomy. However, the central Chinese government
clears far more paths for investment far more quickly.
Neo-authoritarianism also comes with some big economic
disadvantages. Without strong non-government organisations,
there is no one to restrain graft and corruption, so people in
and close to the government can unjustly amass great fortunes
and break laws with impunity. Also, while today's strong leaders
are far less megalomaniacal than Hitler or Stalin, they are
still prone to overconfidence and grandiose ambitions. As they
work in a sycophantic political environment, there is rarely
anyone one willing to object forcefully to foolish plans.
Finally, neo-authoritarian governments generally care more
about non-economic than economic goals. Putin and Xi are
nationalists and Erdogan has a cultural and regional agenda. The
economy may be harmed by the policies that spring from such
ambitions. Russia is now in a trade war and China's current
intense scrutiny of foreign firms could prove economically
At present, the negatives of the new authoritarian economies
probably outweigh the positives. That, however, does not mean
the arrangement is doomed. When industrial democracies were new,
many clever observers thought they were beset by impossible
internal economic contradictions. Indeed, the first
authoritarian economic model was in part a response to those
supposed flaws. But the liberal system evolved and thrived. The
new authoritarian economies may yet do the same.