The Faulty Economic Model Behind America’s Support for Dictators (Instead of Democracies)

It is obvious that America has long supported dictators, instead of democracies, in developing countries.

Why?

Is it simply – as Noam Chomsky asserts – that America supports strong men who will ensure that their country acts as a “client state” to the U.S., and moves to crush countries which refuse to act as satellites to the U.S.?

Perhaps.

But – as usual – faulty economic models are part of the problem.

Specifically, Morton Halperin, Joe Siegel and Michael Weinstein co-wrote a book called The Democracy Advantage: How Democracies Promote Prosperity and Peace, published by the Council on Foreign Relations in 2005, which provides insight into the economic model used to justify America’s historic support for dictators.

Halperin is no outsider, being a high-level adviser in the Clinton, Nixon and Johnson administrations and to the Council on Foreign Relations. In the Johnson Administration, he worked in the Department of Defense where he served as Deputy Assistant Secretary of Defense (International Security Affairs), responsible for political-military planning and arms control. During the first nine months of the Nixon administration, Halperin was a Senior Staff member of the National Security Council staff with responsibility for National Security Planning. In the Clinton administration, he served Director of the Policy Planning Staff at the Department of State, the Special Assistant to the President and Senior Director for Democracy at the National Security Council, and consultant to the Secretary of Defense and the Under Secretary of Defense for Policy. He was nominated by the President for the position of Assistant Secretary of Defense for Democracy and Peacekeeping.

Halperin, Siegel and Weinstein gave a speech at the Carnegie Foundation in 2005 explaining their research findings.

Halperin noted:

Successive American presidents have said, particularly since the end of the Cold War, that a major goal of American foreign policy was to spread or enlarge or enhance democracy, and that our foreign policy was geared to supporting those who were struggling to establish and maintain democratic regimes.

Yet if you look at development assistance from the United States, from the international financial institutions, and even from the Europeans and the European Community, you find that there is no democracy advantage. That is, democratic countries, in fact, receive less development assistance than do non-democratic countries. You also find in the rhetoric, and even the charters, of development agencies a belief that democracy is not their business. They increasingly talk about good governance as one aspect of development, but not about democracy. The people who run USAID believe that their job is to promote development, and not democracy. That permits them to consider good-governance issues, but not to ask the fundamental question: Is this a democratic society that we want to support?

Indeed, the international financial institutions have, with one exception, charters which require them not to take account of whether a country is a democracy, or as it is referred to in the charters, its political criteria.

Underlying this policy of governments and international financial institutions is a belief about how democracy relates to development. There is a widely held view that poor countries need to delay democracy until they develop. Back when I was in college, this was the Scandinavian view of democracy, that only Scandinavian countries were capable of being democratic, and that you needed to have a solid middle class before you could contemplate democracy. The argument went—as presented in the writings of Samuel Huntington and Seymour Martin Lipset —that if a poor country became democratic, because of the pressures in a democracy to respond to the interests of the people, they would borrow too much, they would spend the money in ways that did not advance development—arguments that the current president of Mexico is making about his possible successor. These poor decisions would mean that development would not occur; and because people would then be disappointed, they would return to a dictatorship.

Therefore, the prescription was, get yourself a benign dictator—it was never quite explained how you would make sure you had a dictator that spent the money to develop the country rather than ship it off to a Swiss bank account—wait until that produces development, which produces a middle class, and then, inevitably, the middle class will demand freedom, and you will have a democratic government.

That proposition was wrong.

Siegel picked up from there. Siegel is a Senior Research Scholar at the University of Maryland’s School of Public Policy, and an expert on the political economy of democratic transitions, who has contributed articles to leading policy journals and newspapers including Foreign Affairs , Harvard International Review , Georgetown Journal for International Affairs, Los Angeles Times, Financial Times, Newsweek International, Wall Street Journal, and The International Herald Tribune. Siegel was also a high-level researcher for the CFR.

Siegel told the Carnegie Foundation:

In the last forty-five years of actual performance, there is no evidence that poor authoritarian countries have grown any more rapidly than poor democracies. If you leave out East Asia, you see that poor democracies have grown 50 percent more rapidly, on average, during this period. The Baltic countries, Botswana, Costa Rica, Ghana, and Senegal have grown more rapidly than the Angolas, the Syrias, the Uzbekistans, and the Zimbabwes of the world.

***

Social dimensions of development … are even more starkly divergent. For example, in terms of life expectancy, poor democracies typically enjoy life expectancies that are nine years longer than poor autocracies. Opportunities of finishing secondary school are 40 percent higher. Infant mortality rates are 25 percent lower. Agricultural yields are about 25 percent higher, on average, in poor democracies than in poor autocracies—an important fact, given that 70 percent of the population in poor countries is often rural-based.

There are many reasons for this …. One characteristic that seems particularly prominent is that democracies do a far better job at avoiding catastrophes of all types. If we look at financial catastrophes for each of the last four decades and look at the twenty worst performers over each of those decades, we find that of eighty cases, only five are democracies. Similarly, if you look at a 10 percent contraction in GDP per capita on an annual basis, you find that poor democracies are half as likely to experience this sort of acute recession as are autocracies.

We see similar patterns with regard to humanitarian issues. Refugee crises are almost invariably a result of the politics in authoritarian systems.

***

Amartya Sen, the Nobel laureate economist, famously noted that no democracy with a free press has experienced a major famine.

One of the immediate assumptions made is that this is because of the populist pressures that democracies face; therefore, they are investing much more in their health and education sectors, leading to other macroeconomic problems. In fact, that is not true. To our surprise, poor democracies don’t spend any more on their health and education sectors as a percentage of GDP than do poor autocracies, nor do they get higher levels of foreign assistance. They don’t run up higher levels of budget deficits. They simply manage the resources that they have more effectively.

***

Let me move on to the second assumption, the notion that once autocratic countries reach a middle-income range, they will make the transition to democracy. Given the limited growth that we have seen under authoritarian systems, relatively few authoritarian countries actually reach this middle-income range. In fact, since 1960, only sixteen autocratic countries have reached a per capita base above $2,000 a year.

Fareed Zakaria’s book argues, in a repostulation of the Lipset and Huntington theses, that we shouldn’t be pushing democracy until these countries reach per capita incomes of $6,000 a year. If we were to do that, of today’s eighty-seven democratizers, only four would qualify as being ready. That would exclude the Baltics, Costa Rica, Poland, South Africa, and many others.

***

However, even among those poor autocracies that have grown, they are no more likely to make the transition to democracy once they have grown or once they have reached a middle-income status than they were when they were poorer.

***

The third and final assumption is the notion that premature democratization is a recipe for instability. We find empirically no strong basis for this reasonable hypothesis. What we do see, borne out in much of the conflict literature of the last fifteen years, is that the prevailing factor that influences conflict—and today most conflict is civil conflict—is poverty….

When you control for that and you look at countries that are going through political transition, you find that democratizers are no more likely to be vulnerable to conflict than are other poor countries.

***

In sum, the three core assumptions that have underpinned the authoritarian advantage thesis over the years aren’t borne out through our empirical analysis. What we find is that the form of government that is in place in the developing world has a huge difference on the development performance realized, and that by holding onto these notions that we should defer democracy until some later point, we are, in effect, perpetuating underdevelopment and higher levels of political and sectarian conflict, as well as deferring the point at which people can govern themselves.

Michael Weinstein – former chairman of the Department of Economics at Haverford College and a former economist columnist and editorial board member for The New York Times – then provided some recommendations:

Whether aid is bilateral, multilateral, quadrilateral, let’s give it to the democracies and democratizers, and not to poor autocracies.

***

Development policies have been anti-democratic. They have trampled on the incipient groups, such as civil groups inside poor countries, anmd run roughshod over them to force countries to follow policies drawn up by Washington D.C., and not by the countries involved. Democracy can be a victim in lots of silent ways.

***

Democracy … is so clearly connected to growth and prosperity that we say, highlight it, so that whenever a government like the United States, an agency like USAID, a bilateral or multilateral organization begins to contemplate aid policy, it would issue a democracy impact statement. Give us a good prediction of how the policy as proposed and implemented will trample on democratic forces within the poor countries to receive the aid.

In a question and answer following their speech, Halperin, Siegel and Weinstein gave some additional insights.

Halperin noted that the foregoing discussion applies to Muslim as well as Western countries:

I see nothing to suggest that Muslim culture or religion stands in the way of democracy.

The current debate is over whether the people in the streets of Lebanon are the same as those in the streets of Ukraine. We know, from many anecdotes, that the people in Lebanon watched the people in Ukraine on their television. Free Arab television was much more important in exposing them to Ukraine than it was to events in the Middle East. The Lebanese believe that they are doing what the people of Ukraine did, and out of the same passions and convictions

Siegel pointed out several reasons why democratic countries are more prosperous than autocratic regimes:

When there is more symmetry on all sides of a market, buyers and sellers, you usually get more efficiency, more willingness for people to participate. That doesn’t happen if people are unsure if they have all of the facts on the table.

Openness also contributes to higher levels of transparency and lower levels of corruption. Data show that corruption cuts heavily into GDP growth on an annual basis.

The third point is adaptability. Democracies not only have a self-correcting mechanism, but also mechanisms for a systematic means of changing ineffective leadership. This allows for a stable transition to a new policy framework that might allow for a more effective process of addressing the problems that a country is facing, one that is appropriate for its particular circumstances. Because of this process of succession, you don’t have the same instability in democracies that heavily cuts into growth in other systems, either because of the political uncertainty or the civil conflict that results.

***

One of the problems and barriers to growth is when you have both the political and economic monopolization of power in a single set of hands. This is often one of the characteristic traits of authoritarian systems. To the extent that you can separate economic opportunity from political authority, you will be in a better position to develop. By channeling all of our assistance through central governments, we tend to perpetuate the consolidation. That undercuts the opportunities for development.

And Weinstein gave another reason:

Democracies don’t fall off the edge of the cliff and hit bottom in the way autocracies do.

Afterword: It’s not just America. As Chapter 1 of The Democracy Advantage: How Democracies Promote Prosperity and Peace notes:

Today, it is politically incorrect to extol publicly the virtues of autocracies — countries where leaders are not popularly elected nor subject to meaningful checks and balances. Nonetheless, the view that these governments do a better job of promoting economic growth and stability among
poor countries remains firmly entrenched in the minds of many world leaders, economists, national security advisors, business executives, political scientists, and international civil servants. According to this perspective, promoting democracy in poor countries is naïve and potentially dangerous.

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