经济上仁慈的独裁者：发展民主的教训
罗纳德.吉尔森 2010
哥伦比亚法学院，rgilson@law.columbia.edu
柯蒂斯·J·米尔豪普特
发展中国家的战后经验导致两个令人沮丧的问题结论：只有少数国家开发成功； 和发展理论并没有产生发展。 在这篇文章中，我们研究了一个可能提供对发展难题的见解的关键事实：一些专制政权从根本上改变了他们的经济，尽管在一系列其他方面存在严重缺陷。 我们的目标是了解这些政权是如何实现增长的，以及新兴民主国家是否可以从这些经验中学到一些重要的东西。
我们的论点是，在这些经济上成功的国家，独裁者政权管理国家发展的关键时刻——通过从小规模的关系交换进入全球商业，过渡到政府行为支持绩效的交换，无论是基于正式第三方执法的潜力还是威胁 非正式的政府制裁。与弱民主相比，有利于增长的独裁者在克服政治经济障碍以可信地承诺寻租不会消散私人投资方面可能具有优势。
我们通过检查成功的开发经验来探索这个假设二十世纪后期的三个国家：奥古斯托皮诺切特领导下的智利； 朴正熙领导下的韩国； 以及邓小平及其继任者领导下的中国。 尽管这三个国家的宏观经济政策和制度战略大相径庭，但每位统治者都找到了可靠地致力于实现增长的方法。
世界银行、国际货币基金组织和其他国际组织数十年的法律改革活动组织以及大量的学术文献都认为公正的司法是从关系交换到市场交换的关键。 我们的研究表明，有多种选择是可能的。
然后我们考虑一个关于当代中国的熟悉的问题：经济发展必然导致政治自由化吗？ 这传统智慧说是的，并从智利和韩国的经验中得到支持。 我们表明，传统智慧忽视了直接影响中国的智利和韩国历史经验的重要特征。 推动中国经济增长的相同激励结构可能会减缓政治自由化。
发展中国家的战后经验导致两个令人沮丧的问题结论。 首先，只有少数国家成功发达。 第二个令人沮丧的结论直接来自第一个。发展理论，在其所有不断演变的迭代中，似乎并没有以最基本的方式发挥作用：它没有导致发展。
在这篇文章中，我们通过解决这个问题来回应这个令人沮丧的结果从不同的方向。 我们将从事实中倒推，看看是否出现了一种模式，可以提供对发展难题的洞察力。 我们认识到，这种方法存在简化为同义反复的严重风险：有效的定义了应该有效的。 为了避免这种结果，或者至少在我们犯错或屈服于整洁结果的诱惑时使我们的过程透明化，我们将关注一个关键事实：近几十年来，一些专制政权以惊人的程度取得了成功，尽管 他们在其他领域的严重失败，无法发展（实际上从根本上改变）他们的经济。 我们的论点是，在这些成功的国家中，专制政权管理着该国经济发展的关键时刻——经济通过从关系交换到交换的过渡进入全球商业，在这种交换中，绩效得到政府行为的支持，无论是基于潜在的 第三方执法或政府实施非正式制裁的威胁。 我们将这些政权描述为“经济上仁慈的”独裁政权。
我们所说的这个术语指的是一个专制政权，其领导人的效用函数将 GDP 的长期增长排在其瑞士银行账户增长的前面，从而利用国家的力量来追求国家经济转型。 这种称呼并非褒义词，而是一种区分将国家发展置于个人致富之上的专制统治者的方式。 用保罗·罗默的话来说，这位独裁者偏爱“非排他性商品”，即为每个人创造财富的商品，而不是“排他性商品”，即仅让政权领导人受益的商品。
在这方面，我们的方法与现有文献截然不同，现有文献“假设所有统治者都是由私人目标驱动的……”。
我们认识到，对专制制度说些好话会（而且应该）产生最初的本能消极反应。 我们将描述为在经济上仁慈的那些政权的领导人在其他方面往往并不仁慈——事实上，在某些情况下是可怕的。 此外，平均而言，专制政体的经济增长并不比软弱的民主政体好（在某些方面甚至更低），民主政体是比赛中唯一的另一匹马。
但我们的论点是，并非所有专制政权都是一样的； 例如，这些政权在韩国、台湾、智利、新加坡和中国的表现明显好于平均水平。 在这些国家，也许纯粹是因为运气，政权领导人有不同的野心，作为一个整体，他们比其他独裁国家和不那么专制的政权做得更好。
然而，正如我们稍后将详细阐述的那样，我们并不是说明智的政策是寻找经济上仁慈的独裁者来为发展中国家的转型提供人员。 机缘巧合，而不是计划，解释了寻求增长的专制政权的出现。 相反，我们的目标是从功能上确定这些政权为实现必要的过渡所做的工作，并评估在完成这些任务时其他压制程度较低的机构可能会取代独裁者。 为了预测我们的论点，新兴民主国家无法轻易提供可靠的承诺来保护那些需要投资其金融和人力资本以实现增长的人的回报。 风险仍然存在，即未来的政府将陷入寻租并推行贬值先前投资的政策。 经济上仁慈的专制国家可以提供这种承诺，至少在一段时间内是这样。 我们的愿望是从经济上成功的专制政权的经验中学习如何为新兴民主国家制定功能等效的战略。 作为这种方法的初步示例，我们将研究区域商业法庭、非正统投资者保护机制和创造性合同替代独裁者部分职能的潜力。
我们还认识到，识别和评估经济上仁慈的独裁政权所发挥的作用在很大程度上取决于具体情况，如果不深入了解每个成功政权的经验，这也将难以概括。 我们不会在这里进行整个项目。 相反，我们的目标是通过证明我们的理论解释是合理的，并以几个经济上成功但截然不同的独裁政权的案例研究为支撑，从而推动这个更大的项目。 我们的案例研究包括朴正熙领导下的韩国、奥古斯托皮诺切特领导下的智利以及邓小平及其继任者领导下的中国。
我们还希望阐明最近发展理论对制度核心作用的强调。 假设制度主义者是对的——持久增长最终需要的是支持公平资本主义的正式制度。
那么我们如何获得这些机构呢？ 世界银行和其他国际金融组织在大量奖学金的支持下近二十年的工作表明，有效的正式法律机构和独立的司法机构是成功发展不可或缺的要素。 然而，正是因为每个国家的历史和能力都将深深地依赖于路径，并且因为建立可信的正式机构是一项耗时的任务，我们需要一种稳定的方法来建立成功所必需的机构。
即使在不同的专制政权中使用的各种方法也可以作为一个选项目录，这些选项可以适应特定国家的情况并通过较少压制的方法来实现。 例如，正如 Franklin Allen 和 Jun Qian 的著作所强调的，中国用来支持市场交易的制度与实现相同结果的西方制度非常不同，即使中国的制度可能正在转向更西方的结构。 10 在 至少，了解非民主政体在没有高质量正式法律制度的情况下转变其经济的手段，应该会动摇关于增长所需制度特征的假设，并将调查转向其基本职能。
最后，我们相信我们对智利和韩国的审查威权主义下的经历提供了对中国政治自由化潜力的洞察。 许多评论员不经意地引用这些经验来支持经济发展与最终的政治自由化之间的紧密联系。 我们的观点侧重于专制政权下商业精英的作用，为中国的政治未来问题提供了另一种通常不那么乐观的方法。
第一部分阐述了分析框架：有利于增长的能力独裁政府向投资者可信地承诺，他们的投资回报不会因寻租而消散。 第二部分然后将可信承诺的问题放在背景中。 发展中国家可以通过关系合同经历相当显着的初始增长，而不需要正式的合同执行或非正式的政府鼓励国内各方履行合同。 然而，通过进入全球商业领域，突破性的经济发展需要从精心培育的关系契约转向更多的公平交易。
正如我们将看到的，困难之一在于政治经济学：现有精英的地位取决于他们在关系经济中的成功，他们可能会抵制以牺牲他们的份额为代价来增加总产出的变革。 在这种情况下，经济上仁慈的专制政权的关键作用是强加——或者更准确地说是通过谈判——向一组不同的互补制度的转变。 然后，第三部分调查了三个截然不同的国家的经验，以强调经济上仁慈的政权为促进转型所做的工作。 受日本明治时期的影响，韩国经历了明确寻求“工业革命”的军事政变。 在智利，以猖獗的寻租为特征的民主制度被军事独裁者所取代，其政权拥护自由市场政策，该政策由在芝加哥大学接受培训的经济学家提供信息。 最后，在中国，共产党采取了以经济增长为重点的政策，部分由国有企业主导，国家扮演的角色令人好奇地想起了私募股权基金的普通合伙人。 第四部分对专制体制下这三种截然不同的发展经历进行比较分析。 第五部分然后讨论我们对发展中民主国家的分析的教训，例如区域商业法庭为参与国提供他们无法单独创建的承诺机制的潜力。 最后，第六部分总结了我们的分析与一个棘手问题的相关性——经济增长与民主之间的关系，其中因果关系的方向具有巨大的政策影响。
一、分析框架
我们在这里的努力是解释以下模式。 作为一个经验问题，它是一个就哪种政府形式与发展中国家较高的增长率相关而言，新兴民主国家和专制政权之间的平均竞争非常激烈。 从理论上讲，很难预测赢家，因为每种形式的政府都有不同但令人衰弱的缺陷。 专制政府容易出现盗贼统治，其中最重要的输出是向私人瑞士银行账户的资本。 12 软弱或未巩固的民主国家容易出现利益集团寻租，这种寻租扩大了不良经济政策的范围和幅度，其目的是偿还债务 利益集团而不是支持增长。 这些政策增加了不确定性，相应地减少了对私人投资的激励。 这种对利益集团政治经济的担忧反映了多年前针对特定仍然薄弱的民主制度提出的担忧——汉密尔顿在联邦党人的论文中强调的派系对美国发展构成的威胁。 正如托尔斯泰在安娜·卡列尼娜 (Anna Karenina) 中针对不幸家庭所强调的那样，没有单一的失败方式。14 我们在此解决的问题是，似乎没有明确的成功方式。
Economically Benevolent Dictators: Lessons for Developing Democracies
https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=2632&context=faculty_scholarship
Ronald J. Gilson 2010
Columbia Law School, rgilson@law.columbia.edu
Curtis J. Milhaupt
Columbia Law School Scholarship Archive
The post-war experience of developing countries leads to two depressing
conclusions: only a small number of countries have successfully developed; and
development theory has not produced development. In this article we examine one critical fact that might provide insights into the development conundrum: Some autocratic regimes have fundamentally transformed their economies, despite serious deficiencies along a range of other dimensions. Our aim is to understand how growth came about in these regimes, and whether emerging democracies might learn something important from these experiences.
Our thesis is that in these economically successful countries, the authoritarian
regime managed a critical juncture in the country’s development--entry into global commerce by the transition from small-scale, relational exchange, to exchange where performance is supported by government action, whether based on the potential for formal third party enforcement or by the threat of informal government sanctions.
Compared to a weak democracy, a growth-favoring dictator may have an advantage in overcoming political economy obstacles to credibly committing that rent seeking will not dissipate private investment.
We explore this hypothesis by examining the successful development experiences
of three countries in the late twentieth century: Chile under Augusto Pinochet; South Korea under Park Chung-Hee; and China under Deng Xiaoping and his successors. Although the macroeconomic policies and institutional strategies of the three countries differed significantly, each ruler found ways to credibly commit his regime to growth.
Decades of law reform activity by the World Bank, IMF, and other international
organizations, along with a vast academic literature, assume that an impartial judiciary is the key to the transition from relational to market exchange. Our study reveals that a variety of alternatives are possible.
We then consider a now familiar question raised about contemporary China:
Does economic development inexorably lead to political liberalization? The
conventional wisdom says yes, drawing support from the experience of Chile and South Korea. We show that the conventional wisdom overlooks important features of the Chilean and Korean historical experiences that bear directly on China. The same incentive structures that have propelled Chinese economic growth are likely to slow political liberalization.
The post-war experience of developing countries leads to two depressing
conclusions. First, only a relatively small number of countries have successfully
developed. The second depressing conclusion follows directly from the first.
Development theory, in all of its evolving iterations, does not seem to work in the most fundamental way: it has not resulted in development.
In this article, we respond to this discouraging result by approaching the problem
from a different direction. We will work backwards from the facts to see if a pattern emerges that might provide insights into the development puzzle. We recognize that this methodology runs the serious risk of reducing to a tautology: what worked defines what should work. To avoid this result, or to at least make our process transparent if we make mistakes or succumb to the lure of a neat result, we will focus on one critical fact: to a striking degree in recent decades, some autocratic regimes have managed, despite their serious failings in other areas, to develop (indeed fundamentally transform) their economies. Our thesis is that in these successful countries, an autocratic regime has managed a critical juncture in the country’s economic development – the economy’s entry into global commerce by the transition from relational exchanges to exchange where performance is supported by government action, whether based on the potential for third-party enforcement or by the threat of informal sanctions imposed by the government.
We characterize these regimes as “economically benevolent” autocracies.
By this term we mean an autocratic regime whose leaders’ utility functions rank longterm growth in GDP more highly than growth in their Swiss bank accounts, and thus use the power of the state to pursue national economic transformation. This designation is not meant as a term of praise, but rather as a way of distinguishing authoritarian rulers who place national development ahead of personal enrichment. Put in Paul Romer’s terms, the dictator has a taste for “nonexcludable goods,” those that create wealth for everyone, as opposed to “excludable goods,” those that benefit only the regime’s leaders.
In this respect, our approach differs strikingly from the existing literature,
which “assumes that all rulers are driven by private objectives… .”
We recognize that saying something favorable about autocracy will (and should)
generate an initially visceral negative reaction. Those leaders of the regimes we will describe as economically benevolent very often were not benevolent – indeed, in some cases were monstrous – along other dimensions. Moreover, autocracies on average have produced no better (and by some measures lower) economic growth than weak democracies, the only other horse in the race.
But our thesis is that not all autocratic regimes are the same; the performance of such regimes in, for example, Korea, Taiwan, Chile, Singapore, and China, was dramatically better than average. In those countries, perhaps through sheer luck, the regime leaders had different ambitions, and as a group they did much better than both other autocracies and less repressive regimes.
As we will elaborate later, however, we hardly mean to suggest that sensible
policy is to seek out economically benevolent dictators to staff the transition of
developing countries. Serendipity, not planning, explains the appearance of growthseeking autocratic regimes. Rather, our goal is to identify functionally what these regimes did to effect the necessary transition, and to assess what other less repressive institutions might substitute for dictators in accomplishing these tasks. To anticipate our argument, emerging democracies cannot easily provide the credible commitment to protect the returns of those who need to invest their financial and human capital for growth to occur. The risk remains that future governments will descend into rent seeking and promote policies that devalue prior investments. Economically benevolent autocracies can provide that commitment, at least for a period of time. Our aspiration is to learn from the experience of economically successful autocratic regimes how to fashion functionally equivalent strategies for emerging democracies. As initial examples of this approach, we will examine the potential for regional commercial courts, unorthodox investor protection mechanisms, and creative contracts to substitute for part of the dictator’s function.
We also recognize that identifying and evaluating the role played by economically
benevolent autocracies will be to a significant extent context specific, which also will make it difficult to generalize without a deep account of each successful regime’s experience. We will not undertake that entire project here. Rather, our aim is to motivate that larger project by showing that our theoretical account, supported by case studies of several economically successful, but quite different autocratic regimes, is plausible. Ourcase studies include South Korea under Park Chung-Hee, Chile under Augusto Pinochet, and China under Deng Xiaoping and his successors.
We also hope to shed some light on the recent emphasis in development theory on the central role of institutions. Suppose that the institutionalists have got it right – what ultimately is needed for lasting growth are formal institutions that support arm’s length capitalism.
How then do we get those institutions? Nearly two decades of work by the World Bank and other international financial organizations, supported by a considerable amount of scholarship, suggests that effective formal legal institutions and an independent judiciary are indispensible attributes of successful development. Yet
precisely because each country’s history and capacities will be deeply path dependent, and because building credible formal institutions is a time consuming task, we need a stable of approaches to building the institutions necessary to success.
The variety of methods used even in different autocratic regimes may serve as a catalogue of options that can be adapted to a particular country’s circumstances and accomplished by less repressive methods. As Franklin Allen and Jun Qian’s work has stressed, for example, the institutions China has used to support market-based exchange are very different from Western institutions that accomplish the same result, even while Chinese institutions may be moving toward more Western structures.10 At the very least, understanding the means by which non-democratic regimes transformed their economies without high quality formal legal systems should unsettle assumptions about the required character of institutions for growth, and shift the inquiry to their essential functions.
Finally, we believe that our examination of the Chilean and South Korean
experiences under authoritarianism provides insights into the potential for political liberalization in China. Many commentators casually cite these experiences in support of a tight linkage between economic development and eventual political liberalization. Our perspective, which focuses on the role of business elites under authoritarian regimes, provides an alternative and generally less sanguine approach to the question of China’s political future.
Part I sets out the analytic framework: the capacity of a growth-favoring
autocracy to credibly commit to investors that the return on their investments will not be dissipated by rent seeking. Part II then puts the problem of credible commitment in context. Developing countries can experience quite dramatic initial growth through relational contracts, without the need for formal contract enforcement or informal government encouragement of contract performance by domestic parties. However, breakthrough economic development, by entering the arena of global commerce, requires moving beyond carefully nurtured relational contracting to more arms’ length trading.
As we will see, the difficulty is one of political economy: existing elites, whose position depends on their success in a relationally based economy, may resist the changes that will increase total output at the expense of their share. In this account, the critical role of economically benevolent autocratic regimes is to impose – or perhaps more accurately negotiate – the shift to a different set of complementary institutions. Part III then surveys the experience of three quite different countries to highlight what economically benevolent regimes have done to facilitate the transition. South Korea experienced a military coup that explicitly sought an “industrial revolution,” influenced by the experience of Meiji Japan. In Chile, democracy characterized by rampant rent seeking was replaced by a military dictator, whose regime embraced a free market policy informed by economists trained at the University of Chicago. Finally, in China the Communist Party embraced a policy focused on economic growth, led in part by state owned enterprises, with the state playing a role that curiously recalls that of the general partner of a private equity fund. Part IV undertakes a comparative analysis of these three quite different experiences of development under autocracy. Part V then addresses the lessons of our analysis for developing democracies, such as the potential for a regional commercial court to provide participating countries with a commitment device they could not create individually. Finally, Part VI concludes by considering the relevance of our analysis to a vexing problem – the relationship between economic growth and democracy, where the direction of causality has enormous policy implications.
I. The Analytic Framework
Our effort here is to explain the following pattern. As an empirical matter, it is a
close race on average between emerging democracies and autocratic regimes in terms of which form of government is associated with higher growth rates in developing countries. As a matter of theory, it is hard to predict a winner, since each form of government is subject to a different but debilitating flaw. Autocratic governments are prone to kleptocracy where the most significant export is of capital to private Swiss bank accounts.12 Weak, or unconsolidated democracies are prone to interest group rent seeking that expands the range and magnitude of poor economic policies whose purpose is to pay off the interest groups rather than to support growth. These policies increase uncertainty and correspondingly decrease the incentives for private investment.13 This concern over the political economy of interest groups mirrors that raised many years ago with regard to a particular still-weak democracy – the threat to U.S. development posed by factions that Hamilton highlighted in the Federalist papers. As Tolstoy stresses with respect to unhappy families in Anna Karenina, there is no single way to fail.14 The problem we address here is that there seems to be no clear way to succeed.
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Stern Professor of Law and Business, Columbia Law School, Meyers Professor of Law and Business,Stanford Law School, and European Corporate Governance Institute. ** Parker Professor of Comparative Corporate Law, Fuyo Professor of Japanese Law, and Director, Center for Japanese Studies, Columbia Law School.
We benefitted from feedback on early presentations of this project at the Latin American Law and Economics Association 2009 Annual Meeting in Barcelona, the Hongfan Institute of Law and Economics in Beijing, and on earlier drafts of this article at the Columbia Law School Faculty Workshop and Corporate Law Reading Group, a workshop at the Getulio Vargas Foundation Law School in Sao Paulo, Brazil, and at the Osler Distinguished Lecture in Business Law, Queens University, Kingston, Ontario.
We also received very helpful comments from Peter Conti-Brown, Donald Clarke, Merritt Fox, Jeff Gordon, Henry Hansmann, Doron Kalir, Michael Klausner, Michael Knoll, Thomas Lee, Andrew Nathan, Anne O’Connell, Mariana Pargendler, Randy Peerenboom, Mathias Reimann, Charles Sabel, Peter Strauss, Mark Tushnet, and Frank Upham. Extraordinary
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V. Lessons for Developing Democracies: Creating Credible Commitment
We examined the experiences of three economically successful autocracies with
the goal, not of extolling the performance of authoritarian governments, but to identify the techniques they used to credibly commit to building the institutions that support economic growth. The diversity of the three experiences teaches one important lesson. Just as a country’s development strategy will be in part a path dependent function of its history, so too will the mechanisms available to an emerging democracy for securing credible commitments be dependent upon its circumstances. As suggested previously, this counsels against identifying best practices and in favor of functional efforts to solve a problem common to developing countries regardless of form; the problem, but not always the responses, will generalize。
Shifting focus from the character of institutions for growth to their function
suggests that a range of novel institutional approaches is worthy of consideration by
developing democracies. Such democracies plainly lack the capacity to directly commit
to growth that was available to economically benevolent autocracies. But credible
commitment can be secured in a variety of ways that may not require the governmental
power available to an autocracy, including repeated dealings, changing the party with
decision-making authority, and enforceable contracts.165 Seeking to provide several
illustrations rather than a catalogue, we discuss a few concrete examples of how pragmatically creative institutions may sustain credible commitment to development even
in a weak democracy. And here our own biases emerge quite clearly. We prefer seeing
an existing democracy develop to the hope that development will lead an autocracy to
democratize.
As we noted above, part of the problem facing countries seeking to make the
transition fro elite resistance – a characteristic of developing democracies. But what one country cannot do for itself, a group of countries may accomplish collectively. As our earlier discussion of Russian corporate law reform showed, it is relatively easy to adopt commercially supportive substantive law but absolutely difficult to establish effective formal enforcement. At least part of the difficulty is that in a dispute involving a local elite, the Olson problem presents a significant barrier. Even though the costs to the economy of favoring the local interest are significant, the elite’s influence nonetheless may subvert the enforcement process.166 The intuition is that when it is not possible for a state to credibly commit itself to take hard decisions, the enforcement mechanism can be credibly outsourced through multinational effort. In precisely those circumstances when an individual state would flinch at taking enforcement action, its counterparties could be counted upon to act.
For example, one way of pre-committing the state to more evenhanded
enforcement by reducing the influence of the local elite is through the establishment of a regional commercial court.167 Such a court, created for example by a group of countries in East Asia or South America in connection with regional trade pacts, could be composed of judges drawn from the region with expertise in business and finance. Firms could contractually bind themselves to resolve disputes with trading partners or investors in the regional court. While a country would still have to enforce a judgment of the regional court, the failure to do so would invite retaliation by the country’s largest trading partners, thereby allowing even an emerging democracy to make a credible precommitment to the unbiased enforcement of arm’s length contracting associated with the next step in economic development.
Other imaginative examples of achieving credible commitment to politically
unbiased enforcement of investor protections in the absence of highly functional statesupplied legal procedures can be found in Taiwan and South Korea, both very successful economies with authoritarian political histories. In Taiwan, the Securities Futures Institute (SFI) is an ingenious mechanism for overcoming collective action problems and political uncertainties in shareholder litigation.169 The SFI is a nonprofit organization established by, but separate from, the Taiwanese securities regulatory authority. The organization purchases one trading unit of shares of each publicly listed company in Taiwan, giving it standing to bring suit as a shareholder. By delegating enforcement to an organization politically one step removed from the government, the state makes political protection of elites more difficult and thereby provides support to the establishment of effective capital markets, an area where there is considerable empirical evidence that informal enforcement is not a substitute for formal enforcement.170 In Korea, a private NGO without links to the government has successfully performed a similar function.171 Developing creative partnerships between the government and nonprofit organizations to encourage better enforcement of law seems a good deal more feasible than transplanting procedural mechanisms such as class action litigation from other countries onto a judicial process that is still far from mature.
Finally, the potential of creative contracts as commitment devices is underscored
by three examples from South America: two from Chile and one from Brazil. The first
Chilean example is the state’s contractual promises to foreign investors to maintain
consistent tax policies and arbitrate disputes in a neutral forum. The second is the 1980 Constitution’s explicit enumeration of economic freedoms, protected by high barriers to amendment. The Brazilian example involves a private effort to improve by contract the effectiveness of the capital market and, correspondingly, to lower the cost of equity capital by providing greater shareholder protection. A barrier to capital market reform in Brazil was that it threatened the existing elite who controlled much of the economy through high voting shares, and who had the power to block legislative reform. The solution was the Sao Paulo Stock Exchange’s initiative to give private companies the option to list on a new stock exchange segment that provides much greater shareholder protection, including a requirement of one-vote per share, without altering the rules governing companies controlled by the existing elite and therefore without directly threatening their position.
Our goal here is not to exhaustively survey the variety of ways in which an
emerging democracy can credibly commit to growth-inducing enforcement through
formal or informal means. Rather, it is to highlight the potential for multilateral
government enforcement and informal private initiative to provide a level of credible
commitment necessary to support growth. Clarifying the task – to develop techniques
that allow developing democracies to credibly ties their hands – will allow scholars and policy analysts to generate a range of “Commitment Apps” that will facilitate economic development by developing democracies.
VI. Economic Development and Political Liberalization Up to this point, our focus has been on the potential linkage between political regime type and the creation of institutions conducive to economic development. We conclude with some thoughts on a corollary question of major contemporary significance, particularly in relation to China: Does economic development lead to political liberalization?
While we earlier saw that the empirical evidence does not support the proposition
that democracy leads to economic growth,174 an influential literature argues that
economic growth leads inexorably to political liberalization. The developmental
experiences of Chile and East Asian countries are widely cited in support of this view. 175
Francis Fukuyama, for example, claims that The desire to live in a liberal democracy is not initially nearly as widespread as the desire for development. In fact, there are many authoritarian regimes like today’s China and Singapore, or Chile under General Pinochet that have been able to develop and modernize quite successfully. However, there is a strong correlation between successful economic development and the growth of democratic institutions, something originally noted by the great sociologist Seymour Martin Lipset.1
Similarly, Fareed Zakaria writes that “the best-consolidated democracies in Latin
America and East Asia—Chile, South Korea, and Taiwan—were for a long while ruled
by military juntas. In East Asia, as in western Europe, liberalizing autocracies laid the groundwork for stable liberal democracies.”
The argument for a tight nexus between economic development and political
liberalization is founded on a compelling chain of logic. Though the details vary, the
argument generally proceeds along the following lines: Economic development requires a
rule of law to protect property rights. Development generates a middle class and spawns
complex organizations interposed between the state and the people. An increasingly
comfortable middle class eventually seeks greater freedom of choice in the realms of
politics and civil society, while the formation of new organizations causes power to devolve from the state. In turn, the state becomes increasingly rule bound as it negotiates
with these new, competing sources of authority. Political liberalization follows,
sometimes only unintentionally, as protections expand from property rights to human
rights and freedoms.
Although internally consistent and compelling, there are problems with this
argument that become apparent when it is examined in light of actual experience.
Consider the common reference to Chile as an illustration of the nexus. Chileans
themselves disagree markedly on the contribution of Pinochet’s economic policies to
political liberalization.179
Some commentators—typically past supporters of the Pinochet regime--argue that the economic technocrats, understanding the relationship between economic freedom and political liberty, essentially engineered Chile’s return to democracy.180 Zakaria echoes a version of this claim in asserting that, despite his failings, “Pinochet did eventually lead his country to liberal democracy.” 181 A distinct and more nuanced argument is that the modernizing impact of the spread of market ideas in Chile provided the main thrust for the country’s major advance in development, which fostered a new democracy, distinct from the one that existed prior to Pinochet.182 This debate is instructive, because it highlights an essential fact of Chile’s experience typically overlooked by proponents of the development-to-democracy theory: Chile had a democratic form of government—albeit a weak one—for most of the twentieth century, and returned to democracy following a comparatively brief interruption of military dictatorship. As such, Chile’s experience is hardly a close fit for countries such as China, which – again, putting aside labels -- have never experienced a government that is
responsive and responsible to the people. Moreover, the sequence between development
and the return to democracy in Chile is far from linear. In fact, Chile’s economy enjoyed its best performance in the 1990s--after Pinochet’s departure. As we noted in our country sketch, the prospect of a return to democracy may have actually diminished confidence in Chile’s developmental trajectory, at least until it became apparent that the democratically elected leaders following Pinochet would retain the economic stance self-consciously enshrined in the 1980 constitution, which had as its goal constraining the future actions of someone other than Pinochet.183
If the Chilean case does not clearly support the conventional wisdom about the
causal link between economic growth and democratization, what does it signify? The
most notable feature of the story is Pinochet’s adherence to legal norms to pursue his
economic development agenda. This legalist bent eventually eroded his regime’s grip on
political power. As commentators note, The Chilean case is thus a significant rule of law story, illustrating the importance
of formal institutional constraints on political power to the eventual emergence or reemergence of democracy. It demonstrates the inherent difficulty political leaders face in
seeking to confine the rule of law to the economic realm. This conclusion sits
comfortably with the conventional wisdom, but recall that Pinochet was adhering to a
climate of legalism and democratic politics that predated his regime by nearly a century.
Again, we see the importance of path dependency and a country’s own history.
Pinochet’s decision to subject his regime to a plebiscite (to be sure, an election he
believed he could not lose), was almost certainly influenced by his country’s unique
history. In short, while the implications of Chile’s experience for the relationship
between development and democracy are worthy of deep study, casual references to
Chile’s experience in support of a direct progression from economic growth to political
liberalization are highly misleading, especially when made in the context of
contemporary China.
Now let us turn now to South Korea—another country often cited by proponents
of the development-to-democracy progression. In broad outline, the country’s recent
historical experience does fit the conventional wisdom quite well. As South Korea
developed economically under authoritarian rule, the population grew increasingly
restive, demanding greater social and political freedoms. An active civil society grew up quite literally out of street protests against the series of military governments which followed Park Chung-Hee. In 1987, military strong man Chun Doo-hwan acceded to
protests and allowed his successor to be chosen in a direct presidential election.185 In 1992, three decades after Park seized power, a free election produced the first civilian president, Kim Young-sam. Three democratically elected presidents have followed, and
South Korea receives high rankings for political rights and civil liberties.186
This extremely impressive national accomplishment merits the attention it has
received. But this is only a partial narrative of the link between economic development
and political life in South Korea. At least from the perspective of how Korea’s recent
history may be relevant to China, there is more to the story.
As we have seen, the conventional wisdom stresses the emergence of complex
organizations in the process of development as a counter weight to state power. In each
of our country studies, and most dramatically in Korea, we have seen that economic
development generated a particular form of new, complex organization interposed
between the government and the market—the business group, whether privately owned or
state controlled. The political implications of business groups as engines of economic
growth have not been carefully considered in exploring the democratization hypothesis.
In particular, the rise of huge, globally competitive multinational firms embedded in
networks of affiliations, including familial connections, with the Communist Party and
state organs has not been fully analyzed in the debate over China’s potential for political liberalization. This is where the other side of Korea’s story may be highly relevant.
South Korea’s developmental path has created a decades-long tension between the
economic benefits of chaebol-led growth and the political influence of the business
groups. The tension is perhaps inherent in the chaebol themselves, which are creatures of the political environment: “the rapid growth of the chaebol is generally considered to be the result of political decisions by the government – the result of governmental favoritism through interlocking relations between politicians or government policy-makers and
entrepreneurs.”187 Although the authoritarian military rulers who created these linkages
have been replaced by democratically elected civilians, the business groups forged out of
the growth alliance in the 1960s remain as powerful actors in the Korean political
economy. Many of the chaebol today are enormous organizations with far flung
operations and globally recognized brand names (think of Samsung Electronics or
Hyundai Motors, for example). Consistent with the development-to-democracy
hypothesis, they do indeed possess considerable power vis-à-vis the state. But their
influence is not necessarily conducive to a more transparent and accountable political
process or more robust rule of law. The chaebol have been linked to a long series of
political scandals, and they have staunchly resisted legal reforms that would diminish
their power.188 As Freedom House reports, “Despite the overall health of the South
Korean political system, bribery, influence peddling, and extortion by officials have not been eradicated from politics, business and everyday life.”189 No government subsequent to Park’s has succeeded in distancing itself from chaebol influence or reducing the impact of these groups in the political economy. Rather, they “have all reneged on early promises of taming the chaebol and have pursued pro-growth strategies relying on the chaebol as the engines of that growth.”190
Historical experience suggests that key entrepreneurs present at the critical
moment in a country’s national economic transformation often take on larger-than-life roles in the realm of political governance as well. This was as true of the nineteenth
century robber barons in the United States as of the Russian oligarchs who emerged in
the 1990s. The accumulation of wealth and influence of economic elites, coupled with
the state’s fear of cutting off the engine of development by reining in their operations, can significantly complicate the process of political and legal reform. Globalization serves to magnify this process, as the scope of state influence wanes vis-à-vis businesses that are highly mobile across national boundaries.191
This perspective may bear on the prospect of political liberalization in China. To
a far greater extent than was ever the case in South Korea, key political and economic
actors are bound up together in a dense network of interlocking relationships. From the
Princeling phenomenon to the promotion standards operating in the system of economic
quasi-federalism, and from pervasive state ownership of large enterprises to portfolio
investment by the country’s sovereign wealth fund, the political regime has thoroughly
embedded itself in the high powered incentive structures that fuel the country’s economic growth. At least in the realm of globally competitive or potentially competitive firms, Communist China is indivisible from Corporate China.
A political economy of this sort has few parallels in history.192 To the extent
historical parallels can be conjured up, they do not provide grounds for optimism about
China’s prospects for political liberalization.
193 As of this writing, the extensive linkages between the Party and the largest firms in the economy, while beneficial for domestic
growth and global expansion, have not had a salutary effect on either corporate
governance nor on Governance with a capital G. To the contrary, corruption and nontransparency have been exported by the overseas operations of state-linked firms.194
Particularly in light of South Korea’s experience with the chaebol, it is fair to ask
whether China’s future political liberalization is imperiled by precisely the mechanisms that have been devised to develop economically.195
China to date provides a vivid illustration—in contrast to Chile--of the way
economic growth-promoting constraints may strengthen, rather than undermine, the
political survival of the regime.196 Many commentators, economists in particular, simply equate institutions with “constraints on government,”197 without recognizing that governments often constrain the exercise of their authority selectively and strategically.
Our study shows that national economic transformation can be achieved with a variety of
institutions whose creation and effectiveness are not uniquely tied to a rule of law and political accountability as conventionally understood. If this analysis is correct, China’s rise may similarly challenge the conventional wisdom about the effects of economic development on the emergence of a liberal political order At the very least, the collective nature of China’s autocracy, with its
institutionalized succession processes, suggests that if political liberalization is to occur
over the medium term, it will be brought about principally through intra-Party reforms
rather than bottom-up expression of aspirations for political freedom. This is likely to have a profoundly constraining effect on the nature of the transition process and the posttransition economic structures. As we have stressed, political succession raises credibility problems, as economic actors worry about the new regime’s adoption of policies that will devalue existing investments and discourage new ones. This is where Chile’s experience with democratic transition may actually be most instructive for China.
Recall Pinochet’s 1980 Constitution, which contained modest political reforms coupled
with iron-clad protections for the existing economic order. Similarly, the Chinese case predicts
Party, coupl liberalization through gradual formalization of democratic elements within theed with hard-to-change rules relating to the economy.198 Under a system of
intra-Party political reform, Princelings and other entrepreneurs with close ties to the Party, together with key state-affiliated enterprises, will likely continue to serve as important commitment devices in market transactions. While the role of the legal system in protecting economic expectations may continue to grow, it is unlikely to supplant the preeminent role of the government in informally encouraging contractual performance in support of development.
