Regime type and its influences on growth
During the last period of the 20th century, the world has observed the so called “Asian Miracle”, the phenomenon refers to Asian countries that achieved a very high growth rate that western countries have never experience before. Interestingly, one common thing these Asia countries have in common are the experience of a certain level of dictatorship. For example, China’s economy during 1960-1980 was heavily centralized and the private sector was not allowed to exist. Singapore gained their independence in 1945 and started to develop with the leading role of government. Japan, Malaysia, Korea, and Vietnam experienced the same level of dictatorship when they started to open their market and turn into market economies. The idea behind this phenomenon is because the government can quickly decide what industry to investment in and the large investment help these industries to acquire economics of scale quickly. The government takes the leading role as the distributor of resources instead of the market as in Western countries. My study aims at examine the relationship between the level of dictatorship and the growth rate.
That good governance is necessary for economic development was until recently the conventional wisdom. In 2002, for example, a USAID study asserted that “without good governance, it is impossible to foster development”. Lately, however, this paradigm has begun to lose ground. Robert Zoellick, president of the World Bank, argued in an October 2010 speech that development practitioners should embrace “differentiated policy approaches” noting that “what may safeguard (development) in one context my strangle in another”. The leaders of the G20 nations in November endorsed a “Seoul Consensus” that “there is no one size fits all formula for development success and that developing countries must take the lead in designing and implementing development strategies tailored to their individual need and circumstances”. The topic of whether democracy and autocracy is more appropriate for growth has received a lot of attention lately. This paper will examine five papers as examples of the current state of knowledge. Wilkin (2011) provides several definitions of good governance that he use in his paper. The World Bank defines governance is the process and institutions through which decisions are made and authority in a country is exercised. Wilkin uses the governance metric offered by the Worldwide Governance Indicators Project. The indicators are grouped into six categories that are a useful guide to the dimensions of governance quality as it is generally conceived: (1) voice and accountability (2) political stability and absence of violent, (3) government effectiveness, (4) regulatory quality, (5) rule of law and (6) control of corruption. According to this metric, Wilkin point out that China continues to perform poorly on most of these indicators, ranking near or below the 50th percentile of countries assessed, while nonetheless achieving one of the fastest income growth rates of any country in the world. The reason that oligarchies in these countries can be beneficial to development is that they produce consistent policy choices. There are many developing countries that have achieved brief spurts of rapid per capita income growth – in fact, Wilkin specifies that, more than 130 countries have experienced annual per capita income growth of 6% or more for five or more of the years between 1950 and 2007. The challenge is not to achieve growth of 6% or more for a few years, which is unremarkable, but to do so for decades. This produces exponential rates of development, doubling the population’s average income roughly every 12 years. To attain this kind of consistency, oligarchy or authoritarian governance is useful and highly effective. Rodan and Jayasuriya (2009) focus their paper on the transition process and how capitalism developed in several Asian...
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