Authoritarian capitalism,[1] orilliberal capitalism,[2] is aneconomic system in which acapitalist market economy exists alongside anauthoritarian government. Related to and overlapping withstate capitalism, a system in which thestate undertakes commercial activity, authoritarian capitalism combinesprivate property and the functioning ofmarket forces with restrictions ondissent, complete lack offreedom of speech or significant limits on it, and either a lack of elections or an electoral system with a singledominant political party.[1][2][3]
Countries commonly referred to as being authoritarian capitalist states include China since theeconomic reforms, Hungary underViktor Orbán, Russia underVladimir Putin, Chile underAugusto Pinochet, Peru underAlberto Fujimori, Singapore underLee Kuan Yew and Turkey underRecep Tayyip Erdoğan as well asmilitary dictatorships during theCold War which werebacked by the United States.[4][5]
Political scientists disagree on the long-run sustainability of authoritarian capitalism, with arguments both for and against the long-term viability ofpolitical repression alongside acapitalist free-market economic system.[1][3]
As a political economic model, authoritarian capitalism is not a recent phenomenon. Throughout history, examples of authoritarian capitalism includeManuel Estrada Cabrera's andJorge Ubico's respective reigns in Guatemala,Augusto Pinochet'sreign in Chile,Suharto'sNew Order in Indonesia and thePeople's Action Party's early administration in Singapore.[6] DuringWorld War I, the ideological divide between authoritarian and liberal regimes was significantly less pronounced as both were aligned tocapitalist economic models. Moreover, theAxis powers ofWorld War II have been described as possessingtotalitarian capitalist economic systems, acting as examples of the early developments of authoritarian capitalism.[7]
From the end of World War II, various authoritarian capitalism regimes emerged, developed and transitioned into a liberal capitalist model through East Asia, Southern Europe and Latin America. It has been argued that the change of these early regimes was predominately due to the dominance of liberal capitalist countries such as the United States as opposed to a natural transition, suggesting that modern authoritarian capitalist regimes may further develop the system.[7]
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While having been a relatively unknown system due to the failure of authoritarianism within theFirst World during theCold War, with the transition of authoritarian countries such as China and Russia to capitalist economic models, authoritarian capitalism has recently risen to prominence.[6] While it was initially thought that changing to a capitalist model would lead to the formation of aliberal democracy within authoritarian countries, the continued persistence of an authoritarian capitalist models has led to this view decreasing in popularity.[2] Furthermore, some have argued that by using capitalist economic models authoritarian governments have improved the stability of their regimes through improving the quality of life of their citizenship.[6] Highlighting this appeal,Robert Kagan stated: "There's no question that China is an attractive model for autocrats who would like to be able to pursue economic growth without losing control of the levers of power".[2]
Moreover, authoritarian capitalist regimes have experienced notable growth in their economic production, with theInternational Monetary Fund stating that authoritarian capitalist countries experienced an average 6.28%GDP growth rate compared to the 2.62% of liberal capitalist countries. In addition, many have argued the inability of liberal capitalism, with the2008 financial crisis and the slow response of the United States government, to quickly respond to crisis compared to more authoritarian systems has been bought into prominence. In fact, many argue that authoritarian capitalism and liberal capitalism have or will compete on the global stage.[1][6][8][9]
Authoritarian governments often seek to establish control within their borders and, as such, will use state-owned corporations; therefore,state capitalism will emerge to some extent within countries that practice authoritarian capitalism, manifesting from the ruling authority's desire to exercise control. The prominent use ofstate-owned corporations andsovereign wealth funds within authoritarian capitalist regimes demonstrates such a tendency, with Russia decreasing its private ownership of oil from 90% to 50% while transitioning to a more authoritarian model under the leadership ofVladimir Putin.[9]
It has also been noted by individuals such as Richard W. Carney that authoritarian regimes have a strong tendency to use their economies to increase their influence, heavily investing in their economies through state-owned enterprises. Carney describes the intervention of authoritarian states occurring through means he describes as extra-shareholder tactics, including regulations, government contracts, and protectionist policies alongside the state engaging inshareholder activism. Moreover, he focuses on the use of state-owned funds to engage in takeovers of key assets in other countries, such asKhazanah Nasional's takeover ofParkway Pantai in 2010.[10]
Within countries that practice authoritarian capitalism, state capitalism is generally also present to some extent and vice versa. As such, there is a widespread confusion between the terms with them at times being treated assynonymous by individuals such as former Australian Prime MinisterKevin Rudd.[11] However, there remains a fundamental difference with state capitalism being a system in which government owned entities engage in for-profit activities while authoritarian capitalism is a system where an authoritarian regime co-exists with, or at least attempts to adopt aspects of, amarket economy, highlighted in countries such as Hungary by theTransnational Institute.[3]
It is generally agreed that China is an authoritarian regime, with theFraser Institute ranking them 136th for personal freedom[12] and theHuman Right Watch's 2018 report describing a "broad and sustained offensive on human rights" within China due to the treatment ofactivists, restrictions tofreedom of information,political expression,religious freedom andminority rights as their core reasons.[13] Michael Witt argues that China broadly displays capitalist traits with a significant number of companies either being private or shared between private and public owners alongside a strongentrepreneurial presence despite a continued predominance of indirect state control.[14][clarification needed]
Observers wonder whether authoritarian capitalist regimes can endure. Reporter Joseph Kurlantzick and political scientistYuen Yuen Ang state that China is unable to fully use the entrepreneurial elements needed to drive future growth if it maintains authoritarian control.[15] As Ang writes inForeign Affairs, "[t]o achieve this kind of growth, the government must release and channel the immense creative potential of civil society, which would necessitate greater freedom of expression, more public participation, and less state intervention".[16] As stated by Joseph Kurlantzick, "China's growth 'model' has shown impressive resilience in recent years", with an ability to rapidly respond to crises, confidence around economic success and growing soft power being used to explain it.[15]
After the election ofViktor Orbán in 2010, Hungary has experienceddemocratic backsliding from its former position as a leading example ofliberal democracy in Eastern Europe and become an example of an authoritarian capitalist regime.[17] Exemplifying this claim of anautocratic transformation, Orbán has been described as severely limitingfreedom of press andbalances of power alongside engaging in reworking thedemocratic process in his favour through processes such asgerrymandering.[18] In addition to increasing authoritarianism, Hungary has maintained its capitalist elements, being ranked 59th globally by theFraser Institute foreconomic freedom in 2016,[12] leading to the Transnational Institute using Hungary as an example of a highly authoritarian capitalist regime.[3] The rise of authoritarian capitalism has been depicted as emerging from Orbán using a disillusionment at liberal capitalism due to slow wage growth, increasing unemployment, and high debt to implement policy reform. These reforms have been described as involving both obtaining the support of businesses through low corporate tax rates and preventing opposition from entities such as trade unions or low-income workers through authoritarian measures.[3]
Azar Gat describes Russia, along with China, as a prominent example of a modern authoritarian capitalist nation, describing the country as becoming increasingly authoritarian while maintaining a predominately capitalist economic model.[6]Aaron Friedberg simplifies the evolution of the Russian model in the following statement: "The Russian system has also evolved from communist totalitarianism to a form of nationalist authoritarian capitalism that appears for the moment at least to be relatively stable". Friedberg also describes the1996 presidential election as the point where authoritarian capitalism began forming within Russia, depicting an increasingly powerful majority party backed by media controlled byoligarchies and led byBoris Yeltsin and laterVladimir Putin. From 1999 under Putin, Friedberg describes the Russian regime as solidifying its power through re-obtaining state control of natural resources, obtaining control of media, and limiting dissidence through measures such as restricting non-governmental organization operations.[19]
Saudi Arabia is considered by Freedom House as an authoritarian country, receiving a civil liberty score of 7/100; this is due to the fact that the Saudi absolute monarchy prevents any political rights, and the government extremely controls freedom of expression and religion.[20] The Saudi economy has been opening the market regularly even though it has nationalized some state-owned companies.[21]
Singapore is considered by agencies such as theHuman Rights Watch as a highly repressive regime. They describe a lack offreedom of speech, capital punishment,detention without trial, andsexual freedom as causing the country to run contrary tointernational human rights.[22] Moreover, the country under the rule ofLee Kuan Yew has been described as embracing thecore aspects of capitalism, with the Fraser Institute ranking it second for economic freedom in 2016,[12] creating a state of authoritarian capitalism.[23] However, there is contention around the continued viability of Singapore's economics success which has increased its GDP per capita from US$427.88 in 1960 to US$57,714.3 in 2017.[24] Some economists argue that Singapore has severely restricted its ability to obtain future growth through the repression of individualfreedom of expression and thought.[25] Regardless of this, Singapore is considered as an exception in regards to its stability, withDaniel W. Drezner stating that "with the exception of Singapore, this model has never worked over the long run".[1]
Authoritarian capitalism is a political-economic model that has faced a variety of criticism to various facets of its nature, both around the ability ofcapitalism to coexist effectively with authoritarianism; and more general criticisms towards authoritarian modes of government. Some experts agree that the authoritarian capitalist model is unstable and will eventually transition into that ofliberal capitalism, with Daniel W. Drezner stating: "The conventional wisdom in comparative politics is that as societies get richer ... they also start demanding morepolitical accountability."[1] In opposition, others argue that the increased wealth of capitalist regimes allows authoritarian regimes to more adequately utilize technology to assist in maintaining their regimes.[26]
Daniel W. Drezner, writing forForeign Policy magazine, argues that when societies get richer, their citizens start demanding more political accountability and democracy. Therefore, capitalist economic policies that successfully promote economic growth will be inherently detrimental to the continuation of an authoritarian regime. Individuals will increasingly seek to reduce restrictions upon their human rights as their quality of life and access to communication resources increase, so a successful economy will inevitably lead to citizens revolting against authoritarian governments. An appropriate example of this is theImperial State of Iran during the reign of the Shah Mohammad Reza Pahlavi which was an authoritarian state capitalist system that enjoyed incredible growth but which nonetheless led torevolution.[1]
Yuen Yuen Ang, writing inForeign Affairs, argues that the restrictions to freedom of expression found in authoritarian regimes are harmful to the ability of citizens toinnovate and engage inentrepreneurship,[16] leading to a reduction in the economic growth of the country.John Lee, Michael Witt andGordon Redding claim that authoritarian capitalist regimes primarily obtain theirlegitimacy through their ability to deliver economic growth, and therefore this inherent restriction upon economic growth would eventually lead to the collapse of the regime.[9][14]
Authoritarian capitalist regimes are viewed as having to face civil disobedience towards their authoritarian characteristics, exhibited by countries such as China experiencing 87,000 instances ofmass unrest in 2005.[9] Some critical scholars have argued that "authoritarian capitalism" is a redundancy, as capitalism necessarily involves an authoritarian relationship at the micro-economic level (i.e., in the workplace).[27]
John Lee andBrahma Chellaney have argued that authoritarian capitalism is a potential competitor with liberal capitalism, with the recent success of authoritarian capitalist regimes such as China being used as the core of their argument.[9][26] Chellaney has further stated that through using elements of capitalism, regimes may more effectively employ modern technologies to suppressdissidence towards government such as theGreat Firewall used within China.[26]Niv Horesh also argues that authoritarian capitalist model offered by China is a viable alternative to liberal capitalism, with more effective decision-making processes.[8][28]
In addition, Niv Horesh holds that capitalistfree-market policies lead to an increase in authoritarian policies such as those pursued byMargaret Thatcher.[8] The core of this argument lies in the view that citizens will support whichever regime provides material comforts which increasingeconomic inequality andautomation in liberal capitalist nations undermine. Moreover, challenges to liberal capitalism from an inability to adequately cope with advances of technology have also been raised, summarised in the statement by former Australian Prime MinisterKevin Rudd: "Democracies, like corporations, can now be hacked."[11] Alongside these technological challenges, Michael Witt and Gordon Redding have also pointed to a seeming failure to address structural issues such asgerrymandering.[11] Anders Corr has described the expansion of China as a compelling argument for the success of its authoritarian capitalist regime.[28]
Aaron Friedberg of theSasakawa Peace Foundation has argued that authoritarian capitalist nations have used an exploitation of the Western world, the reshaping of the international order and exclusion of international actors in an attempt to establish their systems of governance. He has also stated that unlike in theCold War contemporary authoritarian powers are likely to be driven towards cooperation in their attempts to consolidate their regimes.[19]
In recent years, theEase of Doing Business scores and rankings of the authoritarian capitalist states Hungary and Poland have fluctuated around the same level, while Singapore remains at the top of the world and China has improved dramatically.[29] China'sGlobal Innovation Index ranking has also improved substantially, while the rankings of Hungary and Poland are fluctuating around the same level despite right-wing populist rule. This evidence suggests that authoritarian capitalism can be very business-friendly and attractive for business.[30]
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