經濟上仁慈的獨裁者：發展民主的教訓

經濟上仁慈的獨裁者：發展民主的教訓

羅納德.吉爾森 2010
哥倫比亞法學院，[e-mail]
柯蒂斯·J·米爾豪普特

發展中國家的戰後經驗導致兩個令人沮喪的問題結論：隻有少數國家開發成功； 和發展理論並沒有產生發展。 在這篇文章中，我們研究了一個可能提供對發展難題的見解的關鍵事實：一些專製政權從根本上改變了他們的經濟，盡管在一係列其他方麵存在嚴重缺陷。 我們的目標是了解這些政權是如何實現增長的，以及新興民主國家是否可以從這些經驗中學到一些重要的東西。

我們的論點是，在這些經濟上成功的國家，獨裁者政權管理國家發展的關鍵時刻——通過從小規模的關係交換進入全球商業，過渡到政府行為支持績效的交換，無論是基於正式第三方執法的潛力還是威脅 非正式的政府製裁。與弱民主相比，有利於增長的獨裁者在克服政治經濟障礙以可信地承諾尋租不會消散私人投資方麵可能具有優勢。

我們通過檢查成功的開發經驗來探索這個假設二十世紀後期的三個國家：奧古斯托皮諾切特領導下的智利； 樸正熙領導下的韓國； 以及鄧小平及其繼任者領導下的中國。 盡管這三個國家的宏觀經濟政策和製度戰略大相徑庭，但每位統治者都找到了可靠地致力於實現增長的方法。

世界銀行、國際貨幣基金組織和其他國際組織數十年的法律改革活動組織以及大量的學術文獻都認為公正的司法是從關係交換到市場交換的關鍵。 我們的研究表明，有多種選擇是可能的。

然後我們考慮一個關於當代中國的熟悉的問題：經濟發展必然導致政治自由化嗎？ 這傳統智慧說是的，並從智利和韓國的經驗中得到支持。 我們表明，傳統智慧忽視了直接影響中國的智利和韓國曆史經驗的重要特征。 推動中國經濟增長的相同激勵結構可能會減緩政治自由化。

發展中國家的戰後經驗導致兩個令人沮喪的問題結論。 首先，隻有少數國家成功發達。 第二個令人沮喪的結論直接來自第一個。發展理論，在其所有不斷演變的迭代中，似乎並沒有以最基本的方式發揮作用：它沒有導致發展。

在這篇文章中，我們通過解決這個問題來回應這個令人沮喪的結果從不同的方向。 我們將從事實中倒推，看看是否出現了一種模式，可以提供對發展難題的洞察力。 我們認識到，這種方法存在簡化為同義反複的嚴重風險：有效的定義了應該有效的。 為了避免這種結果，或者至少在我們犯錯或屈服於整潔結果的誘惑時使我們的過程透明化，我們將關注一個關鍵事實：近幾十年來，一些專製政權以驚人的程度取得了成功，盡管 他們在其他領域的嚴重失敗，無法發展（實際上從根本上改變）他們的經濟。 我們的論點是，在這些成功的國家中，專製政權管理著該國經濟發展的關鍵時刻——經濟通過從關係交換到交換的過渡進入全球商業，在這種交換中，績效得到政府行為的支持，無論是基於潛在的 第三方執法或政府實施非正式製裁的威脅。  我們將這些政權描述為“經濟上仁慈的”獨裁政權。

我們所說的這個術語指的是一個專製政權，其領導人的效用函數將 GDP 的長期增長排在其瑞士銀行賬戶增長的前麵，從而利用國家的力量來追求國家經濟轉型。 這種稱呼並非褒義詞，而是一種區分將國家發展置於個人致富之上的專製統治者的方式。 用保羅·羅默的話來說，這位獨裁者偏愛“非排他性商品”，即為每個人創造財富的商品，而不是“排他性商品”，即僅讓政權領導人受益的商品。

在這方麵，我們的方法與現有文獻截然不同，現有文獻“假設所有統治者都是由私人目標驅動的……”。

我們認識到，對專製製度說些好話會（而且應該）產生最初的本能消極反應。 我們將描述為在經濟上仁慈的那些政權的領導人在其他方麵往往並不仁慈——事實上，在某些情況下是可怕的。 此外，平均而言，專製政體的經濟增長並不比軟弱的民主政體好（在某些方麵甚至更低），民主政體是比賽中唯一的另一匹馬。

  但我們的論點是，並非所有專製政權都是一樣的； 例如，這些政權在韓國、台灣、智利、新加坡和中國的表現明顯好於平均水平。 在這些國家，也許純粹是因為運氣，政權領導人有不同的野心，作為一個整體，他們比其他獨裁國家和不那麽專製的政權做得更好。

然而，正如我們稍後將詳細闡述的那樣，我們並不是說明智的政策是尋找經濟上仁慈的獨裁者來為發展中國家的轉型提供人員。 機緣巧合，而不是計劃，解釋了尋求增長的專製政權的出現。 相反，我們的目標是從功能上確定這些政權為實現必要的過渡所做的工作，並評估在完成這些任務時其他壓製程度較低的機構可能會取代獨裁者。 為了預測我們的論點，新興民主國家無法輕易提供可靠的承諾來保護那些需要投資其金融和人力資本以實現增長的人的回報。 風險仍然存在，即未來的政府將陷入尋租並推行貶值先前投資的政策。 經濟上仁慈的專製國家可以提供這種承諾，至少在一段時間內是這樣。 我們的願望是從經濟上成功的專製政權的經驗中學習如何為新興民主國家製定功能等效的戰略。 作為這種方法的初步示例，我們將研究區域商業法庭、非正統投資者保護機製和創造性合同替代獨裁者部分職能的潛力。

我們還認識到，識別和評估經濟上仁慈的獨裁政權所發揮的作用在很大程度上取決於具體情況，如果不深入了解每個成功政權的經驗，這也將難以概括。 我們不會在這裏進行整個項目。 相反，我們的目標是通過證明我們的理論解釋是合理的，並以幾個經濟上成功但截然不同的獨裁政權的案例研究為支撐，從而推動這個更大的項目。 我們的案例研究包括樸正熙領導下的韓國、奧古斯托皮諾切特領導下的智利以及鄧小平及其繼任者領導下的中國。

我們還希望闡明最近發展理論對製度核心作用的強調。 假設製度主義者是對的——持久增長最終需要的是支持公平資本主義的正式製度。

  那麽我們如何獲得這些機構呢？ 世界銀行和其他國際金融組織在大量獎學金的支持下近二十年的工作表明，有效的正式法律機構和獨立的司法機構是成功發展不可或缺的要素。 然而，正是因為每個國家的曆史和能力都將深深地依賴於路徑，並且因為建立可信的正式機構是一項耗時的任務，我們需要一種穩定的方法來建立成功所必需的機構。

即使在不同的專製政權中使用的各種方法也可以作為一個選項目錄，這些選項可以適應特定國家的情況並通過較少壓製的方法來實現。 例如，正如 Franklin Allen 和 Jun Qian 的著作所強調的，中國用來支持市場交易的製度與實現相同結果的西方製度非常不同，即使中國的製度可能正在轉向更西方的結構。 10 在 至少，了解非民主政體在沒有高質量正式法律製度的情況下轉變其經濟的手段，應該會動搖關於增長所需製度特征的假設，並將調查轉向其基本職能。

最後，我們相信我們對智利和韓國的審查威權主義下的經曆提供了對中國政治自由化潛力的洞察。 許多評論員不經意地引用這些經驗來支持經濟發展與最終的政治自由化之間的緊密聯係。 我們的觀點側重於專製政權下商業精英的作用，為中國的政治未來問題提供了另一種通常不那麽樂觀的方法。

第一部分闡述了分析框架：有利於增長的能力獨裁政府向投資者可信地承諾，他們的投資回報不會因尋租而消散。 第二部分然後將可信承諾的問題放在背景中。 發展中國家可以通過關係合同經曆相當顯著的初始增長，而不需要正式的合同執行或非正式的政府鼓勵國內各方履行合同。 然而，通過進入全球商業領域，突破性的經濟發展需要從精心培育的關係契約轉向更多的公平交易。

正如我們將看到的，困難之一在於政治經濟學：現有精英的地位取決於他們在關係經濟中的成功，他們可能會抵製以犧牲他們的份額為代價來增加總產出的變革。 在這種情況下，經濟上仁慈的專製政權的關鍵作用是強加——或者更準確地說是通過談判——向一組不同的互補製度的轉變。 然後，第三部分調查了三個截然不同的國家的經驗，以強調經濟上仁慈的政權為促進轉型所做的工作。 受日本明治時期的影響，韓國經曆了明確尋求“工業革命”的軍事政變。 在智利，以猖獗的尋租為特征的民主製度被軍事獨裁者所取代，其政權擁護自由市場政策，該政策由在芝加哥大學接受培訓的經濟學家提供信息。 最後，在中國，共產黨采取了以經濟增長為重點的政策，部分由國有企業主導，國家扮演的角色令人好奇地想起了私募股權基金的普通合夥人。 第四部分對專製體製下這三種截然不同的發展經曆進行比較分析。 第五部分然後討論我們對發展中民主國家的分析的教訓，例如區域商業法庭為參與國提供他們無法單獨創建的承諾機製的潛力。 最後，第六部分總結了我們的分析與一個棘手問題的相關性——經濟增長與民主之間的關係，其中因果關係的方向具有巨大的政策影響。

一、分析框架

我們在這裏的努力是解釋以下模式。 作為一個經驗問題，它是一個就哪種政府形式與發展中國家較高的增長率相關而言，新興民主國家和專製政權之間的平均競爭非常激烈。 從理論上講，很難預測贏家，因為每種形式的政府都有不同但令人衰弱的缺陷。 專製政府容易出現盜賊統治，其中最重要的輸出是向私人瑞士銀行賬戶的資本。 12 軟弱或未鞏固的民主國家容易出現利益集團尋租，這種尋租擴大了不良經濟政策的範圍和幅度，其目的是償還債務 利益集團而不是支持增長。 這些政策增加了不確定性，相應地減少了對私人投資的激勵。 這種對利益集團政治經濟的擔憂反映了多年前針對特定仍然薄弱的民主製度提出的擔憂——漢密爾頓在聯邦黨人的論文中強調的派係對美國發展構成的威脅。 正如托爾斯泰在安娜·卡列尼娜 (Anna Karenina) 中針對不幸家庭所強調的那樣，沒有單一的失敗方式。14 我們在此解決的問題是，似乎沒有明確的成功方式。

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, [e-mail]
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.