You have often cited China as a case study of a country where

“home-grown” economic policies have been successful, despite it having only the appearance of stable institutions protecting property rights. How has this appearance of strong, stable institutions affected economic growth in China, and how will this lack of institutions affect China’s ability to sustain economic growth?

I think China has been very creative in devising shortcuts, at least for a period of time, to overcome institutional weaknesses. For example, in the area of property rights, it would have been very difficult and time-consuming to try to institute a Western-style private property rights regime backed by a competent, honest, and efficient judiciary and court system. Instead, China moved toward a very mixed-style ownership in the form of townships and village enterprises, a household responsibility system, which has proved very effective at providing some security of property rights without actually conferring formal property rights to produces and investors. Ultimately, in the long run, I think Chinese leaders will have to invest in the type of formal institutions that are required to sustain growth into the future.

I believe there is a sense in which Chinese economic growth is outrunning institutional development, which I think is a recipe for disaster in the long run. One area in which this phenomenon is absolutely clearest is regarding China’s political institutions. I think that it is going to be very difficult for China to sustain economic growth into the future without its developing much more transparent, representative, and accountable political institutions.

It seems that many successful economic strategies have been initiated by regimes that are not particularly democratic. For example, in the cases you have pointed out in previous works, such as China, Taiwan, and South Korea, economic changes were instituted by autocratic regimes. Do you believe that often democracy should take a back seat to economic growth, at least when economic growth strategies are first initiated? Is there at times a tradeoff between democracy and economic growth?

I do not think there is any tradeoff. I do not think the reason democracy is valuable is exclusively or mostly for economic reasons. Nor do I think any country in the world is poor enough that it cannot afford to have democracy or better observances of human rights. I believe that empirical evidence supports that a country does not have to pay an economic cost or penalty when it makes the transition to democracy. I do not subscribe to the idea that you need to delay democratization just so that you can actually have growth or that you can have democracy only when you can afford it. That is the wrong way of looking at it. However, I also do not think that democracy, as your examples indicate, is a precondition of economic growth. I think democracy is good for a whole lot of things. The sooner you can have it the better. Democracy is a largely different issue than the question of development in the narrow economic growth sense.

The broader point also follows that development is not just narrowly economic growth. A lot of development has to do with accountability, giving people a sense of ownership, a stake and a voice in the community. That is what democracy is all about. Nor would I sacrifice democratic transition for any other purpose.

Also, let us not ignore that countries successful under autocratic regimes are the exception rather than the rule. Many countries have actually made very successful growth transitions under democratic regimes. India is probably the best example. The only two countries in Africa that have enjoyed long-term sustained growth are the only two long-term democratic countries in Africa: Botswana and Mauritius. In fact, I think the lower level of income you have, the better off you are under democracy.

Some scholars argue that only national economic stability can bring about stable democratization. What are your beliefs regarding the short- and long-term effects of democratization? Are these effects consistent with positive economic growth among underdeveloped countries?

In my own research, I have found that democratization does not necessarily create initial economic costs in low-income countries in settings characterized by a high degree of ethno-linguistic fractionalization. So that is the good news: there is not necessarily an economic cost to be paid in low-income environments for democratization. But that also means that there is no automatic link between democratization and improved economic performance in the short term. In general, over the medium to long-term, we know that democratic countries tend to provide much greater economic civility and to be much better at handling adverse economic shocks. Obviously, today they are much more sensitive to issues like human rights and income inequality. So it is quite clear that over the long-term democracies produce better economic outcomes even if one looks at democracy in the purely instrumental economic standpoint.

On a different note, what significant milestone in international growth do you anticipate for the next decade?

It would be very nice to see a significant number of Saharan African countries start to grow at Asian rates. That would be a piece of news that would make me extremely happy.

What are some specific concerns you think these countries must address to attain economic growth similar to Asian levels?

I think that different countries need to have different kinds of fixes. There are some countries in Africa, for example Zimbabwe, that have a very poor investment environment. Political leaders of such countries have effectively, for political motives, eliminated any reasons why anybody in the private sector would want to invest. So in those types of countries, the focus will need to be first and foremost in improving the investment climate. There are other parts of the continent where the investment climate is potentially decent; the issue is truly a shortage of human resources, a shortage in health and education. There, what one needs to do, however, is make relative large investments in the public health and education system. On other parts of the continent, the issue is neither the investment climate, in the traditional sense of the word, nor public health or human resources. Instead, the markets simply do not necessarily work that well. In those countries, what is necessary is a more proactive push on the part of the government to kick-start economic growth, to coax investment behavior through more proactive policies of promotion. There are many other possible syndromes for Africa. One needs to do in-depth diagnostic analysis in each of these countries to figure out where are the most binding and most pressing constraints.