Where did the social planner go_ Authoritarian rulers' strategies and

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Where did the social planner go_ Authoritarian rulers' strategies and Powered By Docstoc
					 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
• "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
 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
• 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
• 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!!
• 2500 years ago, Aristotle wrote "Politics", and
  here he classified regimes and evaluated their
   – 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 Lee-
• 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

                                    Botswana           Korea, South

                  Mauritius                                                       Haiti
                 Irelan                                      Malaysia
                 d                            Cape Verde
                 Luxembourg          Dominican
               Austria               India
                                     Republic                           Egypt
           Belgium                                      Chile
                                                                      Pakistan Guinea-Bissau
     2,50               Germany                   Brazil Lesotho
                                                                Panama     Equatorial Guinea
               Australia                     Colombia
                                                                 Jordan               Algeria
                  Costa Rica                Bangladesh
                New Zealand                               Guatemala                    Cameroon
                                Gambia, The                               Ghana              Guinea
                             Argentina                                      Benin Chad Ethiopia
     0,00                       El Salvador Bolivia
                                                                                   Mauritania Burundi
                                                              Nigeria           Cote d'Ivorie
                                                      Comoros Madagascar         Niger
                                                       Central African Repu

                                                                                Congo (Kinshasa)

               1,00          2,00         3,00          4,00          5,00         6,00         7,00
 Variation in growth performances
• 11 out of the best 15 growth performances
  were in relatively authoritarian countries
• ... But so were 14 out of the 15 worst
• 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
• 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
• 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
  – 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,
• IF internal threat: Grab from opponents, hinder broad
  development of infrastructure and industrial capacity.
• IF modernization theory is perceived as correct: block
             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
• 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.

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