Planting the Seed of Development: The Effects of Political Stability on Economic Growth.

This paper analyzes a new aspect of the relationship between political regimes and economic growth. In particular, this paper investigates the relationship between dictatorial regimes and economic growth by focusing on the importance of political stability. The current literature suggests that while dictatorships are often morally questionable, they do foster economic growth by providing a stable economic environment. As an implication, dictatorships should be viewed as an unfortunate but necessary step in transforming an underdeveloped country into a modern economy. This study, however, shows that dictatorial regimes are able to foster economic growth by establishing a stable political environment. This distinction is crucial because it implies that economic growth does not follow dictatorships per se, but instead follows the regime?s ability to achieve political stability. To test this relationship, this paper uses a case study analysis of Alberto Fujimori?s regime in Peru from 1990 to 2000. This study argues that Fujimori?s eradication of the Sendero Luminoso contributed to Peru?s political stabilization thus allowing Fujimori to implement his economic policy of market liberalization. It is also argues that Fujimori?s market liberalization was the cause of the increasing levels of foreign direct investment during Fujimori?s leadership. . ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]