When a dictator leaves, what happens to economic growth?

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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  In terms of ground rules, we are including dictators that have been replaced by another dictator (Cuba, Venezuela) but are not including monarchies that are uninterrupted.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:

  1. 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.
  2. 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.
  3. 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
Fidel Castro Cuba 1959 2011 5.5% 5.3% -0.2%
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%
Yumjaagiin Tsendenbal Mongolia 1940 1984 -0.7% 11.3% 12.0%
Muammar Gaddafi Libya 1969 2011 -8.8% -10.0% -1.2%
Omar Bongo Gabon 1967 2009 9.2% 8.5% -0.7%
Enver Hoxha Albania 1944 1985 2.1% 1.3% -0.7%
Francisco Franco Spain 1936 1975 22.9% 15.2% -7.7%
Gnassingbe Eyadema Togo 1967 2005 10.3% 8.4% -1.9%
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%
Janos Kadar Hungary 1956 1988 5.9% 4.6% -1.4%
Habib Bourguiba Tunisia 1956 1987 3.6% 9.8% 6.3%
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%
Suharto Indonesia 1967 1998 -9.6% 19.7% 29.3%
Urho Kekkonen Finland 1954 1982 9.5% 11.6% 2.1%
Joseph Stalin USSR 1922 1953 8.0% 7.6% -0.5%
Abdou Diouf Senegal 1970 2000 -0.8% 13.2% 14.1%
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%
Hugo Chavez Venezuela 1999 2013 3.3% -10.0% -13.3%
Augusto Pinochet Chile 1972 1990 13.3% 17.3% 3.9%
Houari Boumediene Algeria 1965 1976 28.4% 20.1% -8.3%
Mathieu Kerekou Benin 1972 1991 8.3% 3.5% -4.7%
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%
Samuel Doe Liberia 1980 1990 -14.7% -18.9% -4.2%
Didier Ratsiraka Madagascar 1975 1993 6.7% 2.1% -4.6%
Moussa Traore Mali 1968 1991 8.0% 0.4% -7.6%
Siad Barre Somalia 1969 1991 -7.8% 16.3% 24.1%
Idi Amin Uganda 1971 1979 0.4% 11.1% 10.7%
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%
Desi Bouterse Suriname 1980 1988 5.6% -18.1% -23.7%
Hussain Muhammad Ershad Bangladesh 1982 1990 7.2% 3.7% -3.5%
Saddam Hussein Iraq 1994 2003 11.8% 30.2% 18.4%
Emile Lahoud Lebanon 1998 2007 5.1% 11.9% 6.8%
Mahathir Mohamad Malaysia 1981 2003 8.8% 15.9% 7.1%
Muhammad Zia-ul-Haq Pakistan 1977 1988 6.0% 6.0% 0.0%
Pervez Musharraf Pakistan 1999 2008 15.4% 6.3% -9.0%
Fidel V. Ramos Philippines 1950 1988 2.7% 7.5% 4.8%
Hafez Al-Assad Syria 1970 2000 11.1% 8.3% -2.8%
Kenan Evfren Turkey 1980 1989 12.3% 4.1% -8.2%
Mehmet Shehu Albania 1954 1981 -4.7% 3.7% 8.4%
Wojciech Jaruzelski Poland 1981 1990 -2.0% 16.6% 18.6%

 

 

 

 

 

 

 

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