The Perfect Governance System Is A Myth!

Political systems and orientations, and their implications have long been studied in the context of economic development. The systems of governance, levels of state intervention & autonomy all have a role to play in the economic trajectory of a country. Adam Smith’s invisible hand doctrine breaks in the real world due to the presence of externalities, which is why the visible hand of government needs to intervene. The Government’s function is to promote equity & increase efficiency while enforcing property rights. However, the system under which a country is governed is still an important factor. The rise of the Asian Tigers (South Korea, Taiwan, Hong Kong, Singapore) in the 20th Century as well as China’s stupendous rise as an economic powerhouse, has led some to believe that the prevailing authoritarian system in these countries is necessary and sufficient for economic development. The recent success of China in handling COVID-19 as compared to democracies like the US & India has also added to people wondering the same. However, the economic development of countries like India & Botswana, which are relatively well-functioning democracies shows that it is not necessary. Similarly, the insufficiency is showcased by the authoritarian regimes in Botswana’s neighbours in Sub-Saharan Africa that, if anything, led to economic disasters.

Considering the case of India & China, we can see that both the countries have seen a meteoric rise in their economic development with opposing systems of governance - India, as a parliamentary democracy with considerable social heterogeneity and China, as a one-party authoritarian regime with considerable social homogeneity. There can also be arguments made about the authoritarian tendencies of the Indian Government, as well as the supposed democratic institutions present at the sub-national level in China.

The Indian State is relatively tolerant of dissent and diversity while also being accountable due to the democratic valves in place. While the electoral system might stall reforms and create infrastructure bottlenecks, it is equally successful in bringing about a social revolution. By empowering every citizen with the right to vote, it has made them an equal stakeholder in the electoral process, although the powerful still hold a large amount of sway. Indian State institutions are still developing, and the limited capacity of the Indian State is common knowledge. Despite this, the economic development alongside a continuing democratic system in place is a major testament that authoritarianism is not necessary for economic development.

Some early 20th century scholars argued that dictatorships were favourable at lower levels of development as they are not bothered by pressures from unions and private players. This was also backed by scholars who believed democracy was suitable for development only at higher levels of growth, as authoritarianism allows for sacrifices required for a brighter tomorrow, that an electorate wouldn’t support. However, the subsequent failure of authoritarian regimes in Eastern Europe & Latin America clearly showed that authoritarian overreaches of the state can only be constrained by democratic institutions. While personalised dictatorships(Somoza in Nicaragua), crony dictatorships (the Philippines under Marcos) and communist bureaucracies (Soviet Union) all are quite different, they had two things in common: Authoritarian decision making & eventual economic crises. They are clear examples of authoritarianism not being sufficient for economic development. Thus, China, where unlike Asian Tigers economic development didn’t lead to successful transitions into democratic systems, is an outlier rather than the norm.

China’s authoritarian style of governance didn’t always lead to economically beneficial outcomes. The most glaring example of this is the ‘Great Leap Forward’, the socio-economic policy that focused on transforming China from an agrarian economy to a communist society, by introducing mandatory agricultural collectivization and prohibiting private farming. The policy was a massive economic disaster that led to millions of deaths and the greatest destruction of real estate in human history. Democracy avoids such catastrophic mistakes.

Democracy also curbs the excesses of capitalism, by allowing social & environmental stakeholders to have a say in development projects. For example, Land Acquisition is a major point of contention in both India & China. India sees loud protests by environmentalists, farmers and other stakeholders before most infrastructure development projects because of land acquisition issues. These take years to be resolved creating bottlenecks and sometimes despite lobbying and compensation promises, cannot be resolved. However, this does keep the government in check, and also makes development more sustainable. Deliberation leads to sustainable development in such cases, so to speak. In China, however, the government has been acquiring land by force for years now, in many cases without considerate compensation & by punishing acts of dissent. This has come at the cost of sustainability as pollution levels have skyrocketed due to rampant urbanisation without the adoption of environment-friendly practices.

Even social conflicts - rampant in heterogeneous societies like India, hindering development, are handled better by democracies. Social conflicts in China are tackled by curbing dissent, curbs on expression & severe punishment. India, on the other hand, has not only seen a much larger amount of social conflict but also tackled it much better by deliberations.

The argument against authoritarianism doesn’t imply democracy is the perfect approach, it merely states that it is a better approach. If we see in the Indian context, wherein the state has limited capacity, reforms, barring the 1991 reforms haven’t been politically wise. The State despite various promises for labour reforms, farm reforms & privatization hasn’t been able to successfully execute these policies. The Gandhian idea for democracy has decentralisation as one of its primary tenets. Despite Panchayati Raj reforms & Smart City plans, governance continues to be lacking in quality at lower levels of the Indian political hierarchy. If anything, India’s growth and its transition from the Planning Era to the liberalised era, haven’t been able to sustain the momentum due to the perils of democracy, wherein the politician seeks power & not development. The largely illiterate electorate & asymmetry in information leads to sops being preferred over reforms. While it helps in winning elections, it further ignores the main issues - endemic poverty, and lackluster levels of overall economic development. However, as the levels of literacy & access to information increase & the state capacity steadily improves, these issues are successfully tackled as seen in various other democracies. The world’s biggest economic power, the United States has almost 250 years long of reforms, stabilisation & success to showcase this.

The volatility of authoritarian regimes also points towards their inefficiency. Democracies not only lead to economic reforms but also a better provision of public goods over time, lower social unrest, lower political instability & higher economic freedom. While the economic development isn’t as fast, it is much more stable & strong. Most major countries in the world have had to face major economic crises, some being- the US during the Great Depression, the Soviet Union under Gorbachev, Brazil under Figueiredo, India during the 1991 economic crisis, and Venezuela under Maduro. However, of these, only democracies India & USA could successfully come out the other side through reforms, and smart policymaking.

China’s growing levels of inequality as well as its weak financial market structure also show that despite strides in reducing poverty & ensuring higher standards of living, the most populous country still has miles to go. India also faces similar problems of rising inequality, however, it has a robust banking system & a well oiled financial market structure that is only getting stronger by the day.

All of the above is a clear testament to the fact that while there is no form of government that is perfect, authoritarianism isn’t necessary nor sufficient for the economic development of a country. Democracy may not be perfect but is much better at fostering stable & strong economic development that is more adaptive & responsive to shocks.


The views and opinions expressed are those of the author and do not necessarily reflect the views of The Brief Bulletin.


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