Economic Growth and Authoritarianism

Many Western economist and political theorists suppose that liberal economic policies inevitably lead to political and social freedoms. Under their thinking, Russia’s rising GDP will shelter the country from authoritarianism, as business leaders and investors demand social reform. Anatole Kaletsky of The Times (UK), proposes that these experts need to rethink their stance:

History has seen plenty of tyrannies that have run their economies on broadly free-market lines. There is a natural tendency for economic freedom to create competing centres of political power, but the link between economic and political liberalism is far from a one-to-one correlation.

It is wishful thinking, therefore, to suppose that Russia will pay a price economically if it succumbs to a Putin personality cult. It is even more fanciful to imagine that Western investors will flee Russia if it continues to stray from the democratic path. Western oil companies and banks have a long history of profitable cooperation with dictators in the Middle East, Asia and Latin America and they will have no problem working with an autocratic Russia.

From another angle, Russia’s economic boom can appear quite deceptive. While investment has increased, the Kremlin continues to play a hand of selective justice, closing or absorbing companies that become “too successful,” or attempt to interfere with politics. Imprisoned Khodorkhovsky’s Yukos comes to mind, as does Gazprom’s power grab from Sakhalin island oil investors.

As Kaletsky explains:

Russia has many economic vulnerabilities not captured by… favourable statistics: corruption in the legal and tax system; weak protection of property rights; political mismanagement of energy resources; the small size and inefficiency of the service sector and a vast backlog of underinvestment in transport and social infrastructure.

In short, rule by law continues to pummel rule of law.