Friday, October 20, 2006

Economic Origins of Dictatorship and Democracy

I had a depressing conversation while seated next to a man from Cote d’Ivoire while traveling about a month ago. What particularly struck me about our conversation was when he was telling me about the second coup in his country since 2000, again with factions breaking mainly along tribal ethnic lines, I realized how similar that situation was to the situation in Europe before the formation of nation-states. At the time I had been reading Oscar Jaszi’s The Dissolution of the Hapsburg Monarchy, which is a detailed illustration of (failed) state formation. Feudalism is noting more then tribalism plus agriculture (and indeed, it may be more accurate to describe contemporary tribalism in Cote d’Ivoire and elsewhere as feudalism). It occurred to me that I could not think of any successful nation-state (besides the neo-Europes, US, Canada, New Zealand, and Australia¹) that did not go through a period of rule by an oppressive autocratic regime, similar to the Hapsburgs: authoritarian regimes which imposed a national identity over the existing clan and tribal identities of feudalism. Henry the VIII in England demanded loyalty to the state church, as did the Hapsburgs in Spain and the Austrian Empire, the result of the consolidation of the French and Russian nation-states famously triggered revolutions. China had Qin and Japan had Tokugawa. India had the British and Turkey had Attaturk.

But most of Africa didn’t have a similar experience. Most of Africa can be characterized as having ethnic conflicts that discourage investment, causing a catch-22 of development: people fight because they are poor and they are poor because they fight.

Recently Delong posted a review of Daron Acemoglu’s new book Economic Origins of Dictatorship and Democracy, and after reading the book I believe my hypothesis concerning absolutism as a necessary stage in state formation is supported by his theories.

To summarize the book: Democracy happens when there is a credible threat of revolution while there is also a large part of the wealth tied up in easily destroyed items (like factories, railways, and equipment, which can be smashed, as opposed to a mine or fertile land, which are practically indestructible). The effect is that democracy will be granted by elites and anti-democratic coups will not be attempted after the establishment of democracy, both because elites are afraid their easily destroyed physical capital will in fact be destroyed in the possible turmoil.

That is all well and good, and indeed I can’t think of any successful democratizations (with the possible exception of Taiwan²) that do not fit into his model. However, Acemoglu and Robinson don’t really talk about transition: how do these countries caught in the development cathch-22 of belligerence due to poverty and poverty due to belligerence break that cycle and become stable successful democracies like most of the Western World? According to Acemoglu’s model, violent destructive governmental transitions happen when there is little cost to that violence; if there are no factories that could burn, then this “punishment” for the violence doesn’t exist, decreasing the disincentives for violence. This seems to mirror the development catch-22 within the Acemoglu and Robinson theoretical framework; countries that are prone to violence cannot develop physical capital, countries with little physical capital are prone to violence. How then can the fragile physical capital that will eventually be held hostage in order to stabilize democracy come into existence in this turbulent atmosphere?

It can’t. It seems that a necessary corollary from Acemoglu’s argument is that a strong and probably authoritarian leader must control and pacify all the various competing factions of the society, possibly through repression, long enough for physical capital to build up to a point where it can be ransomed for democracy.

The direct implication is that pluralistic idealism in the foreign policies of the developed world may impede the development of poor unstable countries if executed improperly. However, there are possible non-passive roles for benevolent foreign actors in this development process, chiefly, ensuring that the economy develops to a sufficient level under any extant authoritarian regime, as well as possibly assisting the destabilization of autocrats that have worn out their welcome (i.e. dictators who stay on past some point of physical capital accumulation), although this can be done non-militarily in some cases (e.g. Taiwan and South Korea, whose authoritarian governments both buckled in the eighties, partially due US policies developed by Carter that put diplomatic and public pressure on the regimes).


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1: The exclusion of the neo-Europes can be explained by the fact that immigration tends to destroy existing tribal identity. Arguably, the only exceptions are immigrant criminal organizations, which still are significantly weakened by immigration and tend to disappear over time.
2: Taiwan is an interesting case in that it was in many respects similar to Singapore in anti-democratic nature. Singapore was held up as an example of a country which accumulated fragile physical capital but remained anti-democratic due to the supposed benign and egalitarian nature of this particular authoritarian regime. This egalitarianism, manifested in the wealth distribution most importantly for Acemoglu, caused a lack of demand for revolution. I would argue that a similar situation existed in Taiwan, except that political pressure from the US nudged the dominant elites towards democracy.
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3 Comments:

Blogger steven andresen said...

Maybe I understand the thesis of this book.

The powers-that-be, or the elites of any society, are like parasites on that society. They suck out all the wealth they can without killing their victim. The victim is passified, or dissuaded from rejecting the parasites by being given just enough energy or crumbs to satisfy them. They are given democracy and the appearence of a life, just so that they do not decide to effectively reject their parasitical elites.

I am reminded of various claims that the elites of the United States have not only been in the process of stealing whatever they can, but, of also trying to disengage themselves from the country before there is no more wealth for them to suck out. Then, I would suppose, they can let their victim rebel and complain and become violent. The elites, presummably, would no longer care.

Do you think this is how the thesis understands our present situation?

11:22 AM  
Blogger steven andresen said...

I am confused about what you've said here.

"...It seems that a necessary corollary from Acemoglu’s argument is that a strong and probably authoritarian leader must control and pacify all the various competing factions of the society, possibly through repression, long enough for physical capital to build up to a point where it can be ransomed for democracy.

The direct implication is that pluralistic idealism in the foreign policies of the developed world may impede the development of poor unstable countries if executed improperly..."

I've thought you were in agreement with these authors that any country is at the mercy of it's elites who are in a position to control, to some great extend, how that country develops. After all, they are supposedly in control of the wherewithall that would make or break any effort at development. The problem that countries with any development of "breakable" wealth has is that the populations can try to get a little better treatment by threatening to destroy the small amount of "breakables," so, the elites are forced to allow "democracy." They are forced to allow some forms of political freedom. You might argue this is the history of the United States.

The problem that countries with no "breakables" is that they have nothing so they fight and threaten to destroy whatever, anyway, which keeps any kind of "breakables" from being created in the first place.

I was sort of in agreement there, with this analysis of our economic situation.

But, then it seemed you suggested that the way for countries to create "beakables," and presumably to preserve them, would be through authoritarian rule.

I am amazed that your concern seems to be that such authoritarians would be stifled in their efforts to create wealth by misguided efforts of western liberal busybodies.

Do you think that there are good dictators who will only kill and torture enough people of the "right" sort so that they will just create prosperity for those who survive, trying not to cause too much of a PR problem?

Was South African Apartheid doing it right but was stifled by western busybodies? Is this what you mean?

This seems to be exactly what you are saying here,

"...there are possible non-passive roles for benevolent foreign actors in this development process, chiefly, ensuring that the economy develops to a sufficient level under any extant authoritarian regime, as well as possibly assisting the destabilization of autocrats that have worn out their welcome (i.e. dictators who stay on past some point of physical capital accumulation),..."

Rather than suppose that it takes benevolent dictators who know just how to tweak their country's economies, to make wealth that benefits their elites, I'd want to look at what could be done to help the populations of those countries develop their human capital, quite apart from whether that development helped the already powerful.

So, for example, try South Africa without Apartheid.

There are other examples of where dictators were given their heads but the populations were made to suffer to be considered here as well. Does any of this history count against this kind of strategy for development?

3:31 PM  
Blogger TheJew said...

First comment:

The elites of only some societies are “parasitic” or, in the terminology of the book, “extractive”, specifically, anti-democratic societies. In stable developed democratic societies people in a position to establish extractive political inequality do not since the cost of doing so would be higher then expected benefits: they could take over, but everything would be in ruins, according to the book. The question the book attempts to answer is why some societies are stable democracies while others are unstable as democracies.

An important assumption, one that I believe valid, is that some wealth can be created or developed, specifically, the wealth held hostage for democracy.

Second

Well, yes, there were some dictators who presided over vast improvements in the situation of their country. One often cited example is Augusto Pinochet of Chile, whose economic reforms are arguably responsible for the development of his country into one of the most economically successful and politically stable countries in Latin America. A stronger example is that of South Korea and Park Chung Hee. Another strong example for this model is Taiwan and Chiang Kai-shek. All three leaders clamped down on political freedoms while at the same time allowing economic freedom and private property rights. This led to the economic development that is associated with democratization, and the eventual development of stable democracy.

This of course is not a blanket endorsement of dictatorship, obviously not all policies pursued by dictators or authoritarian regimes will encourage economic development and many are counter productive. However in cases where the absence of a strong domestic hegemon will likely cause degeneration into chaotic mutually aggressive factions, authoritarianism may be preferable to instability. The immediate and obvious application being Iraq, which would have likely continued to develop economically under the stability of the Baathist regime, and even more rapidly if the economic sanctions were relaxed.

5:04 PM  

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