Although the concept of an economically benevolent dictator has increasingly gained popularity, the relative short-run success of an authoritarian regime has much more to do with the economics of growth, while its long-run performance is marked by inefficiency, poverty, and corruption.

The recent rapid economic growth of Asian nations such as China lead some to reconsider the belief that democracy is inherent, even necessary, for economic growth. Among the appeals of an authoritarian regime is the popular perception that a strong leader can act decisively and efficiently to reduce poverty and target problems in the economy, while a democracy might be hindered with indecision and competition.

But speed does not necessarily translate to solutions or growth, especially when made by an authoritarian government.

While an authoritarian government may be able to build and decide quickly, that does not ensure its actions and decisions are efficient, let alone optimal. In fact, these governments cannot match the efficiency of competitive free markets and price signals, and are riddled with misuse and misallocation of resources.

Authoritarian governments are plagued with rent-seeking bureaucracies and firms – groups that receive rents, or favors, from the government in exchange for kickbacks and political support. As economist Gordon Tullock demonstrates, these rent-seeking groups create massive dead-weight loss, draining the economy of wealth. While rent-seekers exist in democracies, they thrive in governments with unchecked power and extensive corruption.

A country can import knowledge and technology to accelerate growth for a time, but as it approaches what growth economists call “the technological frontier,” governments lose the ability to mask corruption’s effect on growth using imported technology and cheap labor, and GDP comes crashing down.

But the most important aspects are those that indicators such as GDP overlook: rights and liberties. In their struggles to remain in power, authoritarian rulers destroy rights such as the freedom of speech and assembly as part of desperate tactics to suppress the political opposition. Further intangible factors, such as environmental quality, are not accounted for in GDP figures. The environment’s impact transcends mere subjective preferences, affecting the health and quality of its inhabitants. Yet through weak property rights and authoritarian policies, pollution and resource depletion have become tangible problems for these regimes.

In this recent feature service article, Aleksandr Shkolnikov, Policy Reform Director at The Center for International Private Enterprise (CIPE), explains why short-term growth is not all it seems, emphasizing that “what matters is long term, sustainable development and the root sources of economic growth. For every China case you will find dozens of Zimbabwe cases; for every authoritarian economic miracle you will find dozens of economic failures.” He notes, “The history of sustainable economic development and prosperity clearly shows that it is not about strong leaders, but it is all about strong democratic institutions.”

Article-at-a-glance:

Rapid economic growth in some authoritarian countries has led many to believe that democracy is not necessary for prosperity and economic development.

Democratic governance, however, is essential for economic growth to be sustainable in the long term.

Strong democratic institutions, not strong leaders, are necessary for continued growth and investment.

Download the full Economic Reform Feature Service article.