The Political Roots of Poverty: The Economic Logic of Autocracy

The Political Roots of Poverty: The Economic Logic of Autocracy

Mini Teaser: Foreign aid misapplied can lengthen the tenure of bad governments. A guide to understanding and engaging difficult development partners.

by Author(s): Bruce Bueno de MesquitaHilton L. Root

To elaborate the point, one can divide the leadership structures of
poorer countries into two groups: those who depend on a small group
of backers, which may be called exclusive regimes, and those who rely
on a relatively broad coalition of support, which may be called
inclusive regimes. Exclusive regimes tend toward narrow autocracy and
oligopoly; inclusive regimes tend toward what we normally think of as
democracy. But there are many poorer countries short of reaching
mature and genuine democracy that nonetheless exhibit inclusive
characteristics--among these a decade or so ago were, for example,
the East Asian tigers and Chile. In other words, there is a spectrum
of governance structures, and the more inclusive side of it contains
democratizing regimes as well as fully democratic ones. One may
measure how broadly based a regime is by taking into consideration
such factors as constraints on executive authority and the openness
and degree of political competition. A comparison of political
survival rates between these two groups, based on economic
performance, tells a depressing but important story.

Leaders who depend on a broadly inclusive coalition do better at
staying in office only if they manage to promote exceptionally high
growth rates. They do worse if, instead of growth, they promote
rent-seeking opportunities of the sort that typify countries with
vibrant black markets, often controlled by the friends and allies of
the leadership. Inclusive leaders who promote growth stay in office,
on average, 15 percent longer than those who do not.

The reverse is true for those who rule at the pleasure of a small,
exclusive group. Exclusive leaders who rely on black-market
corruption have a better chance of staying in power than those who
engender high rates of growth, staying in office, on average, 25
percent longer. Indeed, at all periods during their tenure in office,
these leaders do much better at retaining their jobs if they promote
black marketeering, corruption and cronyism--distorting the
economy--than if they promote economic policies that lead to growth
and prosperity (see table). Why does this perverse outcome occur? As
suggested above, leaders who would keep their jobs must produce what
their supporters want; when those supporters are unrepresentative of
the country, autocrats will not pursue policies that encourage the
creation of healthy, educated, prosperous citizens.

Autocrats not only retain power by maintaining the loyalty of a
relatively small group of supporters--which usually include those who
control the military, the civil service, the communications and
information infrastructure, as well as key economic levers--but they
also have an interest in keeping that core group as small as
possible. In a poor country, an autocrat faces personal political
risks if he implements policies that dissipate resources away from
the few upon whom he relies to those who have little say in ensuring
his political survival. It is therefore politically irrational to
implement transparent economic policies aimed at protecting and
promoting property rights, rule of law, a broadly educated
population, low taxes and free trade, if they enable challenges to
the incumbent. It is not in an autocrat's interest that people have
ways to enrich themselves that he does not control.

This is why autocrats face their highest risk of being deposed in
their first year in office; they have not yet identified their most
loyal backers and have not yet fully secured their ability to
transfer benefits to them. With time and experience, they get better
at identifying those on whose support they really rely. They discover
that excluding "the many" from sharing in the wealth of the country
is the best way to reward a small clique of supporters.

Even worse, such systems tend to perpetuate themselves, which is why
a reform-minded leader who manages to come to power in such a system
faces excruciating dilemmas. If he is committed to promoting growth
and prosperity, he may find that pursuit of such goals can ensure the
loss of office. Elections give a mandate to a democratic leader, but
in pursuing reform, even a democratic leader may be forced to
implement policies that injure the interests of the constituents who
brought him to power. Any politician unable to satisfy his core
constituents faces a risk of their defection to another politician
who shows more promise of improving their lot. After listening to a
long list of measures designed to improve his country's economy,
President Rafael Caldera of Venezuela told Nobel laureate Douglass
North, "If I were to do the things you are recommending, I would not
survive in office long enough to enjoy the benefits."

Foreign Aid and Autocratic Longevity

How does the provision of foreign aid fit into the logic, and
economic implications, of autocracy? In those many cases in which aid
has not led to economic growth, what has it accomplished?

External aid often promotes longevity in office for autocratic
leaders who are otherwise at risk of being deposed; it simply makes
it easier for them to patronize their core group of supporters. In
such cases, aid not only fails to promote economic growth, but it
also diminishes the odds that the political system will evolve in a
more inclusive, democratic and growth-oriented direction.

This may seem too large a claim to some observers. After all,
external aid generally comprises only a small component of a nation's
total economy. Since 1975, for instance, international aid has
averaged only about $7 or $8 per citizen. Such numbers imply that
foreign assistance is not significant enough to reshape economic
prospects and barely enough to provide relief to the world's poorest
people. This assumption, however, misses the fundamental benefit that
aid provides to autocratic leaders, and again, the data illustrate
it. Autocrats in countries with below-average growth rates who do not
get aid have a 25 percent chance of staying in office for five years.
If they receive economic assistance, that survival time rises to
seven years, a 40 percent increase. A few dollars of aid per capita
is small in terms of any impact on the national economy, but it is
huge with respect to helping autocrats enrich their small coterie of

On average, every dollar of per capita foreign aid improves an
incumbent autocrat's chance of surviving in office another year by
about 4 percent (even after taking into account the independent
effects on political survival exerted by such factors as the
country's economic growth rate, black market exchange rate premium,
national debt, and its geographic situation). Since the average
autocracy gets about $8 per capita in aid, foreign assistance may
boost the survival prospects of poorly performing leaders by 30
percent or more.

The data also suggest that giving assistance to leaders of exclusive,
autocratic regimes is especially critical early in their tenure, when
they do not yet have a solid hold on office. Aid frees up money for
the incumbent leadership to buy support from a relatively larger
number of backers without having to generate the wealth to do so
through policy choices. Even small amounts of aid provide major
opportunities for novice autocrats to outbid political rivals and
hence deter defections to them. Mobutu Sese Seko, for instance, used
foreign aid after his successful 1965 coup (as well as the
nationalization of assets) to buy the loyalty of the Zairian military
and the country's economic elite, thereby securing his hold on power.
(His eventual overthrow, in the late 1990s, was directly tied to his
growing inability to meet the military's payroll.)

Aid is most likely to be effective if it is given as a benefit to
those who have demonstrated that they can use resources to improve
economic performance. However, assistance given in response to
expressed intentions, lacking a proven track record of effectiveness,
is likely to lead to perverse incentives. This creates the central
paradox of foreign aid: under many of the least politically inclusive
systems, good policy is bad politics, and bad policy can be good
politics. In those more inclusive systems, in which good policy is
also good politics, leaders face greater obstacles to maintaining
incumbency because it is not enough for them to distribute a finite
number of private goods to a small oligarchy to win support. They can
only remain in office if they generate and sustain policies that
deliver public goods (schools, health care, a safe environment) to
the general populace.

The policy implications of the dichotomy between exclusive and
inclusive systems of governance go beyond the matter of leadership
tenure. When the political system is dominated by a small coalition
of cronies, relatives or military officers, citizens do markedly
worse on public welfare or humanitarian indices than do their
counterparts who live under more inclusive systems. Across the board,
the data show that more inclusive systems generally do a better job
at producing safe drinking water, expanding public education,
offering access to medical care, encouraging free trade, avoiding
corruption and black marketeering, attracting investors and so forth.
Moreover, even quite poor inclusive societies usually offer more of
these advantages than do autocratic countries lucky enough to possess
some important and valuable resource. The reasons are not difficult
to fathom: inclusive governance promotes greater government spending
on social policy because, in such systems, the longevity of political
leaders is directly tied to the welfare of the majority. El Salvador
and Jamaica are two excellent examples of relatively poor but
inclusive societies with above-average social welfare (as
demonstrated by their low infant mortality rates and high-quality
drinking water). By contrast, during their non-democratic years,
Mexico and Brazil had above-average income levels, but performed
poorly on these social indicators.

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