Some theorists of modernization have influentially claimed that successful “late industrialization” led by developmental states creates economies too complex, social structures too differentiated, and (middle-class-dominated) civil societies too politically conscious to sustain nondemocratic rule. Nowhere is this argument—that economic growth drives democratic transitions—more evident than in Northeast and Southeast Asia (hereafter Pacific Asia).

South Korea and Taiwan, having democratized only after substantial industrialization, seem to fit this narrative well. But “late democratizers” have been the exception rather than the rule. Indonesia, the Philippines, and Thailand democratized before high per capita incomes were achieved. Malaysia, and especially Singapore are more wealthy than they are democratic. The communist “converts” to developmentalism, China and Vietnam, are aiming for authoritarian versions of modernity. Table 1* shows that there is no clear pattern in Pacific Asia. Indeed, according to the nongovernmental organization Freedom House (and using the World Bank categories of low, lower middle, upper middle, or high income), poor and rich countries alike in Pacific Asia are rated “free,” “partly free,” or “not free.”

What key factors have influenced the different timing of democratization in Pacific Asia? Democratization has occurred early in the developmental process when authoritarian states have failed to create sustainable economic growth, which in turn has led to mounting debt. Many reasons explain this phenomenon, but a primary cause is the so-called failure to “deepen”—that is, certain countries’ inability to become major manufacturers of high-tech and heavy industrial goods. For example, when economic crises rocked the Philippines in the mid-1980s and Indonesia in the late 1990s, both nations lacked the economic maturity and breadth to rebound, prompting abrupt financial collapse. These nations’ political systems were too ossified to channel popular unrest, and mass mobilization resulted. Ideologically, the Marcos and Suharto regimes faced accusations of cronyism, as favored business leaders stepped in to rescue failing conglomerates, sidelining once-influential technocrats in the process. In the end, these countries’ limited economic development actually broke down their authoritarian systems.

 “Late industrializers,” by contrast, do succeed in industrial “deepening.” But they are often less successful in terms of “widening”—the perception that the benefits of development are being fairly shared in society. Statistics show that South Korea and Taiwan are relatively equal societies. Nevertheless, neither of these technocratically oriented authoritarian regimes was able to blunt criticisms that growth was unjustly distributed. South Korean workers and native Taiwanese felt particularly disadvantaged. In Malaysia, too, tensions are now mounting about distribution along ethnic lines. Electoral authoritarianism helped to defuse earlier crises in South Korea and Taiwan, but beginning in the mid-1980s, opposition forces in both nations launched successful challenges through the ballot box to bring about democratization. In Malaysia, the opposition scored major gains in the 2008 elections. Ideologically, all three authoritarian regimes were weakened by activist campaigns for social justice, which mobilized middle class professionals.

One can only speculate about whether Singapore will one day democratize. Its economy has continually deepened, most recently through a major drive to grow a biotech industry. At the same time, it has widened through a series of welfare-related measures focused on housing and pensions. The Singaporean government has also perfected a system of electoral authoritarianism, allowing some competition and participation without threatening the ruling party’s hold on power. Ideologically, the government has long determined the political agenda through its collectivist campaigns (including the once high-profile “Asian values” discourse). However, when Singapore’s founding father, Lee Kuan Yew, eventually passes away, the nation’s technocratic elite may be tempted to democratize. Democratization would give the government greater legitimacy to reform welfare provision, which many believe is currently limiting Singapore’s competitiveness. The main arguments are summarized in table two.*

It is evident that China and Vietnam are trying to imitate the Singaporean model. Though each faces many obstacles, both countries have already made great strides in industrial deepening and widening through an elaborate postcommunist welfare system. Ideologically, these countries will rely not just on growth—which will inevitably slow during the current economic crisis—but also on appeals to a collectivist identity that is simultaneously both nationalist and neo-Confucianist in character. Whether China and Vietnam eventually democratize or remain authoritarian despite modernization is one of the most important political questions in the world today.

* Please contact the Manager of Corporate Relations for a full PDF copy of this dispatch, including tables.

At first sight, political turmoil in Thailand and the Philippines—repeated violent protests, impeachment battles, and military coups—gives the impression that democracy in Southeast Asia is on a downward spiral. One country in the region, however, has sustained a stable pluralistic democracy: the Republic of Indonesia.

In 1999, after thirty years of Suharto’s centralistic, authoritarian rule, Indonesia embraced far-reaching decentralization and election reforms. Within a brief period of two years, the Indonesian government reshaped its administrative architecture, including the devolution of local tax and service responsibilities to more than 400 district governments. In view of its deep-seated authoritarian traditions, beginning with Javanese kingdoms and sultanates, moving through Dutch colonialism (1619–1942), and ending with Suharto’s New Order (1965–98), Indonesia’s rapid shift toward democratic decentralization stands out as one of the most remarkable political transitions in recent history.

Particularly notable is the peaceful and competitive conduct of Indonesian elections. Over the last decade, local citizens have elected more than 30,000 local councilors and over 400 mayors, regents, and governors, with little violence or intimidation. High voter turnouts (around 70 percent) and high replacement rates of incumbent executives (roughly 40 percent) bear witness to rising electoral competition in local polities. While subnational elections display considerable flux, the upcoming presidential elections in July 2009 suggest continuity. The latest national polls, for example, predict a comfortable lead for President Susilo Bambang Yudhoyono (49 percent) over his main competitor, Megawati Soekarnoputri (36 percent).

The institutionalization of democracy and decentralization, however, has yet to translate into substantive public sector reforms. Indonesia continues to score low in global governance assessments. According to Transparency International and the World Bank, Indonesia’s government ranks 126th (out of 180) in terms of corruption, and 129th (out of 181) in terms of administrative efficiency for business start-ups. With the introduction of regional autonomy, these governance problems have, to a considerable extent, been decentralized to hundreds of districts. Yet, despite formally uniform institutional settings, local governments exhibit vast differences in regulatory quality, administrative efficiency, and anticorruption measures.

What motivates some local governments to perform better than others? Implicit in this question, which stands at the center of my research, is the idea that local democracy is not only an end in itself, but also a means for improving government outcomes. The pronounced policy differences that arise in Indonesia’s district polities provide a good opportunity to examine the workings of Indonesian local democracy or, to use a different terminology, the political economy of local decision-making.

The findings from controlled case comparisons and subnational datasets suggest that policy variations are best explained by differences in government leadership. Good policy environments emerge primarily in cases where local regents and mayors, whose career aspirations are tested by direct elections, skillfully use their office powers to forge reform coalitions and supervise bureaucratic practices. Societal reform pressures that arise from local parliaments, business chambers, and nongovernmental organizations, in comparison, tend to be less significant drivers of good governance. While broad-based interest groups continue to struggle with collective-action problems, district council members seem more concerned with provincial/national party elites (and their party list positions) than with representing local constituencies. Thus, in Indonesia’s early stage of democratic transition, where societal pressures are yet to fully unfold, much seems to depend on leadership efforts to initiate, facilitate, and oversee government improvements.

Under what conditions, then, are local leaders likely to act in the public interest, rather for private gain? While direct elections provide basic incentives, the direction and strength of these incentives also hinge upon existing socioeconomic structures. Government leaders need to accommodate interests of powerful economic groups in order to secure support for campaign funding and co-investments in public goods. Whether these interest alignments result in unproductive rent-seeking and corruption, or in constructive government reforms, depends on the constellation and transparency of economic powers.  The more economic powers become concentrated in specific sectors, groups, and firms, and the less public-private interactions are monitored by local media, the greater the likelihood that leaders will pursue self-preferential and collusive strategies.

As a result, it is plausible to assume that a moderate economic concentration and strong media presence are conducive to better governance. At this point, only some districts fall into this category. But as globalization and communication technologies progress, local polities are bound to become more economically diverse and politically informed. With growing political awareness and increased incentives for better leadership, it is likely that Indonesia, over time, will see more public-private symbioses for reform and, thus, bridge the gap between well-functioning elections on the one hand and poor governance
on the other.