Do Companies Like Authoritarian Regimes?

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Do Companies Like Authoritarian

My first impression of China was one of piercing cold. In October 1981, I led a delegation of business leaders to the office of the China Investment and Trust Company (CITIC) in Beijing. We were freezing, and the numerous cups of hot tea did not alleviate our discomfort. The country was poor and the heating parsimonious. Later, my Chinese friends told me that they survived through several layers of clothing. Others, more laconic, told me that the cultural revolution had toughened them up.

Today, the soon to be completed CITIC skyscraper in Beijing is 108 stories high. China’s growth has been dazzling. In 1981, China’s GDP was barely double that of Switzerland ($ 197 billion against $ 108 billion).

Today it is 17 times larger at $ 11,200 billion. Everything has changed except one thing: The Communist Party continues to lead the country with an iron fist. The thought of President Xi Jinping, like that of Mao, has entered the constitution and is taught in schools.

The authoritarian approach to economic development is spreading. Russia, Turkey, the Philippines, Dubai and many other nations have followed the path of strong leadership. Western democracies are troubled by the fact that many of these tough leaders have indeed been elected through democratic process.

The election procedure is sometimes subject to debate, but there is no doubt that many of these leaders enjoy a genuine popularity at home.  Alexis de Tocqueville already pointed out that democracies are not necessarily liberal; some of them can be authoritarian.

At the root of this model is Lee Kwan Yew, the celebrated prime minister of Singapore. Through strong leadership he brought unparalleled economic development to his country.

 

His philosophy has greatly influenced that of China; he has been an advisor to Chinese leaders for several years. It can be summed up as follows: “You are free to get rich, to have a secure family life, to enjoy most civil liberties, but in no way, should you interfere with politics .”

In other words, this approach to leadership assumes that most people in developing countries (and perhaps also in some more advanced economies) prioritize their material well-being rather than exercising their full democratic rights. In Thailand, for example, farmers are primarily interested in the price of rice, and if a government guarantees such a stable income, they will vote for it whatever the consequences.

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The other principle of Lee Kwan Yew was that any increase in prosperity should translate into visible consequences for the population. It should materialize in better housing, efficient transportation, competent schools, accessible hospitals, a secure pension system, and so on.  Thus, most of the authoritarian leaders will, at least, invest heavily in the infrastructure of their country to impress the population. But is this model sustainable in the long run?

Companies enjoy models of government that make quick decisions and where authority is well identified. It is the case of most authoritarian regimes. Also, business leaders feel comfortable with a type of hierarchical organization which often mirrors the operating model of the company they run.

The weakness of authoritarian regimes, from the political and economic point of view, is that they heavily depend on a unique leader who can disappear and, with him, his system of government.

They do not last in the long run. This was the case in Tunisia, which for many years appeared to be an economic success in North Africa and which collapsed overnight with the destitution of President Ben Ali.

Business leaders often confuse authority and authoritarianism. Authority has an ethical foundation that legitimizes its existence.

 

Authoritarianism imposes its authority through the manipulation of legal entities, such as the silencing political opponents and the media, or controlling the army and the police. It is the reason why authoritarian regimes always have a limited life expectancy.

As Seneca rightly pointed out: ” Authority founded on injustice is never of long duration .”

This article is authored by Prof. Stephane Garelli- Professor at IMD business school – Professor at University Lausanne – Chairman Le Temps newspaper
The views expressed in this article are of the author and not necessarily the views of the publisher.

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