Does China need to become democratic to become rich?

Central Business District, Singapore (Kah-Wai Lin/Flickr CC BY-NC-ND 2.0)
Written by Stephen Howes

There is a certain irony to the fact that the Australian Foreign Minister’s recent speech, in which she advised China that if it wanted to get rich it would have to become democratic, was delivered in Singapore. History shows, Julie Bishop said, that “democracy and democratic institutions are essential for nations if they are to reach their economic potential. The only countries in the world who have escaped the ‘middle-income’ trap to become wealthy, high-income and advanced economies are democracies – with the exception of a small number of oil-rich Middle Eastern states.”

Singapore is certainly high-income – its income per capita is higher than Australia’s – but it is not a democracy. The ruling party has been in power for half a century. There are only a handful of opposition representatives in Parliament. This is not just due to good performance.

Singapore is regarded by Freedom House to be “Partially Free” in relation to both political and civil liberties. The Polity IV project describes Singapore as an “anocracy”, intermediate to an autocracy and a democracy. Neither index of democracy shows any improvement at all in Singapore’s score over the last 40 years. Even a sympathetic commentator, Professor Yi Feng of Claremont Graduate University, has characterised Singapore (in a chapter in this book) as having “a party-state apparatus that combines ideological domination, demobilization, and repression to achieve pervasive technocratic control of all sectors of society.”

If that’s all a bit abstract, consider that, just a couple of weeks after Julie Bishop delivered her speech, an 18-year-old Singaporean teen blogger was granted asylum in the United States on the grounds of “persecution on account of his political opinion.” That wouldn’t happen in a democracy.

This argument that democracy is essential for prosperity has recently been popularized by the academics Daron Acemoglu and James Robinson in their book Why Nations Fail? They focus specifically on China, and argue that, unless it becomes a democracy, which they think is unlikely, its growth will stall. They predict that we will look back on China, as we do now on the Soviet Union, and wonder what the fuss was about. Their argument is that growth is a relatively simple matter for poor countries to achieve. Poor countries can rely on technological catch-up, and authoritarian governance is no barrier to that. But if countries want to become high-income their economies have to become innovative, and they have to allow old, no-longer-competitive sectors to fade away. Authoritarianism, they argue, is incompatible with a culture of innovation and creative destruction.

It’s a convincing argument, but Acemoglu and Robinson don’t mention the island state. Yet, Singapore does present an alternative model and shouldn’t be dismissed purely on the basis of its small population. Singapore scores extremely well on international indices relating to the rule of law, the elimination of corruption, economic freedom and education. Perhaps it is these things that matter for prosperity, and, if they can be achieved without democracy, then countries can be rich but not free.

Of course, democracy and the political freedoms that go with it are things we value for their own sake. And it is plausible that we value them more as we get richer. If that is the case, then defending an authoritarian system will become increasingly costly, and political stability, another prerequisite for growth, will only be possible with a shift to democracy. This seems to sum up Taiwan and Korea’s experience over the last few decades.

But, again, we cannot take a democratic uprising for granted. Many in China continue to believe that their country is too big to be democratic. Many Chinese look at the United States, and the fact that lawmakers spend most of their time raising funds for re-election, and wonder if democracy is indeed the best way forward.

Indeed, while nearly all rich countries are democratic, the converse does not hold. Democracy in poor countries is often clientelistic, where parties are weak, and politicians focus on providing private, local goods, not public, national ones. There is certainly no guarantee that becoming a democracy puts you on the path to prosperity.

This question of the link between democracy and prosperity is not only relevant for China. What are called “dominant party authoritarian regimes” are the fastest growing class of political systems in the world, increasing their share from just one-tenth of all countries in 1990 to about one-quarter today. These are countries, like Singapore, which have the trappings of democracy, but where the ruling party has worked out how to manipulate the system to stay in power. Many of them are middle-income. Malaysia is a classic example, and it is about to become a high-income country, thereby escaping the infamous middle-income trap.

Whether countries like Malaysia, as well as China, a more narrowly authoritarian regime, need to become democracies to keep growing is in my view one of the great unanswered questions of our time.

Professor Stephen Howes is the Director of the Development Policy Centre.

Stephen Howes

Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School. Stephen served in senior economic positions for a decade at the World Bank before becoming AusAID’s first Chief Economist. In 2011 he was a member of Australia’s Independent Review of Aid Effectiveness.

7 Comments

  • Hi Professor Howes,
    Thanks for following up on my question to you (after Andrew Leigh’s lecture on 20/4) about the relevance of Acemoglou’s theories to China’s & Singapore’s development in this blog. It’s been great exploring this stuff with you & A. Prof. Golley @ Crawford. I’m sad to have had the final lecture of my Masters of Public Policy there today – it was the only year* of my 23 in formal education that I really enjoyed! Thanks :o)
    (* more accurately, 4 yr part time)

  • Quite an insightful and refreshing article, notwithstanding that the jury is still out on wether Singapore proposers because of, or in spite of its political systems.

    Needless to say, democracy in all its variations is an incredibly complex concept/work in progress, and its ideals do not always match the realities. Democracy doesn’t deliver/work equally well in all situations and we should not be afraid to question it – a simple point that is perhaps too often overlooked, with devastating consequences. Trying to force democracy down a nation’s throat can have untold consequences (Iraq?).

    At one time Fiji was ranked better than Singapore by Freedom House. But Fiji ranked well below Singapore on many HDI measures. There are other rights and freedoms besides civil and political rights and freedoms: freedom from crime, right to good education, housing, health, higher life expectancy – on all of these, Singapore leaves Fiji for dead.

    Fiji is trying to emulate Singapore. While journalists, politicians and academia rightly decry the lack of rights, the people have spoken with their votes. Bainimarama continues scores consistently well in scientific polls (although a truer picture will emerge after the 2018 poll). This begs the question: who knows what is best for the people – the political and journalistic elite, or the people themselves? Of course Fiji is no Singapore, with its history of corruption. But from a cost-benefit analysis viewpoint, are Fijians willing to tolerate a certain amount of corruption the sake of stability?

  • Democracy or not, China has witnessed rapid industrialization and accompanying growth in income and a commensurate decline in poverty the past three decades. I am in China now and evidence of the growth in industries, public infrastructure – the bullet trains as an example, and consumerism (foreign brands, abundant food) is all around you 24/7.

    But this is not for free! Air pollution in Northen China has been at a record high for the past two days. The one advantage of a centrally planned state is that these concerns are being registered and there is a determination from the center to address such ‘tragedies of the commons’. Climate skeptics are likely to have less traction here than anywhere else on the planet.

    BTW, I saw the moon and a star (rather a planet as an astrophysicist pointed out) last night but this is a rare sight here. Hope China is able to convince the world of the need for action on the climate front.

    • professor, i think the institution is not important. If it could benefit the people, it is a good institution. Pollution problem happens along with the economic development. This is not a only problem for China. In history, Britain, America, Japan and Italy, all of them also have had a severe air pollution problem, and some of them lasts for 50 years. i think the broken of environment might be the sacrifice for the rapid economic development. The most important consequence of air pollution is the threat to people’s health. Recently, most of my parents’ friend died in cancer (lung caner). It worries me a lot. To eliminate the pollution in China is hard, because we don’t want to stop the economic development what could lead to a social chaos. For now, national stability is what the government wants.

  • Thanks Ash. One of the most interesting seminars we’ve had this year was with Anderbrhan Welde Giorgis, who is now basically in exile from Eritrea, a country which, I learnt from meeting him, can only be described as a modern-day tragedy. In his book, Eritrea at a Crossroads, he writes of Eritrea’s “infatuation with Singapore” shortly after independence. “Virtually every ‘who is who’ in the government and the ruling Front,” he writes “visited the small island city state in the mid-1990s to observe the modus operandi of the Singaporean model, witness its achievements, and learn from its experience”. (p.191). But, alas, for nothing. As Giorgis comments, with masterful understatement: “[T]he Government of Eritrea clearly lacked what it takes to implement such a model successfully, including political will, leadership quality, functional institutions, accountable and transparent public administration, meritocracy in the civil service etc,. to transform the country into an African Singapore.” (p. 194). The road to development seems at once broad and narrow.

  • Super interesting to consider – Singapore is such an interesting case, particularly the way it has codified race and language in this very bureaucratic way in order to minimise disharmony. Imagine walking into a country like PNG and going ‘you are all one of four ethnic groups now and this will dictate what language you learn and what schools you will go to.’

    I always found it bizarre how many small island least-developed countries (I’m thinking particularly of Timor Leste) now make goals to ‘become’ a Singapore (or Macau). The ZEESM project in Oecusse is reportedly being done with idea of turning the enclave into a Singapore or Macau (complete with the country’s only MRI machine, which will be for ‘medical tourism’, not the country’s own people, and a casino). Speaking with friends who were there recently after many years away, there has been no consultation with the people, the big infrastructure projects don’t meet their needs and are really poorly done (already falling apart before they are even finished), and it’s probably just going to be a white elephant and a huge waste of resources. I think countries forget that authoritarian development is not just charging in and doing stuff but that it also still depends on having institutions underneath the leadership that can execute the plan, and not having resources vanished away by corruption or incompetence, and people actually seeing some kind of result so that the reduction of freedom seems to have some kind of conciliatory outcome. Functional quasi-authoritarian developmental states still have some kind of good governance structures underlying them right?

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