Authoritarian Capitalism and its Impact on Business

Abstract

What impact does authoritarian capitalism have on business? In this essay, I inquire into the relationship between authoritarian capitalism and business and set out to answer the following questions: what happens to the business environment under authoritarian leadership? Is there a trade-off between authoritarianism and the climate for business? Does democratic recession in liberal democracies have any notable downsides for business? To answer these questions, I draw on indicators measuring civil and political liberties and corruption on one hand, and the ease of doing business, global competitiveness, and innovation on the other hand. The empirical evidence suggests two key findings. First, key business indicators in China and Singapore have improved significantly despite these countries’ persistent authoritarianism. Second, key business indicators in Hungary and Poland have stayed constant or improved, despite growing authoritarianism in these two countries during the past decade. In short, the authoritarian capitalist model does not appear to be dysfunctional or have significant drawbacks for large segments of business. Supporters of liberal democracy should not argue that liberal democracy is preferable because it is better for business than authoritarian capitalism, since it is far from obvious that that is correct. Supporters of democracy will need to make a stronger case for its intrinsic, rather than its instrumental value.

Keywords: authoritarianism, business, competitiveness, corruption, democracy, innovation

JEL Classification: D73, G38, P16, P26, L26, M13, O31