The Diverging Economic Dynamics of Dictatorships: Enlightened Rule and Tyranny? Paper presentation for “Den nasjonale fagkonferansen i statsvitenskap 2008 ”, Tromsø April Carl Henrik Knutsen, Dep. Pol. Sci., UiO

The motivating “puzzle” The economic performances of dictatorships diverge big-time! Dictatorships dominate both among growth miracles and disasters, and the larger heterogeneity among dictatorships than among democracies exists even if we control for other variables  A need for explanations (Barro, 1997) My suggested answer: Some of the divergence comes from the different strategies rational and power- motivated dictators choose under different contexts (type of security threat). Strategies meant for increasing probability of survival have strong impacts on macroeconomic performance.

Policies and macroeconomic performance We know something about which policies are conducive to for example growth, and the literature often labels dictatorial regimes as “developmentalist” or “predatory”, or uses other labels. But why were these policies pursued in the first place?

Different types of dictatorships The political regime variable can be viewed as multi-dimensional. Institutional and other types of divergences Many classifications, Linz&Stepan, Hadenius&Teorell. But in dictatorships with power concentration: institutional structures are at least partly endogenous and especially in the long run.

Earlier literature and the motivations of rational dictators Wintrobe (90&98) Olson (93&03) Overland et al. (00) Robinson (01) General focus in literature on consumption motivated dictators. I shift the focus to dictators motivated by power.

The model Three actors D (dictator), O (opposition) and S (foreign government) Two periods Actors motivated by “power”-holding office in domestic country, but S also sensitive to costs of war Two sectors in domestic economy, industrial and natural resource, fixed share of industrial income goes to D Transformation functions allow actors to transform economic resources to fighting capabilities Probability of overthrow of D by O and S specified

The model continued G is the choice-variable for the dictator. G=public investments, but can be given much broader interpretation dP o /dg>0 and dP s /dg<0 D wants to minimize probability of being overthrown and sets g in order to achieve this goal

The main implications of the model The rational, power motivated dictator chooses a very different g in different contexts, where context here relates to the gravity of the different security threats – Mainly external threat  High g – Mainly internal threat  Low g – Balanced threats  Intermediate g dY/dg>0  High g gives high industrial outcome

Additional implications Resource curse! dg/dR<0 Ambivalent whether high share of income to dictator increases or decreases g, but for most plausible parameter values (not explicitlly investigated), higher share means higher g Coordinated democratization movement  Dictator has incentives to reduce g in long run

Problems for model Actor-centered functionalism and endogeneity of economic institutions..but long-run model Legitimacy, and how economic crisis in short term increases probability of overthrow

Some evidence Dictatorships are much more conducive to growth in Asia than in Africa, relative to democracies. Claim: mainly internal threats in Africa, whereas large, external threats surround the small Asian Tigers Dictatorships which has experienced “interregnum” (polity-data, proxy for grave internal threat) over the past 50 years have worse protection of property rights than other dictatorships

Kuomintang: A quasi-experiment Before getting on the boat to Taiwan: Internal threats in Taiwan and China  Predatory strategies After establishing main base in Taiwan: Complete switch of economic policies: Building institutional structures, reducing corruption and looting, decent policies  Taiwanese miracle