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Home arrow Management arrow Strategic Management in the 21st Century. The Operational Environment

Authoritarian Capitalism

Although the "strong state-weak society" form is not found in many industrialized nations, this model of capitalism has a record of rapid growth in today's global economy. An authoritarian system provides a strong centralized government to discipline disorderly and aggressive societal impulses. Authoritarian capitalism gives the head of government extraordinary powers. Government organizes societal interests from above, and prohibits the formation of autonomous groupings that might resist state leadership. Late-developing nation-states with weak industrial infrastructure are historically excellent candidates for this interventionist form of capitalism.77

Authoritarian capitalism first emerged in the early 1900s and, to varying degrees, continues to shape newly industrialized nations during times of war. Some early corporatist models were found in Italy and Germany during the World Wars.78 The primary difference between today's neocorporatist systems and the former corporatist systems is that the government of the latter used coercive behavior to control societal elements (labor and capital). To distinguish corporatism from neocorporatism (the latter also is referred as corporatism in the literature), the former will be called "authoritarian" capitalism.

Compared to other forms, authoritarian capitalism is relatively new. The other three forms of capitalism emerged in response to commerce; however, the authoritarian variation appears to have roots in conflict or unstable political systems. Under an authoritarian system, tight resource control is necessary to build a power base. Whatever reason for authoritarian capitalism's emergence, the market is structured so that the principal beneficiaries are government élites.

The economic growth in South Korea and Taiwan represent some variation found within the authoritarian form of capitalism.79 In both cases, these nations have had high degrees of political autonomy in postwar economic development; however, differences exist in how businesses are organized in these countries. In South Korea, large business conglomerates (chaebol) remain operational, but Taiwan's private business groups (guanxiqiye) primarily are composed of smaller businesses. Arguably, South Korea's chaebol provide evidence of a different type of market structure. Some evidence suggests that government planning and directing is still prominent in South Korea. For example, the South Korean government still has the ability to slow the international expansion of domestic firms.80

Although authoritarian control by the state suggests an antidemocratic decision-making structure, some evidence does support this form's effectiveness. During the early 1990s, a number of Southeast Asian economies had tremendous economic growth. In particular Indonesia, Thailand, Malaysia, Singapore, and the Philippines seem to fit within an authoritarian style of capitalism.81 The recent enterprise expansion in China also seems to parallel other recent Asian nation transitions to authoritarian capitalism.

Today, a growing segment of the world is adopting some variant of an authoritarian mode of capitalism. Newly emerging democracies and longstanding dictatorships are both trying to rapidly catch up with industrialized nations. Authoritarian capitalism offers a possible solution to their goal of a more-prosperous national economy. Although industrialized nations unlikely will evolve into this form of capitalism, business leaders need to understand the authoritarian mode's structure because today's economy is global.

 
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