Correlation between democratic and autocratic regimes: Structural reforms

According to globally acknowledged norms of economic growth, economic reforms particularly in the area of trade liberalisation, privatisation and arresting growing trend of monopolisation and cartelization initiated under democratic set of rules bring the desired results, but experience with quite a number of developing and emerging economies with regard to their structural reforms initiatives in above said areas, while their being under autocratic rule for quite a long time has proved contrary to this assumption.
Chile, South Korea and quite a number of countries in East Asia were able to achieve economic liberalisation through reforms undertaken in almost all sectors of their economies under their autocratic setup particularly during the 1960s and 1970s.
Experience with Pakistan itself being under military rule for more than three decades is also more or less the same. During the regime of General Ayub Khan from the late 1950s to end of 1960s, Pakistan achieved tremendous growth of industrial sector, impacting all sectors of economy with a remarkable improvement shown in all macro economic indicators like surplus national budgets, very favourable balance of payment position, strong currency and high GDP growth rate, etc.
Unfortunately, however, during comparatively short span of subsequent democratic governments despite their ambitiously designed economic reform programmes through restructure of public sector entities to ensure their doable privatisation, experienced numerous impediments as economic managers of the country have to convince legislators both in federal and provincial Assemblies regarding proposed privatisation and restructuring strategy as this results in downsizing being its integral part. As such sizeable number of unwanted or less efficient staff mostly comprising political appointments is laid off. Secondly, the sale of public-sector entities wherever done was viewed transparency as such intervention of judiciary was sought by civil society and in certain cases sale was rendered null and void.
No doubt, there are compelling reasons that a democratic government despite its seriousness to undertake economic reforms programme may fall prey to various powerful interest groups who totally ignore socio-economic welfare of society as a whole. Legislators themselves being stakeholders in these organisations foreseeing any reduction in their profits/gains during initial period usually oppose the idea of bringing any change in the existing setup.
It has generally been seen that in a weak democratic set up or in coalition-based government's non-development expenditures increase substantially as is evident in case of Pakistan also. Here ruling party has to oblige coalition partners by increasing the size of cabinets and allowing unethical monetary concessions and as a result such countries face heavy fiscal deficits every year and entangle them in heavy internal and external borrowings thus impacting adversely economic health of the country.
Under dictatorial regimes there is always a cap on public sector spending everywhere. Further countries under autocratic rule have experienced substantial rise in saving rates through proper incentives and curtailing both private and public spending through strict taxation measures. Deficit financing whenever required is kept within redeemable limits.
Pakistan has frequently passed through long spells of autocratic military-based regimes. With the exception of Ayub Khan's era of rule (1958 to 1969) country encountered various economic upheavals due to war and terrorist activities in neighbouring countries and also frequency of natural calamities like devastating earthquake, floods and drought conditions particularly in recent past that is during the period from 2003 to 2007 covered by most controversial military-backed dictator's rule , but despite that things had not gone out of control as is the situation today. Direct foreign investments. Investments from indigenous sources and GDP growth rate remained at a satisfactory level perhaps due to manipulated financial repression achieved through comparatively better monetary and fiscal policies of the then economic managers. Unfortunately, whenever a dictator with a benevolent mindset tried to uphold masses' general well-being he fell prey to interest groups and could not enforce most needed taxation and agrarian reforms for bringing equity in taxation system and getting rid of feudal system, which is the basic cause of all socio-economic ills. Similarly privatisation policy of previous military regime was not transparent. Government fell captive to interest group, thus sale of various public sector entities brought enormous financial loss to the nation. Such erroneous performance of autocratic government negates the reform agenda.
Even in Latin American and East Asian countries facing dictatorial regime for quite sometime faced loopholes with regard to their economic reforms agenda. It is because of the fact that dictator's preference/policies usually change overtime and they do not face any legal constraint for abrupt change in their policy hence they can not commit to reform agenda as has been experienced by Pakistan also during its various dictatorial ruling setups.
Secondly curbed freedom of press and rights of civil society particularly right to property, which are essential for sustained economic growth reform agenda are the main factors impeding effective implementation of structural reforms particularly in low income developing countries. Hence general norms of policies towards economic development are based on democratic set up.
The study conducted by IMF Research department team in 2009 in this respect covers 150 countries over a span of 40 years and examined correlation between democracy and performance in six areas viz. domestic finance, capital account, product markets (electricity and telecommunication), agriculture, trade (based on tariffs) and current account transactions. It was revealed by the study that improvement in democratic institutions correlates significantly with the adoption of economic reforms and moving from an autocratic regime to a complete democratic setup is linked with a 25% increase in the index of reforms. It was also deduced from the study report that economic liberalisation does not necessarily leads to political liberalisation. At the same time quite a number of developing countries despite being under autocratic rule worked on structural reforms leading to focus on labour intensive manufacturing units, which in turn culminated into fast growth in value added manufacturing and service sectors being outcome of substantial rise in per capita income and skills of their work force. China and South Korea are the appropriate economic models in this regard.
To conclude one can say that economic reforms bring results both in a benevolent dictatorial regimes and also democratic set up where there is maximum concern for good governance, accountability and transparency in all transactions.