Q: Isn’t the idea that “democracy is bad for growth,” which you disavow, one that was applicable to India more than any other country? The economic leaders of the past few centuries have mostly been democracies. Has India not been the exception rather than the rule?
Yasheng Huang: True, all the economic leaders are democracies. However, there are two pertinent issues that my article tried to address. One is that there is an active chicken-and-egg debate: Did the current economic leaders—Western countries and Japan—become economic leaders because they were democracies or are they democracies because they became economic leaders? This is not a trivial distinction. It implies very different policy implications. If you believe that economic growth promotes democracy, then you should be primarily concerned about growth. But if you believe that democracies promote growth, then you should argue for political reforms (in addition to being concerned about growth). I belong to the camp that argues that political liberalism is conducive to growth, not simply a byproduct of it.
The other issue is how to explain the rapid growth in China and in East Asia when those countries seemingly were (and are) authoritarian. The East Asian model gave rise to the idea that authoritarianism promotes economic growth. This is a very influential idea, and my own view is that this is one of the most influential ideas least based on facts in the history of economic ideas. Consider how this idea was derived: Only the successful East Asian countries were selected for the formulation of the idea of the East Asian miracle; the failed East Asian economies were ignored. This is a bit like polling those who come to claim prizes at a lottery office and concluding that the odds of winning the lottery are 100 percent.
For each East Asian authoritarian success story, there is an East Asian authoritarian failure. Taiwan grew rich but authoritarian Maoist China did not. South Korea developed rapidly, but North Korea stagnated. Strong one-man rule in Singapore succeeded, but so did laissez-faire Hong Kong. In its totality, the East Asian experience precisely mirrors what we social scientists have known for a long time—authoritarian regimes are no more successful economically than democratic regimes. My article, by comparing China with India, is meant to convey this idea.
Q: Thank you for articulating your opinions about the impact of democracy on an economy. Have you examined the intersection of environmental stewardship and economic growth in developing countries like India and China? What do you think such an analysis would find?
YH: I do believe that democracy matters for environmental management, though I can’t predict that India will necessarily do a better job in environmental management than China. Today, China’s environmental challenges are substantial. Sixteen out of the world’s 20 dirtiest cities are located in China. One reason is the underpricing of capital, which encourages energy-intensive and capital-intensive growth and industrialization in China. This is an economic issue, to be sure, but also it is a political issue. The reason is that the noneconomic costs of building huge industrial projects are low in China because the government is free to minimize the political opposition to these large-scale projects.
The Chinese government is widely considered to be very business friendly, especially by foreign firms, and this attitude is widely praised by the likes of the World Bank. The Indian government, on the other hand, is often criticized for its anti-business attitudes.
There are many benefits to a business-friendly approach, but there is also an unintended downside. Because government is always on their side, managers become lazy. They feel no need to upgrade their technology to the cleaner, next-generation level, and they are less concerned about the environmental impact of their production. However, there are hopeful signs in China. I would argue that nongovernmental organizations are most active in the environmental area and that the Chinese government has recognized the need for a more democratic way—as opposed to a command-and-control approach—to curb pollution. Keep in mind that East Asian societies became more democratic in the 1980s in part because of the environmental movement.
My view is that India will run into the pollution problem that Americans have, which is that consumers and households generate pollution by their heavy use of cars. India is rapidly moving to a car culture and consumption-heavy lifestyle. The biggest mistake the Indian government has made was to not levy high taxes on gasoline consumption at a time when there were fewer owners of cars. Once the car culture becomes widespread, it will be extremely difficult politically to rein in the habit. Arguably, here, democracy is a hindrance.
Q: Britain was the most powerful country in 1900, and the United States held that spot in 2000. But how do you think the major countries will rank in 2100?
