Politics has inevitable effects on economics. The economic progress of all countries are deeply connected to the political affairs of the countries. The second sign of successful nations, as described by Sharma is politics. The interactions are complicated. The first one is that young and fresh leaders are more likely to conduct economic reforms. As the leaders grow older or as they stick to power for longer periods they tend to become more and more conservative and reluctant to perform any changes. Even Reagan also fell victim to the “second term course”. The cycle of scandals and opposition from the legislative branch that halts the speed of revolutionary reforms in the first term. Margaret Thatcher also never lost her zeal for reforms but after twelve years her fellow conservatives got tired of her uncompromising style, and sacked her.
Regarding democracies and autocracies, the economic results for autocracies are more extreme compared to democracies. Tracing back the data from 1950, there are 43 cases that a country experienced an average annual growth rate of more than 7 percent for more than decade, 35 percent of the cases were under authoritarian governments. On the other hand, there are also 138 cases where a country suffered a decade of average annual growth rate of 3 percent. This growth rate is like an economic recession at least for developing countries, in 100 cases the country was ruled under an authoritarian government.
Authoritarian regimes also swing between strong economic booms and busts. Unfortunately in many cases the bust is so hard that evaporates all the benefits that were created during the growth cycles. Looking at data from 1950, there are 36 cases that frequently witnessed strong economic growth rates of more than 7 percent per year which wes followed by economic bust, reflected in negative growth rates. In 27 cases the country is ruled by autocrats, and in most cases these countries are quite poor nowadays. On the other hand many democracies were able to create modest but consistent growth rates, which led to economic growth and prosperity after generations.
Source: “10 rules of successful nations”
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