Is democracy necessary for economic success?

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As an American, I’ve always believed that democracy, capitalism and economic progress are all intimately connected, that you can’t have one without the others. Such thinking is part of the philosophical DNA of the United States. But the economic miracle in Asia has consistently contested that notion. Since the 1960s, many of the region’s most vibrant economies enjoyed huge spurts of growth under dictatorships or semi-authoritarian governments. Some scholars came to believe that the forceful and efficient decision-making possible under tight-fisted regimes was better suited to achieving development than the chaotic politics of Western-style democracy. The challenge to democracy is stronger today than ever, due to the rise of China. Beijing’s leadership believes the country can develop a modern, market-oriented economy without political openness. In fact, they see democracy as a threat to the nation’s economic progress. That’s what the Tiananmen massacre was all about. And with the advanced democracies gridlocked by political bickering, the clear, directed policymaking of China’s authoritarians has come to appeal even to some in the West.

I have always seen the connection between dictators and development to be a false one. It’s not the nature of a country’s political system that determines the course of its economic development, but the intelligence of the policies it implements. The ascent of India shows clearly that even the most tumultuous of democracies can post growth rates as lofty as any dictatorship.

And then there’s the interesting case of South Korea, which is the subject of my latest story in TIME magazine. Modern Korea shows that dictators may be able to bring about economic development – but only to a point. Then political openness becomes crucial to keep that growth story going. Korea therefore provides important lessons for the rest of the emerging world, especially China.

Korea had been one of those super-growth states that spawned the idea that dictatorships were good for development. The country was largely dominated by autocrats for 26 years, during which time it experienced a remarkable ascent from poverty to prosperity, in the process building industries in electronics, ships, steel and cars. Park Chung Hee, the nation builder who ruled from 1961 to 1979, thought Korea simply couldn’t function as a democracy before a higher level of development was achieved. “The gem without luster called democracy was meaningless to people suffering from starvation and despair,” he once wrote.

But eventually, the dictators fell. In 1987, free elections were held after huge pro-democracy protests clogged the streets of Seoul. And what happened? Korea took its economy to an entire new level. And I’d suggest that Korea would have never gotten to that next level without democratization.

Korea is one of those rare countries that has jumped from a developing to a developed nation. Many emerging markets get stuck in the “middle-income trap,” in which they achieve a comfortable level of development but can’t make that last, difficult push into the realm of the truly advanced economies. Korea has managed that feat because it has become a more innovative economy. You can see that in the popular products of companies like Samsung or LG, the nifty marketing of Hyundai Motor, and the regional popularity of K-pop.

Could that leap have been possible under the old dictators? It probably would have been much harder. Innovation isn’t something you can create in government ministries or corporate boardrooms. Sure, you can toss more resources at R&D and branding (Korea does that, too) but you can’t make people more innovative. That requires a change in mindset. Creativity goes on inside people’s heads.

That’s much more difficult without an open political environment. In order to be innovative, you need full access to information, a confidence to speak your mind and a willingness to take risks. Fear caused by political control doesn’t foster an atmosphere conducive to free thinking. Censorship and limitations on information curtail the knowledge and debate necessary for the generation of new ideas. I’m not the only one who believes this is true. Some Koreans, as you’ll see in my magazine story, argue that the country couldn’t have become more innovative without democracy.

If we’re right, then there are huge implications for China. Beijing’s industrious planners have made clear that they want the Chinese economy to innovate more, to invest greater sums in R&D and storm into sectors like IT and clean energy. Cities around the country are creating “hi-tech zones” to attract new software developers and R&D centers. But can China make the leap that South Korea has achieved, without political reform? Can authoritarian “state capitalism” foster innovation as well as Korea’s democratic, liberalized economy?

It’s a tremendously important question, for the future of China, and the global economy. My own opinion is that China is going to struggle to match Korea’s success. If China wants to advance to become a fully developed economy, it can’t ignore political reform.

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