When a dictator leaves, what happens to economic growth?
Top-of-mind for us this week, was the fall of Mugabe. Mugabe represented a special kind of scum, of the same ilk as Fidel Castro, Gaddafi, Kim Il Sung, Khomeini, Chavez, and Erdogan. Folks who led an uprising against injustice and then allowed power to corrupt themselves. The question that immediately arose in our minds was how do countries tend to fare after the removal of a dictator.
We decided to take a look at the countries where dictators have been deposed of, since 1950 and look at what happened economically in the 5 years after the removal of the dictator. In terms of ground rules, we are including dictators that have been replaced by another dictator (Cuba, Venezuela) but are not including monarchies that are uninterrupted. We are also not including those countries that suffered from the fall of the Soviet Union. Those countries suffer from data that is skewed because of the transition to capitalism. Current dictators or those that have vacated in the last 5 years are not included. Certain leaders on this list were part of a democratic process, but we contend that anyone in power for more than three terms begins to act like a dictator insofar as power becomes too concentrated.
After looking at the data, and slicing it in multiple ways a few learnings are clear:
- Isolating leadership changes from a variety of other factors going that led to the removal of someone is difficult. Changes in regimes do not happen in a vacuum. The best example of this is Saddam Hussain’s removal which led to rapid economic growth that was entirely driven by US military spending in Iraq.
- The quality of the institutions built is a strong indication of whether or not the country can thrive with a change in leadership. Leaders that leave when there are no institutions at all are an exception. They set up a country to do well, simply by the fact that basic stability brings about some level of economic growth. A good example of this is Barre departure in Somalia which led to rapid growth post-1991.
- There needs to be a group that is empowered to thrive after a leader departs. It could be the private sector, it could be the government, and it could be the military, but some entity needs to be able to step in and create an environment for economic growth to occur. In the case of Zimbabwe, we think the ingredients are there for the private sector to step in, post-2018 elections.
The chart below provides some indication of how random economic growth (relative to prior growth for that country) is.
The other interesting way to look at this data is what post-departure of a leader, economic growth looks like based on the years served by the leader. On that basis, we also see limited significance of the duration a leader serves as an indicator of future growth. You can see this in the chart below.
The full dataset used is found below. As always, any questions please let us know.
|Leader||Country||Year||Year Deposed||Last 5 Years||Post 5 Years||Change|
|Kim Il Sung||North Korea||1949||1994||-12.9%||6.6%||19.5%|
|Chiang Kai Shek||Taiwan||1950||1975||21.1%||20.4%||-0.7%|
|Josip Broz Tito||Yugoslavia/Serbia||1943||1980||16.0%||-14.8%||-30.8%|
|Antonio de Oliveira Salazar||Portugal||1932||1968||10.2%||18.9%||8.7%|
|Fleix Houphouet-Boigny||Cote D’Ivoire||1960||1993||1.5%||2.7%||1.2%|
|Dawda Jawara||The Gambia||1962||1994||21.3%||1.8%||-19.5%|
|Pham Van Dong||Vietnam||1955||1987||356.9%||-23.1%||-380.0%|
|Lee Kuan Yew||Singapore||1959||1990||13.6%||19.4%||5.9%|
|Mobutu Sese Seko||Democratic Republic of the Congo||1965||1997||-5.8%||7.5%||13.2%|
|Hastings Kamuzu Banda||Malawi||1963||1994||-5.8%||8.5%||14.3%|
|Rafael Turjillo||Dominican Republic||1930||1961||0.0%||8.5%||8.5%|
|Maumoon Abdul Gayoom||Maldives||1978||2008||15.1%||5.8%||-9.3%|
|Kim Jong Il||North Korea||1997||2011||1.7%||2.8%||1.0%|
|Sangeoule Lamizana||Burkina Faso||1966||1980||15.5%||-4.2%||-19.7%|
|Andre Kolingba||Central African Republic||1981||1993||0.2%||-5.4%||-5.6%|
|Denis Sassou-Nguesso||Republic of the Congo||1979||1992||5.0%||-4.6%||-9.6%|
|Gamal Abdel Nasser||Egypt||1954||1970||8.5%||8.3%||-0.2%|
|Mengistu Haile Mariam||Ethiopia||1977||1991||6.5%||-8.7%||-15.1%|
|Policarpo Paz Garcia||Honduras||1967||1979||16.8%||8.1%||-8.8%|
|Joao Baptista de Oliveira Figueiredo||Brazil||1979||1985||-1.0%||15.7%||16.7%|
|Hussain Muhammad Ershad||Bangladesh||1982||1990||7.2%||3.7%||-3.5%|
|Fidel V. Ramos||Philippines||1950||1988||2.7%||7.5%||4.8%|