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Benevolent dictator

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Iris Boutros

Iris Boutros

South Korea has quickly become one of the world’s economic powerhouses. Growth of its real gross domestic product (GDP or the most common although imperfect measure of a country’s economic performance) was an average of 8% from 1962 to 1989.

Interesting and quite relevant for Egypt today, the South Korean experience of rapid growth occurred under a dictator after a military coup d’état following a student uprising. After the 19 April Revolution, General Park Chung-hee’s military removed a weak and ineffective government in place for one year, quickly ending a brief period of political instability.

Park took over as president and led the country through a period of rapid export-led economic growth and political repression. China and Chile also experienced fundamentally important economic transitions under authoritarian rule. These autocratic regimes transformed their economies very much for the better, despite serious deficiencies along a range of other important dimensions.

An 8% growth rate is the kind of economic growth that makes a poor country rich. It gives citizens more reliable access to better goods and services (basic and otherwise) and better life opportunities. This is the type of high growth that rocketed China up the global ranking. Egypt, before the start of the 25 January Revolution, had growth rates of about 5% and as high as 7% before the global financial crisis.

The key for South Korea and for these other countries was the management of the economy during a critical juncture in the country’s development – entry into global commerce, transitioning from small-scale, relationship-based economic transactions to larger exchanges supported by government action. If business is strongly based on personal relationships, as is the case in Egypt, then an economy will always be severely held back.

Compared to weak democratic governments, economic growth-favouring dictators have the advantage of better overcoming political economy obstacles to growth. Dictators can more credibly commit to growth, particularly when it comes to government behaviour, and can be better at ensuring that things like corruption do not reduce the positive impact of private investment for an economy.

For decades, organisations like the World Bank, the IMF and other such institutions, as well as forests worth of academic papers, have asserted that market-favouring laws and an impartial judiciary are key to the transition from relationship-based to real market exchange. In other words, a country has to have the right legal protections for an economy to do well. The Doing Business rankings are indicative of how critical these institutions see this as the primary way to transform an economy.

What the South Korea, China, and Chile examples indicate is that there are other ways.

At the time that Park took power, South Korea was one of the poorest countries in the world, with a lower GDP per capita than most of Latin America and some of sub-Saharan Africa. It had a low savings rate, almost no natural resources and has always suffered from overpopulation of its small territory. Unlike Egypt, it could not rely on a large internal consumer market.

The most significant factor in making South Korea the economic giant it is today was the outward-looking, export-oriented strategy it adopted in the early 1960s. Economic growth followed from a heavy focus on labour-intensive manufactured exports, in which South Korea could develop a competitive advantage. Government initiatives to support the strategy were crucial as was Park’s ability as a dictator to ensure cooperation. Park even forced initial investments that would later become some of South Korea’s largest corporations.

Undoubtedly, economic growth is not the most important indicator of a country’s well being. Throughout the years that Park was president until his assassination in 1979, South Koreans’ history was stained by the severity of Park’s political oppression. Equally hard to deny is that South Korea is in a better place as a country, economically and otherwise, because of the actions taken by a strong dictator after a military coup d’état.

The lessons for Egypt from the South Korean experience are plentiful, including what can be learned from looking east as well as west. Perhaps also is an explanation for why some citizens would happily welcome a General to serve as president, or what some might call a dictator assuming power after a military coup. Economically, maybe it all depends on how benevolent of a dictator one might turn out to be.

About the author

Iris Boutros

Iris Boutros

Iris Boutros is an economist and strategist. She focuses on growth, impact investment, and decision-making. Follow her on Twitter @irisboutros

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