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Discounted Cash Flow (DCF) analysis is the bedrock of modern-day financial analysis. It is for this reason that financial modelers use discounted cash flow analysis extensively. In fact, the DCF analysis may have been the reason why the field of financial modeling came into existence in the first place. In this article, we will have […]
Types of Teams – Permanent Teams, Temporary Teams, Task Force, Virtual Teams etc
When individuals with a common interest, goal, attitude, need and perception come together, a team is formed. Individuals need to come and work together to form a team for the accomplishment of complicated tasks. In a team, all team members contribute equally and strive hard to achieve the team’s objective which should be predefined. In […]
Documenting a Process – Importance and Its Benefits
While improving business processes, it is essential that one document the process as well as any improvements made to it. Most consultants will document both the “As-Is Process” as well as the “To-Be Process”. While many think about it as customary and do it for the same reasons, there are other important reasons to document […]
Vulture Capitalism: An Introduction
The fall of American giants such as Sears and Toys R Us has brought the focus back on vulture capitalists. People react negatively when they hear about private equity firms who have profited off the misery of other weaker firms. This is the reason why they have coined a derogatory term for the companies. This […]
Shortcomings of Employee Multitasking
Everything in life comes with some positives and some negatives. Every coin has two sides and the same logic applies to employee multitasking as well. Employee multitasking has both pros as well as cons. Let us go through the shortcomings of employee multitasking: Employees who are responsible for many things at workplace are generally overburdened […]
If we look at the history of economic development of nations over the last hundred years or so, we find that different nations have taken different trajectories in their pursuit of economic growth.
While countries such as China opened up their economies and at the same time retained their authoritarian political systems, India remained democratic and took a different route as far as economic development was concerned.
Indeed, some Indian commentators are fond of saying that China raced ahead of India mainly because it took unpopular and iron willed decisions wherein the authoritarian nature of its political system meant that its rulers could push through economic reforms without bothering about opposition whereas in India, for every major economic decision, there has been a pushback and resistance from below as well as driven by opposition parties.
Thus, it is fashionable among Indian elites to say that dictatorship is better for economic development.
On the other hand, we have the case of the erstwhile Soviet Union that collapsed under the weight of its own contradictions and its socialist and communist model of economic development was discredited in the end.
So, some experts believe that democracy is better in the longer term as can be seen from the continued success of the United States and other Western countries that have retained their democratic credentials and the at the same time, maintained their steady pace of growth.
Indeed, as democracy promotes the Rule of Law and the Honouring of Contracts drawn up between businesses and other entities, it is believed that a healthy and vibrant political system backed by an independent judiciary is prerequisites for nations to grow.
As free and fair societies often ensure egalitarian and just laws that are necessary for businesses to thrive, it is also the case that democracy promotes economic growth.
Moreover, a tolerant and plural polity is known to encourage creativity and incubate innovation, both of which are stifled in repressive regimes.
Of course, as every expert worth their salt is not tired of saying, China is the great exception here wherein it ensured economic prosperity even in a closed system.
They also point to the success of the so-called Asian Tiger economies such as South Korea and Taiwan as well as the City State of Singapore to buttress their point that authoritarian systems fare better since they can take decisions that are not blocked or thwarted.
Having said that, the recent instances of how the Coronavirus Outbreak threatens the Chinese state reveals, dictatorships, sooner or later, run out of steam and implode as the workers and the person on the street eventually tires of wealth without freedom and more importantly, protests against the Grotesque Inequalities of the system.
In other words, the people who have been left out of the spoils of economic growth often find their voice and rebel in such systems.
On the other hand, democracies ensure that dissent and protest are released through Safety Valves such as elections and other forms of political representation wherein the disenfranchised and the disaffected can vote for someone else when they feel that they are being short changed.
Indeed, this is the beauty of democracy as it allows all voices to prosper and thrive unlike dictatorships where dissent is crushed and sooner or later, such dissent often finds its way to corrode the social fabric.
Of course, there is no guarantee that democracies ensure fair distribution of wealth as can be seen from the high levels of wealth disparities seen in most democracies worldwide.
Therefore, it is our contention that both democracies and dictatorships have their pluses and minuses as far as economic development is concerned and it is mainly due the kind of leaders that lead nations that makes a difference.
For instance, tall leaders such as Nehru and Lee Kuan Yew were able to steer their nascent countries through difficulties as did Deng Xiaoping in China as well as Park Lee in South Korea.
While each of these leaders took a different route to economic development of their nations, they had in common an undying commitment to make their countries great.
So, the quality of leadership is often very important as nations pursue economic growth and prosperity.
Moreover, democracies are better for some situations as unpopular leaders can be replaced whereas dictators have to be removed by force.
In addition, businesses often find it easier to work in countries where they are treated with respect and ease of doing business is prevalent.
This means that business leaders often do not give that much importance to the political systems and are instead contended with how they are treated and whether their firms can grow and deliver prosperity to their stakeholders.
Indeed, as can be seen from the events of the last few years world over, many prominent business leaders often prefer to mind their business (literally and figuratively).
Last, while the debate over the kind of system that is better for economic growth goes on, it is worth remembering that no matter the type of system, ultimately, the people have to benefit and this is where the crux of the issue lies.
As long as there is just and equitable growth, any system manages to thrive and survive and once, people perceive that prosperity is only for the few, then the system starts to implode gradually.
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