Leadership Economics Policy Jun 1, 2007

Do Lead­ers Matter?

The sud­den death of a pres­i­dent can trig­ger sweep­ing, unex­pect­ed changes in a nation’s economy

Based on the research of

Benjamin F. Jones

Benjamin A. Olken

The degree to which lead­ers mat­ter is an old and unset­tled ques­tion. Despite cen­turies of thought and study, this issue remains divi­sive. What none can doubt, how­ev­er, is this: lead­ers die. And when they do, nation­al economies can change in major, unex­pect­ed ways, accord­ing to research by Ben­jamin Jones, assis­tant pro­fes­sor of man­age­ment and strat­e­gy at Kel­logg, and his col­league Ben­jamin Olken (Har­vard Soci­ety of Fellows).

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Their report in The Quar­ter­ly Jour­nal of Eco­nom­ics pro­vides clear evi­dence that unpre­dictable changes in a country’s lead­er­ship, due to the executive’s death by acci­dent or ill­ness, can trig­ger changes in gross domes­tic prod­uct (GDP) growth. In this new light, the grip of mas­sive polit­i­cal insti­tu­tions on economies appears much less com­mand­ing than was pre­vi­ous­ly thought.

Econ­o­mists, his­to­ri­ans, and polit­i­cal sci­en­tists have long debat­ed the role of lead­ers. Marx argued that lead­ers can mere­ly choose from options that are strict­ly lim­it­ed by fac­tors far beyond their con­trol. Even more dis­mis­sive was Tol­stoy, who saw lead­ers mere­ly as arti­facts, their impor­tance con­trived after the fact to explain events com­plete­ly beyond their influ­ence. Through such eyes, the Great Men” of his­to­ry, as observed by Thomas Car­lyle, are nowhere to be seen.

This is not to say that great, or at least idio­syn­crat­ic and influ­en­tial, indi­vid­u­als have been com­plete­ly dis­cred­it­ed as engines of change. The British his­to­ri­an John Kee­gan attrib­ut­es the polit­i­cal his­to­ry of the twen­ti­eth cen­tu­ry to six men: Lenin, Roo­sevelt, Churchill, Hitler, Stal­in, and Mao. Strad­dling the chasm between the extreme, all-or-noth­ing views of lead­er­ship, Max Weber and oth­ers pro­posed shift­ing bal­ances of insti­tu­tions, social pres­sures, and charis­mat­ic” indi­vid­u­als as dri­vers of history.

While serv­ing as spe­cial assis­tant to the deputy sec­re­tary of the U.S. Depart­ment of the Trea­sury, Pro­fes­sor Jones saw first­hand how indi­vid­u­als, charis­mat­ic or oth­er­wise, could wield enor­mous influ­ence over the orga­ni­za­tions they led. But the qua­si-monar­chic lead­ers he saw scat­tered about the gov­ern­ment and the globe had not cap­tured the full and pro­longed atten­tion of aca­d­e­m­ic economists.

The study of lead­ers as impor­tant fix­tures in under­stand­ing growth is under­rep­re­sent­ed in the eco­nom­ics lit­er­a­ture, which main­ly empha­sizes social and tech­no­log­i­cal forces,” said Jones. Econ­o­mists would have giv­en lead­ers room for influ­ence, but assumed that they wouldn’t have much effect.”

The study of lead­ers as impor­tant fix­tures in under­stand­ing growth is under­rep­re­sent­ed in the eco­nom­ics lit­er­a­ture, which main­ly empha­sizes social and tech­no­log­i­cal forces,” said Jones. 

As he became increas­ing­ly inter­est­ed in the study of human cap­i­tal and invest­ment in indi­vid­u­als, Jones want­ed to under­stand mech­a­nisms and lim­its of indi­vid­u­als’ influ­ence on large-scale phe­nom­e­na. He won­dered, Would those influ­ences aggre­gate upwards to impact the growth of an economy?”

To test the pow­er of lead­ers, Jones and Olken col­lect­ed data on all nation­al lead­ers world­wide since World War II and paired it with the Penn World Tables, a data­base of glob­al eco­nom­ic infor­ma­tion. They found descrip­tions of 1,108 dif­fer­ent lead­ers from 130 coun­tries, cov­er­ing essen­tial­ly every nation from 1945 to 2000. Can­cers, heart attacks, strokes, and deaths by oth­er nat­ur­al caus­es took six­ty-five of those lead­ers while in office. Anoth­er twelve died in acci­dents fiery, watery, and even equestrian.

In order for their analy­ses to tru­ly reflect unique effects of indi­vid­ual lead­ers, Jones and Olken had to ensure that the deaths were ran­dom and not relat­ed to under­ly­ing fea­tures of the econ­o­my. For this rea­son, they were care­ful to exclude the twen­ty-eight lead­ers who were assas­si­nat­ed, since such deaths are often relat­ed in some way to polit­i­cal and eco­nom­ic fac­tors. Of the sev­en­ty-sev­en lead­ers who died but were not assas­si­nat­ed in office, twen­ty could not be stud­ied due to a lack of suf­fi­cient eco­nom­ic data, leav­ing Jones and Olken to focus on fifty-sev­en leaders.

Hav­ing iden­ti­fied these ran­dom­ly deceased lead­ers, Jones and Olken mea­sured what effect, if any, these upheavals in lead­er­ship had on nation­al economies. They devised empir­i­cal tests to eval­u­ate year­ly mea­sures of aver­age per­son­al income, com­par­ing eco­nom­ic changes over peri­ods of three to sev­en years before and after the fifty-sev­en deaths. If lead­ers had impacts on their nations’ economies, the mod­els would detect dif­fer­ences in eco­nom­ic growth between pre- and post-death periods.

The effect of lead­ers on growth was sub­stan­tial. Economies were mea­sur­ably dis­turbed and unset­tled far more than nor­mal fol­low­ing unex­pect­ed lead­er­ship tran­si­tions. A mea­sure of vari­a­tion in growth showed 31 per­cent more vari­abil­i­ty fol­low­ing lead­ers’ deaths than would nor­mal­ly be expected.

But what is a nation­al leader with­out a nation to lead? Might some nations be more will­ing or able than oth­ers to resist their lead­ers’ influ­ence? Rec­og­niz­ing that social and polit­i­cal cir­cum­stances could have a pro­found impact on lead­ers’ eco­nom­ic influ­ence, Jones and Olken dis­sect­ed their data fur­ther. They stud­ied whether dif­fer­ences in gov­ern­ment, income, and eth­nic frag­men­ta­tion affect­ed economies’ resilience in the face of lead­er­ship change.

Not all types of gov­ern­ment are equal­ly sen­si­tive to ran­dom changes in lead­er­ship. Democ­ra­cies, in which exec­u­tive influ­ence is typ­i­cal­ly mod­er­at­ed by inde­pen­dent leg­isla­tive and judi­cial pow­ers, appeared insu­lat­ed from indi­vid­u­als’ influ­ence on GDP. But lead­ers’ deaths trig­gered sub­stan­tial eco­nom­ic change in auto­crat­ic coun­tries, which typ­i­cal­ly had lim­it­ed com­pe­ti­tion for lead­er­ship and imposed few con­straints on the exec­u­tive. Par­tic­u­lar­ly vul­ner­a­ble were autoc­ra­cies with no polit­i­cal par­ties and those whose lead­ers had assumed pow­er via coup d’etat. In short, lead­ers mat­tered most when insti­tu­tions mat­tered least. Com­pared to these effects of gov­ern­ment, pat­terns of pover­ty and eth­nic­i­ty with­in a coun­try had lit­tle or no effect on growth.

The effect of lead­er­ship on growth, while dra­mat­ic in autoc­ra­cies, was not con­sis­tent­ly good or bad. Some lead­er­ship tran­si­tions ampli­fied or min­i­mized trends that already exist­ed while oth­ers trig­gered dra­mat­ic rever­sals. Some economies expand­ed and oth­ers shrank. Fol­low­ing Mao’s death in 1976 (see Fig­ure 1) China’s growth reached 5.9 per­cent annu­al­ly. This was near­ly triple the more mod­est 1.7 per­cent year­ly growth pri­or to his death. In stark con­trast to the Cul­tur­al Rev­o­lu­tion and oth­er poli­cies that like­ly retard­ed growth under Mao, his suc­ces­sor, Deng Xiao-Ping, is wide­ly cred­it­ed with mov­ing Chi­na toward mar­ket-ori­ent­ed policies.

Figure 1: Growth and leader deaths—China

Growth in Mozam­bique (see Fig­ure 2) changed course entire­ly fol­low­ing the 1986 plane crash that killed Samo­ra Machel. A Com­mu­nist Fre­limo guer­ril­la, Machel nation­al­ized all pri­vate land as pres­i­dent of his one-par­ty state. Per­sis­tent shrink­ing of the econ­o­my ensued, aver­ag­ing a 7.7 per­cent annu­al decline in GDP. The mul­ti-par­ty, freer-mar­ket tenure of Joaquin Chissano reversed the shrink­age from Machel’s rule while aver­ag­ing 2.4 per­cent growth each year.

Figure 2: Growth and leader deaths—Mozambique

To see effects in such a large mea­sure as eco­nom­ic growth was sur­pris­ing to us,” said Jones. We thought we would see effects only among a sub­tler set of policies.”

Jones and Olken then looked at sub­tler poli­cies, seek­ing to iden­ti­fy par­tic­u­lar eco­nom­ic fac­tors sus­cep­ti­ble to lead­ers’ influ­ence that could help explain large-scale changes in growth. They stud­ied the roles of mon­e­tary, fis­cal, trade, and secu­ri­ty poli­cies. To do this, they mea­sured rates of infla­tion, gov­ern­ment spend­ing, inter­na­tion­al trade, and armed con­flict, respectively.

Auto­crat­ic lead­ers, pre­sum­ably more crit­i­cal than cen­tral banks in set­ting mon­e­tary pol­i­cy, influ­enced infla­tion rates. Oth­er research by Jones and Olken sug­gests that lead­ers’ deaths trig­gered changes in the mon­ey sup­ply. There is lit­tle evi­dence, how­ev­er, that indi­vid­ual lead­er­ship affect­ed fis­cal, trade, and secu­ri­ty policies.

That this research dis­cov­ered any influ­ence of indi­vid­u­als on nation­al eco­nom­ic mea­sures is notable. But to find that an indi­vid­ual could manip­u­late some­thing as sub­stan­tial as GDP is trans­for­ma­tive. This work points to pos­si­ble mech­a­nisms behind the often-sharp changes in growth in devel­op­ing coun­tries. It also recasts social and polit­i­cal insti­tu­tions in less con­sis­tent roles as agents of eco­nom­ic devel­op­ment. Democ­ra­cies may be able to pro­tect coun­tries from eco­nom­ic dis­as­ters such as those suf­fered in Zim­bab­we under Mugabe, but they may also hand­cuff suc­cess­ful poli­cies such as those put forth by Deng Xiao-Ping in China.

Their inter­est piqued and their data still fer­tile, Jones and Olken are con­tin­u­ing their research on lead­ers, death, and nation­al trans­for­ma­tion. They recent­ly pre­sent­ed their new work, Hit or Miss? The Effect of Assas­si­na­tions on Polit­i­cal Insti­tu­tions and War,” at the annu­al meet­ing of the Amer­i­can Eco­nom­ic Asso­ci­a­tion. This new paper, like their pre­vi­ous one, shows how seem­ing­ly triv­ial ran­dom­ness, such as can­cer muta­tions and twitch­ing trig­ger fin­gers, can alter the course of history.

Fur­ther reading:

Jones, Ben­jamin F. and Ben­jamin A. Olken. Hit or Miss? The Effect of Assas­si­na­tions on Polit­i­cal Insti­tu­tions and War.” Work­ing paper pre­sent­ed at the annu­al meet­ings of the Amer­i­can Eco­nom­ic Asso­ci­a­tion, Chica­go, Jan­u­ary 2007.

Kee­gan, John (2003). Win­ston Churchill,” Time Mag­a­zine

Weber, Max (1947). The The­o­ry of Social and Eco­nom­ic Orga­ni­za­tion. New York: Free Press.

Featured Faculty

Benjamin F. Jones

Professor of Strategy; Faculty Director, Kellogg Innovation and Entrepreneurship Initiative (KIEI)

About the Writer

Dr. Brad Wible, a Science and Technology Policy Fellow in Washington, DC sponsored by the American Association for the Advancement of Science

About the Research

Jones, Benjamin F. and Benjamin A. Olken (2005). ”Do Leaders Matter? National Leadership and Growth Since World War II.” The Quarterly Journal of Economics, 120(3): 835-864.

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