Where did the social planner go?
Authoritarian rulers' strategies and
their economic effects
"Aktualitetsuka" at the Department
of Economics, University of Oslo
Carl Henrik Knutsen, 7/3-2008
Facebook and the recognition that
dictators come in different versions
• Your results for What dictator are you? Fidel
Castro
• "You and Fidel Castro have strong nationalistic
pride, and can get by without many resources,
resorting to ingenious guerilla tactics. Some
even call Castro a benevolent dictator (and
hopefully you'll end up this way!) but sadly he
resorts to the same oppression he fought
against."
Political economy and democracy
• The point of departure for most studies on political
regimes/ structures and the economy: Investigate the
interaction between politics and the economy in
democracies.
• Persson and Tabellini (2000:1) "We want to explain
economic policies in modern democracies".
• There are credible exceptions among less “formalized”
studies in political science, but there are also some
more “formalized” studies in pol.sci and economics on
authoritarianism and the economy (Tullock, 1987,
Robinson, 2000, North 1993, Clague et al., 2003,
Wintrobe, 1990, etc)
Does authoritarianism (in general)
matter for the economy?
• Przeworski and Limongi (1993): Other aspects of political regime
than the democracy-authoritarianism dimension might matter
more: Empirical studies show divergence on the overall effect of
democracy on economic growth.
• Theoretical arguments point in different directions, both when it
comes to growth and protection of property rights.
• Knutsen (2007): Democracy affects property rights positively.
• Knutsen (2008): Also a significant positive effect from democracy on
growth when using new data and econometric methods.
• Other aspects of the economy also related to democracy. E.g.:
Wages (Rodrik), Population growth (Przeworski et al, 2000), Human
capital accumulation.
• Democracy-authoritarianism dimension does not exhaust the issue
of politics, but theory and empirics indicate that it is an important
variable to analyze!
The dictator
• Certainly not the social planner that dictates the optimal allocation of
resources at will! (Nobody really believes this anyway, after thinking over
it. The problem is that many analysts forget thinking about the issue.)
– Institutions and constraints matter also in autocracies
– The role and structure of information
– The self-interested autocrat
• We have to ask: What characterizes the autocrat and his strategies and
policies?
• A self-centered, optimizing autocrat might not be completely realistic,
but it presents a more valid picture than the benevolent, socially
optimizing leader.
• Avoid the popular fallacy: Socially non-optimal economic outcomes does
not imply that the dictator is incompetent, stupid or irrational.
• Robert Mugabe's CV: Bachelor in education, Bachelor in administration,
Master in Law and Master in Economics!!
Aristotle
• 2500 years ago, Aristotle wrote "Politics", and
here he classified regimes and evaluated their
effects:
– In the ideal world, a benevolent, enlightened ruler
would be best.
– Unfortunately, most often we do not come close to
the ideal world.
– Enlightened monarchy often degenerates to tyranny.
– In most contexts, a more "balanced" regime type
works best: “Politeia".
Missing Aristotle's point: The Leethesis
• Amartya Sen (1999:15): "[A] great many people in
different countries of the world are systematically
denied political liberty and basic civil rights. It is
sometimes claimed that the denial of these rights helps
to stimulate economic growth and is "good" for
economic development. Some have even championed
harsher political systems - with denial of basic civil and
political rights -for their alleged advantage in
promoting economic development. This thesis (often
called "the Lee thesis", attributed in some form to the
former prime minister of Singapore, Lee Kuan Yew) is
sometimes backed by some fairly rudimentary
empirical evidence"
Regime type and growth from
1970-2000
7,50
Botswana
Korea, South
China
5,00
Mauritius
Haiti
Irelan
Malaysia
Cape
Verde
Barbados
d
Dominican
Luxembourg
India
Republic
Austria
Egypt
Chile
growth7000Belgium
Pakistan Guinea-Bissau
Brazil Lesotho
2,50
Germany
Fiji
Equatorial Guinea
Panama
Colombia
Australia
Jordan
Algeria
Costa Rica
Bangladesh
New Zealand
Cameroon
Guatemala
Gambia, The
Ghana
Guinea
Argentina
Benin Chad Ethiopia
0,00
El Salvador Bolivia
Mauritania Burundi
Cote d'Ivorie
Nigeria
Comoros Madagascar
Niger
Mozambiqu
e
Nicaragua
Central African Repu
-2,50
Angola
Congo (Kinshasa)
-5,00
1,00
2,00
3,00
4,00
FHITOTAG
5,00
6,00
7,00
Variation in growth performances
• 11 out of the best 15 growth performances
were in relatively authoritarian countries
(1970-2000).
• ... But so were 14 out of the 15 worst
performances.
• Econometric tests show that there is
significantly higher variation among the more
authoritarian countries.
• Why?
Why divergence?
• Concentration of power and lack of checks and balances
(horizontally) and accountability (vertically): Political
decision makers matter!
• Leaders and elites make political decisions, not nations
• What are the capabilities, and (maybe even more
importantly) preferences and opportunities/constraints of
dictators?
• Different types of authoritarianism. Large literature with
many labels: Politics are structured differently in different
dictatorships (military rule, hereditary monarchy, dominant
one-party etc..)
• Type as a constraint for dictator or as an outcome of
dictator's strategies? Both in the longer run..
Let's assume
• ..A utility-maximizing dictator.
• The maximization of what?
• Power, money, fame, sex, interest group
promotion, ideological vision.
• Earlier models have focused on wealth, I focus on
power: More specifically staying in office.
• Uruler = U(p, m(p), f(p), s(p), i(p), v(p))
– Where U'(x)>0 x:{p,m,f,s,i,v} –
– And z'(p)>0 z:{m,f,s,i,v}
Maintaining power
• Political psychology and political science:
power is a central motivation for rulers.
(Definitions of power, precision)
• The central question for the optimizing
dictator is then: "How do I maximize the
probability of staying in power?"
• The answer to this question depends crucially
on several contextual variables, and therefore
the strategies chosen vary tremendously!
Political strategies and the economy
• Political strategy->economic effects->survival probability
• Dictators recognize the linkages and utilize strategy that
maximizes probability of survival (actor-centered
functionalism)
• Economic and development policies as means.
• Other strategies for survival can have important economic
implications (wars, "terror", sealing the borders).
• How to keep your backers by your side? Multiple strategies
(Haber, 2006):
– Logic of terror (fear as a tool)
– Logic of co-optation (sharing the spoils)
– Logic of organizational proliferation (creating institutional
checks and balances)
Context and time dimension
• Who are the main security threat?
– The middle or working classes (democracy
movement)
– Internal rebel movement
– The army
– Neighboring country
• Short term vs long term: legitimacy vs
modernization theory.
Power is a relative concept
• "How do I promote my own resource-base without
enhancing that of my opponents?"
• Natural resources? The resource curse: Two effects.
• Industrialization and development
• IF external threat: promote development to build army
and national economic capacity (Taiwan, S.Korea,
Singapore)
• IF internal threat: Grab from opponents, hinder broad
development of infrastructure and industrial capacity.
• IF modernization theory is perceived as correct: block
development.
Peter Evans(1995)
• "Extracting a larger share from a shrinking pie is
not the optimal way to maximize revenues, but it
may be the only way consistent with the survival
of predatory states ... Generating an
entrepreneurial class with an interest in industrial
transformation would be almost as dangerous as
promoting the political organization of civil
society. For predatory states, "low-level
equilibrium traps" are not something to be
escaped; they are something to be cherished"
(Evans, 1995:248)
Some historical examples
• Mobutu in Zaire: "I've never built one road.."
• Kim Jong II: Military first and no
trade/openness
• Mugabe's clean-up in Harare and land-grabs
• Kuomintang's change of strategies when
moving from China to Taiwan
• Meiji-Japan and the fear of colonization
Social planners and tyrants, or
divergence "by accident"?
• An analogy to Immanuel Kant and moral
behavior: Doing the right thing because of some
reason, or doing the right thing because of the
right reason (duty).
• Dependent on context, self-interested rulers
might and might not enhance development.
• The structure of political life is crucial to
economic development. An understanding of the
latter requires an understanding of the former.