4. Leadership and Political Regime

1. The crucial role of leadership

Leadership with proper vision and decisive action is the most important driver of organizational change. This is true for any organization, from the micro level such as a firm or a committee, to the macro level such as a country or even the global community. Although some changes are realized through popular pressure or effort by middle-ranking technocrats, bold policy shifts or administrative reforms are usually accomplished under strong leadership.

We are particularly interested in the quality of the top leader of the state such as the president or the prime minister. In addition, effective leadership is desirable at any level, including ministers, committee chairs, department heads, etc. These leaders determine the effectiveness of organizations under their supervision.

There are many "strong" national leaders in the world, but only a few of them succeed in promoting development. This is because strong power is only a necessary, but not sufficient, condition for effective leadership. Good leaders are not just strong.

First and foremost, the personal character and ability of the top leader is crucial. A strong national leader must at the same time be economically literate. He or she must have the keen sense of what works and what does not in accelerating development. PhD in economics is not needed, but instinct to select right policies and good people is essential. When that instinct is combined with strong determination and quick action, development begins. In contrast, a strong leader who is economically illiterate only causes stagnation and confusion.

Second, a political regime that enables a leader to execute necessary policies and reforms is needed. However, this requirement is secondary, since a truly strong, economically literate leader can build such a regime if it does not already exist. In this sense, leadership is primary, since it can change all other conditions and relations, including the political regime and five relations we have proposed to look at.

2. State typology

Robert Wade (London School of Economics), a political scientist specializing in Taiwan, asks what kind of government is needed for industrial policy to work. He classifies developing countries into three types (Wade, 2006):

Neopatrimonial type--in this type of state, there is no clear separation between the public realm and the private realm. State leaders and officials see the state's authority and resources as their own. Budget, investment projects, ODA, state companies, etc. are considered to be instruments for increasing the personal profits of those in power as well as their relatives, friends and followers. Prof. Wade says that many states in Sub-Saharan Africa, Middle East and Central Asia belong to this type.

Fragmented-multiclass type--in this state, public and private realms are separated, and policies are conducted for the benefit of the nation rather than for the ruling few. However, state authority is fragmented and the social base (supporter base) is plural, including capitalists, workers, farmers, military, landowners, etc. According to Prof. Wade, India, most of Latin America, and some Southeast Asian countries belong to this group. (This type of state is normally called "populism" or "soft state.")

Cohesive-capitalist type--this state is characterized by concentrated state authority at the top; a narrow supporter base comprising of capitalists only, who interact intensely with the state; use of concentrated power to discipline the rest of society including workers; deep penetration of state power into all rural and urban areas; nationalistic or anti-communist ideology to keep the society as one; and restriction of political participation. (This type of state is normally called "developmental state" or "hard state.")

Using this classification, Prof. Wade argues as follows. Whether industrial policy works or not depends on the type of state. In a neopatrimonial state, any industry policy fails, so it should not be attempted. The IMF-World Bank prescription of bold liberalization and provision of the level playing field is most suitable for such a state. By contrast, industrial policy is useful for states of the other two types. For the fragmented-multiclass type, "grass roots" industrial policies for upgrading technology, management and human resources, such as industrial extension service and worker training programs, should be implemented. These do not require huge capital or a sophisticated organization. For the cohesive-capitalist type, more aggressive and selective industrial policies, like those adopted by Japan and Korea in the past, may also be possible.

However, Prof. Wade's classification is a static one. The big question is how a country can transform itself from the first type to the second or third type--if that is deemed desirable.

3. East Asia's authoritarian developmentalism

Developing countries are often trapped in policy dilemma. There are usually many weaknesses in the private sector, such as low technology, insufficient labor quality, weak management, fund shortage, lack of trust and entrepreneurship, unreliable contracts, primitive banking, etc. The government is expected to solve these problems, but the government itself faces many problems, such as inefficiency, lack of talent and information, corruption, bureaucratic formalism and sectionalism, and political pressure. Low-quality policies cause low growth and social frictions. Policy, economy and society are trapped in a vicious circle. Huntington-Nelson's technocrat model and populist model, introduced earlier, are an example of such dilemma. Only countries that escape this trap can take off and achieve sustained growth, while others may forever remain in a state of low development.

In East Asia, there are many latecomer countries that have achieved (or are achieving) high growth and rapid industrialization. Japan began to show remarkable performance as early as the late 19th century. Newly industrializing economies (NIEs)--Singapore, Hong Kong, Taiwan and Korea--followed in the late 20th century. At present, a number of ASEAN countries are experiencing high growth, and China is also catching up very rapidly. How did these East Asian countries overcome the policy dilemma mentioned above?

East Asia's successes were not because of good initial conditions. After WW2, most countries in East Asia suffered serious war damage or had to fight a painful war of independence. The Korean Peninsula and Indochina (Vietnam) were the two places where the Cold War turned hot. China under Chairman Mao experienced serious human and social damage. In 1950, the average income of East Asia was lower than Africa. But now, no one doubts the superb economic achievement of East Asia.

Per Capita GDP (in adjusted 1990 dollars)

Source: Angus Maddison, The World Economy: A Millennium Perspective, OECD Development Centre, 2001.

East Asia's high-performing economies solved the policy dilemma by adopting a political regime which Prof. Toshio Watanabe (Takushoku University) calls authoritarian developmentalism (also called developmental state). As argued in Overview, institutional change can occur in several ways. Authoritarian developmentalism was installed and managed by policy, that is, by internal initiative of the central government as deus ex machina. (The only exception to this was Hong Kong, which adopted laissez-faire policies and political liberalism to achieve high income.)

Key ingredients of authoritarian developmentalism are as follows.

  (1) Powerful and economically literate leader
  (2) Development as a supreme national goal and ideology (obsession with industrialization and export competitiveness, instead of poverty reduction or people's empowerment)
  (3) An elite technocrat group to support the leader in designing and implementing policies
  (4) Political legitimacy derived from successful development
  (5) Broad popular support

To be successful, an authoritarian developmentalist state must implement two kinds of policies: (i) developmental policies to accelerate growth, which include development plans and strategies, education and training, technology, infrastructure, FDI attraction, finance, etc; and (ii) supplementary policies to solve the problems arising from rapid growth and social change, such as pollution, congestion, inequality, corruption, and other social evils. Unless both policies work, the country cannot stay on the long-term growth track. This policy mix enabled East Asian countries to avoid social crises which Huntington and Nelson regarded as inevitable.

East Asia's authoritarian developmentalism often emerged under severe military threat. South Korea was threatened by North Korea, and Taiwan's existence was precarious in the presence of Mainland China. Internal political chaos and ethnic unrest also increased the likelihood of such a regime. Authoritarian developmentalism was often established through a military coup to replace a previously weak, ineffective government. After its establishment, many elements of democracy such as freedom of speech, free and fair election and the power of parliament were restricted or suspended. For this reason, the regime is usually criticized by the Western countries as "undemocratic."

Why do we need an "undemocratic" state to execute development? The reason--which may be convincing or questionable depending on one's viewpoint--is that rapid economic growth from a low level requires massive and speedy resource mobilization. The country must build power and transport infrastructure, unify ethnic and social groups into one nation, attract investment, improve skills and technology, build new schools and hospitals, crack down on crimes and social evils, relocate residents, manage internal migration, conduct macro and trade policies, etc. If broad political participation of all groups is allowed, and if all policies must be debated in the parliament, it is more democratic but takes too much time. If a critical mass of policies is not adopted simultaneously, the country cannot initiate or sustain growth.

The graph below, with pink areas, shows the history of East Asia's authoritarian developmentalism according to Prof. Akira Suehiro (Tokyo University), an expert on Thailand. Among all "dictators," some were very effective in promoting development while others were not. Despite Prof. Suehiro's nomination, it is quite doubtful if we should label Philippines' Marcos regime as authoritarian developmentalism. On the other hand, China is not included here, but if it is, Deng Xiaoping's rule (1978-1997) would surely be counted as authoritarian developmentalism. Prof. Suehiro does not consider Vietnam or Myanmar as authoritarian developmental states. Although they may be authoritarian, they are not sufficiently developmental.

<Click graph to enlarge>

Another important point about authoritarian developmentalism is its transitional nature. It is not a regime all countries should strive to achieve as a long-term goal. Rather, it is a short-term regime of convenience lasting for a few decades, an instrument for achieving fast growth at a critical moment in the history of a particular country. Once the desired level of development is attained, it should be thrown away just like the first-stage booster must be ejected when the rocket reaches a certain height.

4. Components of democracy

When authoritarian developmentalism is mentioned, there are usually two types of reaction. The first reaction is acceptance and even a praise of this regime as an effective tool for latecomer countries. The second reaction is rejection and abomination, with a strong conviction that democracy is sacred and should not be sacrificed in the name of development. Generally speaking, officials and researchers in East Asia have more favorable views on authoritarian developmentalism than their Western counterparts. Evaluation is always sharply divided--that is the general experience of the author when he presented the idea at OECD (Paris), UNCTAD (Geneva), World Bank (Washington, DC) or ADB (Hanoi).

Some people are emotionally opposed to any restriction of democracy. Others think that democracy and economic development are two separate matters. For example, Prof. Dani Rodrik (Harvard University) states:

"I do not think there is any tradeoff [between economic growth and democracy]. I do not think the reason democracy is valuable is exclusively or mostly for economic reasons. Nor do I think any country in the world is poor enough that it cannot afford to have democracy or better observances of human rights. I believe that empirical evidence supports that a country does not have to pay an economic cost or penalty when it makes the transition to democracy. I do not subscribe to the idea that you need to delay democratization just so that you can actually have growth or that you can have democracy only when you can afford it .... I also do not think that democracy is a precondition of economic growth. I think democracy is good for a whole lot of things. The sooner you can have it the better. Democracy is a largely different issue than the question of development in the narrow economic growth sense." (Rodrik, 2006)

To consider this issue more deeply, the concept of democracy should be divided into several components:

Human rights--freedom, equality, social rights, etc. and the absence of oppression.

Legitimacy--origin and transition of power must be legal and based on the will of the majority, without power seizure by force.

Rule of law--all decisions and actions of the state must be based on law, not personal discretion of politicians or officials.

Participation--free election, voting right for every citizen, multi-party system, opposition and interest groups, and decision-making by majority rule in the parliament.

Public purpose--all policies must be conducted for the benefit of all, not a few.

Decentralization--localities should have enough authority and budget to conduct policies, instead of being dictated by the center.

Authoritarian developmentalism restricts some of these components in order to carry out policies that are regarded as necessary with speed and flexibility. But not all components need to be suppressed for this purpose.

When the regime is established by a military coup, there is no legitimacy in the above sense. Instead, an authoritarian developmental state seeks legitimacy by pursuing public purpose, namely, delivering high economic performance to all. As for other components of democracy, they are usually restricted, but the degree of restriction must be moderate and reasonable. For example, some human rights such as freedom to criticize the government are often restricted to achieve political stability, but random oppression, torture and execution, or even ethnic cleansing, at the whims of a dictator should never be allowed. Under authoritarian developmentalism, only those restrictions necessary to carry out economic policies may be tolerated, if at all. Instead of rejecting any deviation from democracy, we may perhaps ask whether or not the amount of restriction is appropriate and not excessive.

Another important issue is the exit problem. Watanabe (1995) argues that authoritarian developmental states will melt away when they succeed in development. As income rises, social structure and people's attitude change in the direction which tends to disapprove authoritarianism. This is true, but the exit may not be so automatic. Strong leaders tend to stay for a long time, and often continue to cling to power when they are old and no longer useful. Unlike well-functioning democracy, this regime does not have an internal mechanism of power transition without causing instability or bloodshed. Thus, smooth power transition must rely largely on the wisdom and self-control of the leader himself. In East Asia, exits of authoritarian leaders have been sometimes smooth and sometimes violent.

The situation is much the same when one political party monopolizes power, be it the Communist Party or the Liberal Democratic Party. The ruling party, when it remains in power for several decades, generates a web of beneficiaries and supporters who resist reforms. As the party's policies, which worked well initially, become outdated, a fight between reformers and conservatists normally emerges.

5. Democracy as an evolving process: the Korean experience

Today, South Korea (Republic of Korea) is a country that can competitively produce high-tech products such as cars and consumer electronics. But half a century ago, people did not think that Korea had any future. It was a colony of Japan until 1945. The Korean War (1950-53) devastated and divided the country. In comparison with North Korea which had heavy industries and natural resources, the development potential of agriculture-based South Korea seemed bleak. Under the Rhee Syngman government (1948-60), South Korea was regarded as a corrupt basket case. It depended heavily on American aid.

However, the situation changed dramatically in 1961, when Park Chung Hee, a military general, staged a coup and seized power. His regime was a typical authoritarian developmentalist state with strong will to promote capitalism under state guidance. The Economic Planning Board was created as an executing agency and five-year plans were started. Development strategy focused on export competitiveness, foreign loans and importing technology. Export subsidies, import protection, foreign exchange allocation, exchange unification and devaluation, low-interest rate policy loans, and tax incentives were implemented. Targeted industries shifted from garment and footwear (1960s) to steel, petrochemicals, and shipbuilding (1970s) and automobiles and electronics (1980s). Korea conducted highly interventionist policies. It became one of the most successful latecomers.

Park Chung Hee was assassinated in 1979, but another military general, Chun Doo Hwan, continued to rule until 1987. Korea's industrialization was carried out under a serious threat from North Korea and suppressed democracy. It was characterized by the triangular alliance of government, banks and chaebols (large business groups like Daewoo, Samsung, Hyundai, LG).

Based on the hypothesis that democracy can be introduced effectively only after a certain level of development is reached ("developmental threshold for democracy"), Nguyen Thi Thanh Huyen analyzes the process of Korea's development and democratization (Nguyen 2004). She contends that economic growth leads to "social mobilization," that is, social changes such as urbanization, industrialization and modernization. These phenomena breed two necessary driving forces of democracy, namely political culture and social structure.

Political culture is popular attitude which supports democracy, such as compromise, participation, equality and moderation. Social structure means a power shift from the old classes (farmers, military, landowners) to the new classes (students, workers, professionals). These factors interact with each other to prepare conditions under which democracy can be installed and sustained. Ms. Huyen's view, which sees democracy as endogenous to the development stage, is diametrically opposed to Prof. Rodrik's view cited earlier, which regards development and democracy as mutually independent.

In 1961, 80% of South Korea's population were farmers. By 1985, workers (over 50%) and the middle class (about 40%) dominated the social structure. Korea made a transition to democracy in 1987, when Roh Tae Woo became president through popular election. Korea could not introduce democracy in the 1960s or 1970s, but socio-economic changes under rapid economic growth prepared conditions for political transformation by the late 1980s.

6. Some questions

Finally, let us ask a few difficult questions, to which this lecture cannot offer good answers.

First, even if we accept authoritarian developmentalism as a temporary regime for rapid industrialization, how can society ensure that leaders are economically literate? How can we have "good" dictators instead of bad ones? Forces that affect the quality of top leaders include foreign pressure, an education system that inculcates proper attitude on the elite class, academic studies to propagate the idea, and social expectation for and acceptance of such leaders. The solution must be indirect since there is no direct way to install such leaders in the government.

Second, is authoritarian developmentalism replicable in other parts of the world? How about Africa, for example? Copying economic policies is hard enough. Transplanting a political regime in a different socio-cultural context seems almost impossible. Contagion existed within East Asia, when governments adopted authoritarian developmentalism one after another. But it did not spread much beyond East Asia (Chile may be the only exception).

A related question is, can anyone--including foreigners and international organizations--do anything about the type of government? President Bush wants to install democracy in Iraq, but the results are not very encouraging. Retaliation by suicide bombers, not moderation and compromise, rules. Similarly, any attempt to set up a "good" authoritarian government may fail miserably. If that is the case, the existing government must be taken as given when development strategy and ODA policy are formulated.

References

Huntington, Samuel P., and Joan M. Nelson, No Easy Choice: Political Participation in Developing Countries, Harvard University Press, 1976.

Leftwich, Adrian, "Democracy and Development: Is There Institutional Incompability?" Democratization, 12:5, Dec. 2005, pp.686-703.

Nguyen Thi Thanh Huyen, "Is There a Developmental Threshold for Democracy?: Endogenous Factors in the Democratization of South Korea," in ADB and VDF, Which Institutions Are Critical to Sustain Long-term Growth in Vietnam? Asian Development Bank, 2004 (English and Vietnamese). download

Ohno, Kenichi, Shijo Iko Senryaku (Strategy for Market Transition), Yuhikaku, 1996, Japanese.

Ohno, Kenichi, and Izumi Ohno, eds, Japanese Views on Economic Development: Diverse Paths to the Market, Routledge, 1998.

Ohno, Kenichi, "The Role of Government in Promoting Industrialization under Globalization: The East Asian Experience," in ADB and VDF, Which Institutions Are Critical to Sustain Long-term Growth in Vietnam? Asian Development Bank, 2004 (English and Vietnamese). download

Rodrik, Dani, "Home-grown Growth: Problems and Solutions to Economic Growth," an interview with Harvard International Review, Winter 2006, pp.74-77.

Sen, Amartya, Development as Freedom, Anchor Books, 1999.

Suehiro, Akira, Catch-up gata Kogyoka ron (Catch-up Type Industrialization), Nagoya University Press, 2000, Japanese.

Wade, Robert, "The Case for Open-economy Industrial Policy," paper for PREM conference on the Institutional Foundation of Growth, World Bank, April 2006, Washington, DC, and GRIPS seminar, May 2006, Tokyo.

Watanabe, Toshio, Shinseiki Asia no Koso (Designing Asia for the Next Century), Chikuma Shinsho, 1995, Japanese. English translation in Ohno-Ohno (1998).