The Diverging Economic Dynamics of Dictatorships: Enlightened Rule and Tyranny?

1. The Diverging Economic Dynamics of Dictatorships: Enlightened Rule and Tyranny? Paper presentation for “Den nasjonale fagkonferansen i statsvitenskap 2008 ”, Tromsø 28-30 April Carl Henrik Knutsen, Dep. Pol. Sci., UiO

2. The motivating “puzzle” • The economic performances of dictatorships diverge big-time! Dictatorships dominate both among growth miracles and disasters, and the larger heterogeneity among dictatorships than among democracies exists even if we control for other variables A need for explanations (Barro, 1997) • My suggested answer: Some of the divergence comes from the different strategies rational and power-motivated dictators choose under different contexts (type of security threat). Strategies meant for increasing probability of survival have strong impacts on macroeconomic performance.

3. Policies and macroeconomic performance • We know something about which policies are conducive to for example growth, and the literature often labels dictatorial regimes as “developmentalist” or “predatory”, or uses other labels. • But why were these policies pursued in the first place?

4. Different types of dictatorships • The political regime variable can be viewed as multi-dimensional. Institutional and other types of divergences • Many classifications, Linz&Stepan, Hadenius&Teorell. • But in dictatorships with power concentration: institutional structures are at least partly endogenous and especially in the long run.

5. Earlier literature and the motivations of rational dictators • Wintrobe (90&98) • Olson (93&03) • Overland et al. (00) • Robinson (01) • General focus in literature on consumption motivated dictators. I shift the focus to dictators motivated by power.

6. The model • Three actors D (dictator), O (opposition) and S (foreign government) • Two periods • Actors motivated by “power”-holding office in domestic country, but S also sensitive to costs of war • Two sectors in domestic economy, industrial and natural resource, fixed share of industrial income goes to D • Transformation functions allow actors to transform economic resources to fighting capabilities • Probability of overthrow of D by O and S specified

7. The model continued • G is the choice-variable for the dictator. G=public investments, but can be given much broader interpretation • dPo/dg>0 and dPs/dg<0 • D wants to minimize probability of being overthrown and sets g in order to achieve this goal

8. The main implications of the model • The rational, power motivated dictator chooses a very different g in different contexts, where context here relates to the gravity of the different security threats • Mainly external threat High g • Mainly internal threat Low g • Balanced threats Intermediate g • dY/dg>0 High g gives high industrial outcome

9. Additional implications • Resource curse! dg/dR<0 • Ambivalent whether high share of income to dictator increases or decreases g, but for most plausible parameter values (not explicitlly investigated), higher share means higher g • Coordinated democratization movement Dictator has incentives to reduce g in long run

10. Problems for model • Actor-centered functionalism and endogeneity of economic institutions..but long-run model • Legitimacy, and how economic crisis in short term increases probability of overthrow

11. Some evidence • Dictatorships are much more conducive to growth in Asia than in Africa, relative to democracies. Claim: mainly internal threats in Africa, whereas large, external threats surround the small Asian Tigers • Dictatorships which has experienced “interregnum” (polity-data, proxy for grave internal threat) over the past 50 years have worse protection of property rights than other dictatorships

12. Kuomintang: A quasi-experiment • Before getting on the boat to Taiwan: Internal threats in Taiwan and China Predatory strategies • After establishing main base in Taiwan: Complete switch of economic policies: Building institutional structures, reducing corruption and looting, decent policies Taiwanese miracle