Security Threats, Enemy-Contingent Policies, and Economic Development in Dictatorships

Abstract

In this article, I introduce, discuss, and formalize the argument that the type of security threat a dictatorial regime faces has implications for economic policy making and, consequently, economic outcomes. Dictators who mainly face internal threats often have incentives to conduct policies that are harmful to economic development, like underproviding productive public investment. However, dictators who mainly face external threats are more likely to conduct economic development–enhancing policies. The type of security threat facing a dictator thus contributes to explaining the large variation in economic development among dictatorships. The argument finds empirical support in cases from different geographical regions and historical periods. One particularly illustrative example, addressed in the article, is Japan in the nineteenth century, where the sharply increased severity of external threats from Western countries induced the selection of development-enhancing policies in the last half of the century.