Interest Groups, Transfer Seeking and Democratization: Competition for the Benefits of
Governmental Power May Explain African Political Instability
Author(s): Mwangi S. Kimenyi
Source: American Journal of Economics and Sociology, Vol. 48, No. 3, (Jul., 1989), pp. 339-349
Published by: American Journal of Economics and Sociology, Inc.
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Interest Groups, Transfer Seeking
and Democratization:
Competitionforthe Benefitsof GovernmentalPower
MayExplainAfricanPolitical Instability
By MWANGIS. KIMENYI*
ABSTRACT.
The effect of permanent interest group transfer-seeking behavior
on the degree of democratization is examined. Eachpermanent interest group
is viewed as attempting to maximize its share of wealth transfers through the
political process. To maximize the share of transfers, each group undertakes
competitive strategies to control the instruments of transfers.Such competition
is more intense the larger the number of permanent interest groups in a given
country, and the higher the likelihood that the competition would involve nondemocratic means to achieve and maintain control of the political machinery
in those countries. It is predicted that the more intense the competition for
transfers,which is a direct function of the number of permanent interest groups
in any given country, the less democratic the system of government in that
country is likely to be. This prediction is supported empirically using crosssectional data for 65 countries.
Introduction
THEORYof government
THE INTEREST-GROUP
(Stigler 1971, Peltzman 1976) sug-
gests that public policy outcomes result from the interplay between the concentrated interests of groups seeking transfersand the more diffuse interests of
groups that supply these transfers. Such competition results in a political equilibrium level and pattern of wealth transferswhereby some groups within the
polity benefit at the expense of others, and those performing the brokerage
function-the regulatorsor members of the legislature--maximize their political
support. The behavior of interest groups in the competition for wealth transfers,
and the vote maximization motive of the legislators generates a rich set of empirical predictions about government behavior (see for example, Shughart, et
al., 1986, and Kimenyi, et al., 1988).
* [MwangiS. Kimenyi,Ph.D., is assistantprofessorof economics in the School of Business
Administrationof the Universityof Mississippi,University,MS38677.] I thanktwo anonymous
referees for challengingcommentsand suggestionson an earlierdraft.
American Journal of Economics and Sociology, Vol. 48, No. 3 (July, 1989).
? 1989 American Journal of Economics and Sociology, Inc.
340
American Journal of Economics and Sociology
Rent-seeking, the use of resources to capture some artificiallycreated rents,
is the most commonly analyzed behavior of interest groups. Rent-seeking activities emerge whenever governmentalaction creates differentiallyadvantageous
positions for some people, groups, or firms, for example through the erection
of entry blocking regulations that create monopoly rights (Buchanan, 1980).
The resources expended to acquire such rightsdo not go directlyinto the creation
of value and therefore, from a social standpoint,are wasted. Rent-seekinginvolves
transfer of resources from the interest groups to the legislators or regulators
who award these rights. Another possible form of interest group behavior that
is analogous to rent-seeking is one where the groups attempt to perform the
brokerage function themselves by undertaking strategies that assure that the
leadership is composed of members of their group. Once in power, leaders
transfer more benefits to members of their group relative to the amount transferred to nonmembers. Thus resources are not expended in influencing politicians or regulators but rather in maintaining the leadership that is favorable
to a particulargroup either by blocking entry of leaders from other groups, or
by removing leaders who are members of other groups and replacing them with
those of their own group.
Both of these types of interest group behavior involve social waste as resources
are not used in the creation of value. In the analysis of rent-seeking, the political
institutions are assumed to be predetermined and therefore are exogenous. In
the second type of interest group behavior, however, the political system is
determined by the activities of the transfer-seeking groups in their attempt to
control the political machinery. In this case the natureof the political institutions
is endogenous.
This paper looks at the consequences of the second type of interest group
behavior. In particular, the paper looks at the role of interest group transferseeking behavior on the type of political institutions that emerge in a given
country. Specifically, we investigate how the number of competing permanent
interest groups affect the degree of democratization as measured by the index
of political competition. Focusing on cross-sectional data for 65 countries for
which consistent data were available, it is shown that countries that have a large
number of permanent interest groups tend to be less democratic. Using the
percentage of population homogeneity as the measure of the number of permanent interest groups, we show that the more groups there are in a given
country, the lower is the degree of political competition. Our argument is that
the more the number of these groups, the more intense is the competition for
wealth transfers.
Transfer Seeking
341
To assure that a particulargroup maximizes its share of wealth transfers,it is
necessary for that group to control the instruments of wealth transfers,namely
political leadership. The desire to control the political machinery motivates the
groups to undertakenon-democraticmeans to acquire leadership such as military
overthrow of existing governments if the present ruling coalition is dominated
by members of another group. Likewise, a leader who comes to power through
a democratic electoral process extends his tenure by adopting non-democratic
procedures that act as barriersto entry into politics by members of other groups.
By so doing, such a leader establishes himself as a monopoly supplier of legislation and broker of wealth transfers.This assures that members of the leader's
group receive more transfersrelative to the members of other groups. Thus the
more heterogeneous the population of a given country, the less democratic
such a country is likely to be.
The paper is organized as follows: Section II presents a brief analysis of the
relationship between population homogeneity and permanent interest groups
and how interest group behavioraffectsthe natureof political institutionsthrough
the competition of government transfers.Section III provides empirical evidence
on the relationship between interest groups and political competition, and section IV contains some concluding remarks.
II
Permanent Interest Groups and Political Competition
POPULATIONHOMOGENEITY,defined by characteristicssuch as race, ethnicity, and
language, can be used as a measure of the number of permanent interest groups
in a given country. We define a permanent interest group as one with clear and
distinct features that unifies and distinguishes members from nonmembers.
Likewise, such features are generally difficult or impossible to be acquired by
nonmembers. Race for example, is an important permanent interest group. We
treat members of a given race as an interest group that attempts to maximize
the group's welfare. Similarlydifferent tribalgroups (notably in Africa) consider
themselves as different from each other and members of each tribal group are
predominantly concerned about the welfare of members of their tribe (Brough
and Kimenyi, 1986, and Kimenyi, 1985). The degree of population homogeneity
is therefore a proxy for the number of permanent groups within a given country.
The larger the percentage of population homogeneity, the fewer the number
of permanent interest groups in that country.
The wealth maximization motive of permanent interest groups is no different
342
American Journal of Economics and Sociology
from that of other interest groups such as labor unions, farmers associations,
and so on. Laborunions for example, attemptto influence public policy outcomes
by supporting candidates who support legislation to increase the legal minimum
wage. Such policies involve the redistributionof wealth from some other groups
(employers and stockholders) to the employees, but involves no creation of
wealth. Likewise, permanent interest groups attempt to maximize the wealth
transferredto them by the government. But because governments do not create
wealth, such transfersmust be taken from other groups, which essentially implies
that the transfer-seeking behavior by permanent interest groups is a zero sum
game. Consequently the competition for government transfersis nothing more
than a rivalrybetween the various permanent interest groups. It follows that to
maximize its share of wealth transfers,a group must seek to control the political
tools. A leader in a country where there are many such interest groups must
transfermore benefits to the members of his supporting coalition who are also
members of his group. Should such a leader attempt to transfer more benefits
to other groups, his own people may oust him for unnecessarily diluting their
benefits. Such a monitoring mechanism within the group assures that a leader
transfers more benefits to his own group.
The crucial point, however, is that in his attempt to keep the supporting
coalition intact, the leader's actions of redistributing income from other groups
to members of his own group creates dissatisfactionamongst these other groups,
who now increase their opposition. Different groups may join together to oust
the common enemy through a violent takeover of the government.
With a coalition government (one which includes leaders from different permanent interest groups) or one where the ruling coalition is predominantly
from one group, some groups will nevertheless be excluded. As the new leaders
start transferringbenefits to their members, other groups increase their opposition, and the cycle of violent takeovers repeats itself.
The foregoing analysis suggests that the more the number of permanent interest groups there are in a given country, the more intense is the competition
for transfersand therefore the higher the likelihood that political leadership is
achieved through non-democratic means. There is a feedback mechanism that
leads to lower degree of political competition in such countries. A leader who
comes to power (either through the democratic electoral process or through
undemocratic means) is aware that his tenure may be terminated at any time
by other groups. To protect himself from being ousted, such a leader is likely
to adopt repressive measures-detain political opponents, outlaw political parties, and so on-so that other groups are not able to organize strong opposition.
The result will be reduced political competition.
Transfer Seeking
343
Africancountries have extremely heterogeneous populations. These countries
also present the most clear evidence of permanent interest group competition
and the effect of such competition on democratization. For example between
1958 and 1984, there were 56 successful military coups in sub-saharanAfrican
countries, 65 attempted coups, and 109 reported plots (McGowan and Johnson,
1984). In most of the successful coups, the new leaders almost have always
claimed that the former leader was removed because of corruptionand tribalism.
Tribal inequalities in the allocation of public finances have been a major cause
of political instability in Nigeria. Likewise, the removal of Obote of Uganda,
Nkrumahof Ghana, and a host of other Africanleaders has been justified by the
coup leaders on the grounds of the extensive tribalism practiced by these rulers
and by the other members of the ruling coalition.
Evidence of the adoption of non-democratic procedures by African leaders
(even those elected in a democratic process) to protect themselves from competition by other groups is also abundant. In 1965 for example, General Soglo
of Benin dismissed the government, banned all political parties, suspended the
constitution, and arrestedall civilian and militaryopponents. Priorto his removal
from power in a military coup, President Obote had suspended the constitution
and detained political opponents. Both the former and the current presidents
of Kenyahave on several occasions held political prisoners in detention without
trial. Manyother Africanleaders have banned other political parties, and almost
all countries have at one time held political opponents in detention.
The United Statespresents a good example of racialinterest-groupcompetition
and the effect of such on political competition. The delay in recognizing the
voting rights of blacks until a few decades ago is a reflection of the white population's (notably in the former Confederate States) desire to prevent redistribution of wealth transfersto blacks. This was accomplished via the erection of
barriers to entry into politics-both legal and artificial-that assured that the
interests of the whites were protected. Likewise, the South African apartheid
system is designed to prevent redistribution of the wealth of the whites to the
blacks which would most likely take place were a system of majorityrule adopted
(Kimenyi, 1987). The result of this permanent interest group behavior, by creating barriersto entry into politics by other groups, reduces the degree of political
competition.
The foregoing examples indicate that the intensity of permanent group competition may be an important factor in explaining the differences in the degree
of democratization across countries. In the section that follows, we present a
model that seeks to test the impact of the number of permanent interest groups
on political competition.
American Journal of Economics and Sociology
344
III
Empirical Model and Results
OUR MAIN HYPOTHESIS is that differences in the degree of democratization as
measured by the index of political competition can be explained in part by the
degree of population homogeneity. In particular,we test a prediction of the
interest-group theory of government that, because of the desire to control the
TABLE 1
INDEX OF POLITICAL
COUNTRY
I. P. C.
Australia
Belgium
Bolivia
Botswana
Brazil
Cameroon
Canada
Chile
Costa Rica
Denmark
Dominican
Rep.
Egypt
El Salvador
Ethiopia
Finland
France
W.Germany
Ghana
Greece
Guatemala
Guyana
Honduras
Indonesia
Ireland
Israel
Italy
Coast
Ivory
Jamaica
Kenya
S. Korea
Kuwait
Malawi
55.3
68.0
0.0
26.5
8.0
0.0
57.6
19.0
52.2
66.8
31.2
6.1
48.3
0.0
48.2
66.1
53.0
12.1
31.1
59.4
34.2
5.0
16.8
52.6
60.3
61.2
0.0
44.5
0.0
10.0
2.0
0.0
SAMPLE COUNTRIES
COMPETITION AND HOMOGENEITY INDEX
H. I.
68
45
32
49
93
11
25
86
93
95
96
96
83
31
84
74
97
29
90
36
42
84
24
96
80
96
14
95
17
100
82
38
COUNTRY
Malaysia
Mali
Mauritania
Mexico
Netherlands
New Zealand
Nicaragua
Norway
Panama
Paraquay
Philipines
Rwanda
Senegal
Sieraleone
Spain
Sri Lanka
Sudan
Sweden
Switzerland
Tanzania
Thailand
Togo
Trindad and
Tobago
Tunisia
Turkey
United Kingdom
Uruguay
USA
Venezuela
Zaire
Zambia
I. P. C
H. I.
45.3
0.0
0.1
11.7
71.1
54.2
6.6
59.2
0.0
23.0
11.3
0.2
3.6
21.3
19.8
45..5
1.1
56.2
76.1
5.8
19.6
0.0
28
22
67
47
90
63
13
96
72
86
26
86
28
23
55
31.5
0.1
60.3
57.4
16.8
47.0
57.3
0.5
17.3
53
27
92
50
7
34
29
44
84
75
68
80
49
89
10
18
instruments of wealth transfers, interest groups in more heterogeneous populations will adopt non-democratic means to achieve political leadership. Likewise, leaders elected in a democratic process in such countries are likely to
Transfer Seeking
345
adopt measures that restrict the entry of competing political parties so that they
can maintaina monopoly in the supply of legislation and in the wealth brokerage
function. These strategies assure that the ruling group maximizes its share of
wealth from government transfers.
We estimated a regression specification of the following general form:
IPC = ao + a,GNPP + a2AGE+ a3HOMOG+ u;
where
IPC = the index of political competition;
GNPP = income per capita (U.S. dollars), 1979;
AGE = age of the nation in 1979 from independence or since the year
of establishment in present form;
HOMOG = percentage of population homogeneity; and
u = regression error term.
Data
Table 1 shows the sample countries and their associated index of political
competition and the homogeneity index. The index of political competition is
the most commonly used measure of the degree of openness of a political
system-the higher the index of political competition the fewer the barriersto
entry into politics. Dictatorships, including militarygovernments and other despotic governments, have low values of the index of political competition, signifying strong restrictions to political competition. The homogeneity index is
a composite variable that measures the degree of population similarities as indicated by race, ethnicity, tribe, and so on. This index tends to be very low in
countries that have many tribal groups, each with a different language, or in
countries that have a sizable number of racial groups.
Data for the index of political competition, the percentage of population
homogeneity, and the age of the countries were obtained from The WorldBook
ofRankings (1984). The index of political competition covers the period 19701979. The homogeneity index covers the period 1960-1965. Although this variable may have changed in some countries by 1979, which is the year of the
study, such would not have significantly affected the index in most of the countries because most of the characteristicsthat define homogeneity do not change
rapidly as group change is rare or impossible. Unless a country experiences
massive in-migration or out-migration of members of a group, this variable remains reasonably stable. Data on income were obtained from the International
Financial Year Book (1980), and from the WorldBook of Rankings (1984).
American Journal of Economics and Sociology
346
The higher the per capita income the lower the emphasis on the need for
government transfers. Simply, at higher income levels, the margin of interest
group competition is likely to be exercised in the market place. However, in
low income countries, political allocation yields higher income benefits through
transfers relative to the income derived from the market. In other words, it is
TABLE 2
REGRESSION RESULTS FOR THE DETERMINANTS
OF THE INDEX OF POLITICAL COMPETITION
Intercept
GNPP
AGE
HOMOG
R-2
F-ratio
2.17
(0.42)
2.08
(0.41)
0.0026
(5.68)---
6.86
(1.41)
0.0026
(5.65)"""
-0.00040
(-0.11)
0.27
(3.40)"""
0.44
18.00"'-
NOTES: t-statistics
is the adjusted
determination;
at the
icance
0.27
(3.49)"""
0.46
27.12"--
0.36
(3.94)"""
0.18
15.59"'"
R-2
in parentheses;
of multiple
coefficient
asterisks
denote
signifone percent
level.
more profitable for groups in low income countries to invest resources to influence government policy than it is for them to invest their scarce resources in
the market where the returns are low. The competition to control the instruments
of wealth transfers is therefore likely to be more vigorous in low income countries
than in higher income countries. Consequently, we expect more political instability in low income countries, as well as a low degree of political competition
because the ruling coalition always seeks to monopolize the supply of legislation
Transfer Seeking
347
and to dissipate its transfers to the members of the supporting coalition. We
therefore predict a positive relationship between the level of income and the
degree of political competition.
The relationship between the age of a nation and the degree of political
competition is unclear. In the first place, nations that have been in existence
for a long time are likely to have evolved into more efficient democratic political
systems. If this were the dominant factor,we would expect a positive relationship
between the age of a nation and the degree of political competition. On the
other hand, the longer a nation has been in existence the more likely it is that
a dictatorial coalition will have established itself as a dominant force in the
political leadership. By establishing a strong military, such a group may have
succeeded in protecting itself from overthrow by other smaller groups, and may
have also designed repressive measures to prevent those other groups from
attempting to take over the government. Such measures will likely include a
limitation on political partycompetition. If this were the dominant factor, then
we would expect a negative relationship between the country's age and the
degree of political competition.
Ourvariableof particularinterest is the percentage of population homogeneity.
According to our earlier analysis, the more homogeneous the population the
fewer the number of permanentcommon interest groups there are in thatcountry.
On the other hand, more heterogeneous populations have more permanent
interest groups. Using the interest group theory of government as applied to
the competition for wealth transfers, we expect countries with more interest
groups to be more politically unstable as each group attempts to use non-democratic means to achieve control of the instruments of wealth transfers. We
therefore predict a positive relationship between the degree of population homogeneity and the degree of political competition.
The regression results of three specifications of the model are shown in Table
2. In all cases the income variable and the homogeneity variable have the expected signs and are statistically significant to the 1 percent level. The higher
the per capita income, the higher the level of democratization as measured by
the index of political competition. This may be explained by the fact that since
members of the society benefit more by competing in the market, the interest
in a stable democratic government that protects property rights is paramount.
Likewise, there is a positive relationship between the homogeneity variable and
the degree of political competition. The more interest groups there are the
more the incidence of political instability.As other groups attemptto take control
of the government, non-democratic means are likely to be used. At the same
348
American Journal of Economics and Sociology
time, a leader who chances to obtain leadership will adopt entry blocking strategies which are essentially dictatorial.
IV
Conclusion
THIS PAPERHAS PROVIDED EVIDENCE on the impact of the number of permanent
interest groups on political competition. Using the interest group theory of
government, and treating each permanent interest group as attempting to maximize its share of government transfers, the study shows that the more such
groups there are in a given country, the more likely thata dictatorialgovernment
will emerge. The competition for wealth transferstakes the form of non-democratic means to achieve leadership and similar policies to maintain control.
This analysis may well explain, at least in part,the continued state of political
instability in Africa.With so many tribal groups attempting to control the governments, and leaders who continue to treat members of their groups in a preferential manner, the cycle of instability repeats itself continuously. Such instability has resulted in the poor economic performance of these countries, a situation which makes government transferseven more attractive.Thereby it breeds
further political instability.
This analysis also may apply to other developing countries, even those now
spared the disadvantages of tribalism. For they have other permanent interest
groups. Does it have a lesson, too, for such developed countries as the superpowers, the Soviet Union and the United States?In the former, the bureaucratic
elite enjoys wealth transfers denied to the rest of the country. In the latter, a
small group is composed of members who control billions of dollars in assets
and a larger one of those who control tens and hundreds of millions of dollars
in assets-groups which, for example, are favoredby tax laws which exact tribute
even from the poor.
One is reminded of the historical analysis of the great German sociologist,
Franz Oppenheimer, who maintained that the contemporary State in its various
forms represented a development of political means for "the economic exploitation of one class by another." (Oppenheimer, 1928: 275). He derived his
results from the study of history and culture. Here we reach a similar result in
an empirical investigation.He was an optimist;he believed thatthe constitutional
state would develop further into a "freemen's citizenship:" "The 'State' of the
future will be 'society' guided by self-government." The data analyzed here do
not support optimism.
Transfer Seeking
349
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Crumbs
have long belittled reformers who were willing to compromise
COMMUNISTS
and accept less than a total overturning of a capitalist order. The charge was
made that they were settling for "crumbsfrom the capitalists'table." LechWalesa
is now attempting to get his confreres in Solidarityto accept some compromises
from the unrepresentative communistic government of Poland. We do hope he
succeeds even if these are "crumbs from the communists' table." The rule of
reason seems to be that the edge of the wedge must first be inserted and then
it might accomplish great things. Evolution also breaks fewer heads than
revolution.
F. C. G.