When Business Meets Autocracy, the Stakes Rise for Everyone

Democratic governance offers a better environment for economic growth, innovation, entrepreneurship, and competition than autocratic governance, and the data shows it. Correlations between the World Justice Project’s Rule of Law Index, Transparency International’s Corruption Perceptions Index, and Freedom in the World, Freedom House’s annual survey of political rights and civil liberties, are strong and support the notion that where there is robust rule of law, less corruption, and more rights and liberties, there is also a productive environment for private enterprise and investment. The opposite also holds true: where there is weak rule of law, high levels of corruption, and fewer rights and freedoms, there is more uncertainty, greater risk, and less economic prosperity in the long term.

In 2015, Freedom House found that the top performers on the World Bank’s Doing Business survey were mostly countries rated Free in Freedom in the World. In 2025, of the 20 top-rated countries in Freedom in the World, 16 were also on top of the Atlantic Council’s Freedom and Prosperity Indexes. These findings suggest that governments that uphold the rule of law—the principle that citizens, organizations, and state officials are equally subject to a set of norms and laws enforced fairly through an independent court system—create the conditions for economic activity to flourish.

Where the rule of law is upheld, people can feel reasonably assured their assets will be protected, contracts will be enforced, intellectual property is secured, and rights like freedom of expression, freedom of assembly, and freedom of the press will be respected. Such a robust ecosystem of rights encourages the investment, innovation, and trust essential for economic growth, as well as the stability and predictability that allows business development and mid- and long-term planning. Where the rule of law is deficient, businesses face unpredictable risks. These stem not only from operating in an environment that lacks checks on private-sector corruption, but also because businesses lack protection from abusive practices by the state itself.

The risks of autocratic rule for business, investment, and the rule of law

There is a dangerous misperception among some that strongman rule, where a single leader can sweep aside constraints and govern at will, is better for investment and economic growth than democracy is. Perhaps this can hold true in the short term. But giving up the rule of law in the hope of achieving quick economic gains is a deal with serious consequences. Economies overseen by autocrats are more fragile and prone to crisis. And where financial systems are controlled by autocrats, corrupt leaders have additional means to dodge accountability and persecute their own people. They can even exert harmful influence on the private sector beyond their borders.

Many autocrats attempt to rally popular support and justify their rule through visible economic projects like highways and other infrastructure, or large extractive ventures like state-run oil fields and mines. They are less likely to adopt policies that encourage innovation among citizens, which could threaten their grip on power by promoting independent entrepreneurship and demands for rule of law and accountability. Repressive authoritarian regimes also face few if any obstacles to seizing citizen-owned enterprises or jailing their staff. Last November, for example, Mali’s junta arrested several senior figures from a Canadian mining company in what media reports described as an effort to compel the firm to pay additional taxes. Such risks, alongside broader systematic repression, encourage brain drain, with the most ambitious citizens leaving for freer environments where they can innovate and grow businesses on their own terms, and where they can be protected by the rule of law.

Research shows that autocracies are also much more likely to experience economic crises, in part because the concentration of power in one person or party unbound from the rule of law can lead to poor decision-making. For decades, Venezuela was one of the most developed countries in the world. Under the rule of Hugo Chávez and his successor Nicolás Maduro, however, it has become one of the poorest countries in the world. Autocrats chip away at the rule of law gradually but steadily, and to the detriment of a nation’s prosperity.

In Nicaragua, Daniel Ortega’s assault on the country’s independent institutions has gutted the rule of law, allowing authorities to engage in large-scale economic repression for political control. The regime uses sophisticated digital tools to conduct surveillance on private financial and business activities, and has notoriously seized bank accounts, businesses, and property belonging to dissidents. Nicaraguan authorities also abuse international cooperation mechanisms intended to fight crime and terrorism to track dissidents’ financial transactions, even outside of the country. They’ve also seized upon ordinary public records as a tool to punish dissent. One Nicaraguan journalist told Freedom House that dissidents’ homes had vanished from the civil registry of property, leaving them with no way to prove legal ownership or defend their property rights. (The same Freedom House study found that the governments of Tanzania, Thailand, Tunisia, Turkey, and Venezuela, all rated Partly Free or Not Free in Freedom in the World, were among those that had frozen or seized outright dissidents’ assets.)

In China, employees at international firms and other businesspeople are being pressured into silence on Chinese policies and the country’s human rights abuses. The compliant reactions of some in the corporate world demonstrate how Chinese leaders can leverage the country’s market power to silence unwanted criticism and promote the regime’s strategic interests.

However, businesses are increasingly recognizing that they have a role to play in pushing back against authoritarian rule. Since the Kremlin’s full-scale invasion of Ukraine began in 2022, more than 1,000 companies, including major brands, have curtailed operations in Russia beyond the extent required by international sanctions.

Innovation can’t thrive without the rule of law

Autocrats around the world today don’t always resemble the uniformed, iron-fisted rulers of the past. They hold elections, wear business suits, and some even project themselves as tech-savvy reformers. But these modern facades can’t conceal the same authoritarian instincts that have always underpinned autocratic rule. As Freedom House documented in Freedom in the World 2025, modern autocrats are staging fake elections to legitimize their rule, using their power to weaken the rule of law, and imprisoning those who dare to challenge their authority. Doing business under autocracy invites a whole new level of risk.

An innovative economic system rests on the rule of law and the presumption of freedom, rights, and liberties—principles that come under assault under autocratic rule. Democratic governments more reliably uphold fundamental rights and freedoms and pursue economic reforms that encourage business growth. As a result, they see greater business investment and returns. In one study, for example, economists found that countries that switched from autocratic to democratic rule experienced a 20 percent increase in gross domestic product (GDP) over a 25-year period compared to what would have happened had they remained authoritarian states. In the long run, democracies fare better economically because they exhibit less volatility and more certainty, and protect space to innovate—in great part due to leaders who work to uphold the rule of law.