Barro Doesn't Like Political Freedom, Neither Did my Motherland

While reading Barro, I could not help but think about what Barro thought of South Korea's rapid economic growth during the dictatorial presidential administration of Park Chung Hee (Chris wrote about him in a previous blog post, and this is almost a direct reaction to argue against his observations). In that blog post, Chris had argued that the Miracle on the Han River was an exception to Friedman's argument that economic freedom is necessary to create real political freedom.

Barro says something slightly different: he believes that "improvements in the standard of living...substantially raise the probability that political institutions will become more democratic over time." He calls political freedom a "luxury good" that develops gradually. If one looks at Park Chung Hee's reign over Korea, his economic reforms were very interventionist and yet aggressively open to foreigners. People remember him for his export-oriented industrialization and government-corporate cooperation on establishing robust export industries, which helped these companies become the South Korean conglomerates we see beating out all types of international companies today. Not only that, but he created economic planning boards and ministries of finance. When he came to power in 1961, South Korea's per capita income was only US$ 72.00. During 1961-73, one could see the huge economic impact of his policy work: exports grew from 3million to 300 million, trade deficit was maintained under $1B, and GDP growth was almost 10% a year.

Barro writes that there are two types of dictators: "one whose personal objectives often conflict with growth promotion and another whose interests dictate a preoccupation with economic development." President Park was definitely the latter. As much as I love and believe in democracy, Barro is right in mentioning the following inefficiencies that come with a strong democracy: tendency of majority voting to support redistributive social programs, strong political power of interest groups that generate policies to redistribute in favor of themselves, etc. Barro calls these "growth-retarding features of democracy" and while I would not put it so harshly, it surely does pose problems for future economic growth. Because President Park was able to bypass the inefficiencies, Korea was able to experience high sustained economic growth (although it has obviously been through a financial crisis and tapered growth since then). The point is that "more democracy is [not always] the key to economic growth," and South Korea's rapid growth provides yet another Asian country example.