Dictators ruin the economy

RNW, 11 May 2012 , by Gerhard Verduijn

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Dictatorship is bad for the economy. Researchers say a country’s finances go into freefall after 10 to 15 years of totalitarianism. The tell-tale characteristics are decreasing growth and increasing inflation.

“The longer a dictator is in power, the worse the economic performance,” concludes economic historian Jan Luiten van Zanden from Utrecht University. He’s studied the economies of 55 dictatorships and there is no denying that, if one person has all the power, the economy suffers.

It comes as no surprise that dictators tend to tell another story. Former Libyan leader Muammar Gaddafi wasted no opportunity to stress that he had brought his country nothing but prosperity. Some economists think this kind of story makes sense. A strong man without an opposition needn’t make concessions: he can push thorough whatever is best for – the economy of - his country.

Driving seat

In practice, though, it’s different. That becomes glaringly obvious the longer a dictator is in the driving seat. Van Zanden:

“With the passage of time, the balance shifts from the country’s interests to private interests and that is disastrous for the economy. The quality of governance declines, the clique surrounding the Great Leader is corrupt and loots the treasury. What’s more, as everything goes downhill, they start to print money with the result that inflation rockets.”

Of all the authoritarian regimes in Africa and the Middle East Van Zanden has studied, he thinks the most striking examples, besides Libya, are Zimbabwe, Congo and Ivory Coast. It’s no coincidence that these are countries which have been ruled by one man for years. Van Zanden:

“On average, African presidents are in power for over a decade. So far, Gaddafi wins the prize with 42 years at the top, but Zimbabwe’s Robert Mugabe (32 years in power) and Uganda’s Yoweri Museveni (26 years) are not doing too badly. Just compare that to the Western World, where presidents and other government leaders average three to four years in power. There’s a reason for this. Power corrupts.”

Sanctions

Just how much can a dictator be blamed though? Is poverty and economic malaise also not often caused by economic sanctions? Van Zanden:

“They definitely influence things and contribute to the decline. Zimbabwe is a good example of this. Economic sanctions, though, only come into play in a few of the dictatorships researched. I think you first have to look at the positive side to these punitive measures: imposing sanctions is one of the few things the international community can do to try to change these kinds of dictatorships.”

Costs

Van Zanden argues it’s a fact that regime change would benefit the population of a dictatorship on economic grounds alone. The extent of the benefit can even be worked out: his research details the costs to the economy of these dictatorships.

“Every year under a dictator reduces growth in GDP by between 0,10 and 0.15 percent. That means, if a dictator is in power for 20 years, average growth will be about 2.5 percent lower than in a comparable country without an all-powerful leader. That is a really major effect. Africa and the Middle East pay a high price for their dictators.”

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