Meritocracy, Not Democracy Is Key to Growth

Meritocracy, the secret sauce of growth?  

Adrian Woolridge wrote a thought-provoking essay titled «Meritocracy, Not Democracy, Is the Golden Ticket to Growth,» advertising a forthcoming book.

Meritocracy, the secret sauce of growth?  

To Woolridge, meritocracy is the secret sauce of prosperity:

The surest sign that a country will be economically successful is not the health of its democracy, as some liberals like to think, or the leanness of its government, as some free-marketers imagine, but its commitment to meritocracy. Singapore is a soft authoritarian power. But it has transformed itself in a few decades from a poverty-stricken swamp into one of the world’s most prosperous countries, with a higher standard of living and a longer life expectancy than its old colonial master, because it is perhaps the world’s leading practitioner of meritocracy. The Scandinavian countries have some of the world’s largest governments and most generous welfare states. But they retain their positions at the top of international league tables of prosperity and productivity in large part because they are committed to high-quality education, good government and, beneath their communitarian veneer, competition; in other words — meritocracy.

By contrast, countries that have resisted meritocracy have either stagnated or hit their growth limits. Greece, a byword for nepotism and “clientelism” (using public-sector jobs to reward partisan cronies), has struggled for decades. Italy, the homeland of nepotismo, enjoyed a postwar boom like France and Germany but has been stagnating since the mid-1990s….

Democracy alone does not lead to growth, and likewise growth does not swiftly lead to democracy. Look at China vs. India, and many democratic, at least in the sense of leaders chosen by fairly free elections,  but poor countries around the world.

For a generation, political economists have been looking more deeply at institutions — rule of law, property rights, etc. — as a secret sauce. «Meritocracy» is a good buzzword for a different idea of what is centrally important.

…countries that favor recruiting professional managers through open competition have higher growth rates than those that favor recruiting amateur managers through personal connections. America has the highest overall management score, followed by Germany and Japan. Rich-world laggards such as Portugal and Greece, and big emerging-market countries such as India, have a long tail of un-meritocratic and therefore badly managed firms.

The essay goes on, condensing much more evidence.

It is plausible that meritocracy is especially important now, as businesses globalize and incorporate IT. The rising skill premium and larger reach of global corporations means that it is ever more important to match skilled people with the positions that require skill.

His bottom line

… The idea that there is a necessary relationship between democracy and growth rests on a false positive. The really robust relationship is between meritocracy and growth. ..

the evidence of economics is overwhelming: Meritocracy promotes prosperity, and dismantling meritocracy will reduce it. Those who support the current campaign against merit need to admit that they are opting for lower growth.

I am not an expert on the huge political/economic literature on the correlates of growth. This sounds reasonable, but the Acemoglus, Barros, etc. of the world may have important things to say on the evidence. Still, it’s a novel idea and let’s follow it.

We should distinguish «leading country» growth that must come from innovation, and «catchup growth» that simply uses current ideas most efficiently. Woolridge, and the rest of this essay, is, I think, mostly about the latter.  For almost all of the world’s population, that’s what matters. And in my view, the US is a good deal below the efficient frontier as well.

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