Higher Growth in Autocratic Regimes M.

Ali Kemal Research Economist at PIDE Military dictatorship, worldwide, is always considered the worst form of governments in current modern era especially in comparison to the Democratic regimes. Nevertheless, we had higher growth rate of GDP under military dictatorship compared to democratic governments. On the other hand, it is generally argued that growth is not strongly linked to the regime polity, instead success lies in higher investment, and coherent economic policies. Since the inception of Pakistan, we had several episodes of martial law as well as democratic governments. We can divide 66 years into 7 regimes; 1947-1958 in which we achieved 3.1 percent growth per year. During these first 11 years the sole emphasis was to set up base for sustained growth process. GDP growth in the Regime-2 (1st autocratic regime, 1958-71) was 6.8 percent. Regime-3 was the first pure democratic regime during 1971-1977, had 3.9 percent growth. General Zias Martial Law, regime-4, had 6.6 percent growth, while slower growth of 4.5 percent has been observed during the second democratic regime, from 1988-1999. Although the period of this democratic era was almost eleven years but it is comprised of four short interval governments of Benazir Bhuttos (Late) [Twice] and Nawaz Sahrifs Government [twice]. On average growth rate was 5 percent during the Regime-6, 19992008, of General Musharrafs. Despite democratic government of PML-Q was in power through 20022007 but it is mostly believed that everything is controlled by the General Musharraf. Regime-7 is the current democratic era in which we are having very low growth rate of GDP since 2008.

Growth
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Regime-1 Regime-2 Regime-3 Regime-4 Regime-5 Regime-6 Regime-7 (1947-58) (1958-71) (1971-77) (1977-88) (1988-99) (1999-08) (2008 - )

Apparently it is very straight forward that growth rate in the autocratic regime was higher than democratic regime. Apart from just growth rate of GDP, several indicators have improved during the military dictators regime such as overall public debt was reduced during the Musharrafs regime as well as, foreign exchange reserves position has improved remarkably. The standard of living of the individuals has increased during all the three autocratic regimes. On the other hand it has also been observed that since industrial growth was higher in all the autocratic regimes therefore income disparity has widened, which is the integral part of the development process.

Various aspects are responsible for better GDP growth in the autocratic regimes. All the three autocratic regimes had overwhelmingly received foreign aid which is amongst the top reason for higher growth. Ayub era received easy foreign aid as well as technology of green revolution, which is considered to be the significant reasons for higher growth in his era. General Zias era received foreign aid due to Afghan war and increased industrial productivity due to investment in High-tech industries in 1970s. Similarly, general musharraf era received aid due to our participation in the war against terror. Contrary to this, the democratic regimes faced several sanctions, repayment of debt and debt servicing on the loans which were taken in the autocratic regimes and need to borrow short term loans on strict IMF conditions which negatively affect the overall economy. The nature of foreign aid received in the autocratic regimes is different than the aid received under IMF programs. For instance, project aid has multiplier effect on the overall economy. Aid if invested in the project generates employment opportunities. Moreover, due to aid externality effect, public and private investors as well as several multinationals investors invest in the country and generate employment opportunities. Notably in the last two autocratic regimes, we received foreign aid due to our participation in the war against Russia in Afghanistan and war against terror in Afghanistan, known as Coalition Support Fund (CSF), which we were free to spend without facing any conditionalities. On the other hand, sustained economic growth is possible if policies are consistent, continuous, investors have confidence in the government, and same rule of law is applicable for longer period of time. This is only possible if same government is remain in power for longer period of time or change in government does not change the policies of previous government. Apart from foreign aid, investors who invested during the autocratic regime had full confidence in the government that they do not change the existing policies. Moreover, special incentives were also given to the investors which although increase the rent seeking behavior but they had invested for longer term which thus lead to higher growth. Similar examples in the world are Indonesia, Malaysia, Taiwan, Singapore and South Korea who prosper under autocratic regimes. Unlike the democratic government who has fear of taking over by the military ruler and faced criticism from the opposition, autocratic governments are not questionable to that extent and thus work without consensus. In short the autocratic government does not have legal hurdles, which democratic government can face in implementing certain policy. Thus instead of having myopic view and beyond self interest of getting elected in the next elections, the autocratic government can make a policy which may not be people friendly in the short run. Another interesting feature of the autocratic government is lesser political instability compared to our democratic regimes. Democratic regimes especially in the 1990s were very fragile. Dr Eatzaz, Acting VC, Quaid-i-Azam University call the 1990s era as Musical Chair Governments, which was shared by Benazir Bhutto (Late) and Nawaz Sharif. Therefore, as researchers argue that the collapse of the government significantly lowered the economic growth. Hence we had higher growth in the autocratic regime due to political stability. Affirmative to say that growth is not at all linked with the system of government instead the policies adopted by the government. In autocratic regime there is less confrontation and more freedom to opt different policies and implement it, which gives positive signals to the investors that their objectives will

be achieved without any deterrence and thus easier to take investors decisions. More importantly, foreign aid has vital importance in the history of economic growth of Pakistan in the autocratic regimes.