The Dictator's Handbook Read online

  Perhaps the most egregious case of bald opportunism occurred in the state of Bihar. There ideologically disparate parties formed a government, relying heavily on currying favor with the Raja of Ramgarh. The raja, owner of much of the mining interests in Bihar, switched parties every few months, bringing coalition governments down—and up—with him. Each time he switched, he garnered greater private goods for himself and his backers, including the dismissal of criminal charges against him. As the newspaper, The Patriot, reported on June 26, 1968, following one of the raja’s frequent defections to an alternative coalition, leading to the formation of a new government, “The Raja who had been able to get his terms from Mr. Mahamaya Prasad [the former head of the Bihar government] assumed that he could demand from Mr. Paswan [the new head of the Bihar government] a higher price. This amounted to Deputy Chief Ministership and the Mines portfolio for himself and withdrawal of the innumerable cases filed against him and members of his family by the Bihar government.” 16 The raja understood that he could manipulate his bloc of backers to make and break governments and, in doing so, he could enrich himself a lot and help his followers a little bit in turn. That, indeed, is the lesson of bloc voting whether based on personal ties in Bihar, trade union membership among American teachers, tribal clans in Iraq, linguistic divisions in Belgium, or religion in Northern Ireland. Bloc leaders gain a lot, their members gain less, and the rest of society pays the price.

  Bloc voting takes seemingly democratic institutions and makes them appear like publicly traded companies. Every voter or share has a nominal right to vote, but effectively all the power lies with a few key actors who can control the votes of large numbers of shares or deliver many votes from their village. Bloc voting makes nominally democratic systems with large coalitions function as if they are autocratic by making the number of influentials—that is, people whose choices actually matter—much smaller than the nominal selectorate of the rest of the voters. Since this is such an important aspect of winning elections we are obliged to explore how politicians do it.

  The traditional approach has been to treat emerging democracies as patronage systems in which politicians deliver small bribes to individual voters. The New York Times, for instance, reported on September 17, 2010, in an article with the headline “Afghan Votes Come Cheap, and Often in Bulk,” that the typical price paid for an Afghan voter’s support was about $5 or $6. But the article also noted that widespread vote fraud probably made vote buying unnecessary in any event.

  The explanation for fraudulent electoral outcomes based on vote buying in exchange for patronage is simple, but it is also incomplete. First, parties don’t bribe enough people, and second, once in the voting booth, voters can renege. Historically parties used to issue their own ballots. For instance, your party might print a ballot on pink paper. In such a way, party representatives could check that those who took bribes voted with pink ballots. Although we could fill a whole book with the tricks parties use to monitor vote choices, the reality is that today votes are likely to be anonymous, at least in real democracies.

  Bribing voters works far better at the bloc level. Suppose there are just three villages, and suppose a party, call it party A, negotiates with senior community figures in the villages and makes the following offer: if party A wins it will build a new hospital (or road, or pick up the trash, send police patrols, plow the snow, and so on) in the most supportive of the three villages. Once a village elder declares for party A, voters in that village can do little better than support party A, even if they don’t like it. The reality is that there are so many voters that the chance that any individual’s vote matters is inconsequential. Yet, voters are much more influential about where the hospital gets built or whose streets get swept than they are about who wins the election. To see why, consider the case where two or three of the village elders declare in favor of party A and most voters in these villages go along with them.

  Consider the incentives of an individual voter. Since at least two of three villages have declared for party A, an alternative party is unlikely to win so an individual’s vote has little influence on the electoral outcome. Voting for party B is a waste of time. Yet the voter could influence where the hospital is built by turning out to vote for A. If everyone else supports A, but she does not, then her village gives one less vote for A than another village and so loses out on the hospital. If she votes for A, then her village has a shot at getting the hospital. In the extreme case, where absolutely everyone votes for party A, our voter would give up a one third chance of getting the hospital in her village if she did not vote for party A. Voters have little incentive but to go along with their village elders.

  By rewarding supportive groups over others, individual voters are motivated to follow the choice of their group leader, be that a village elder, a ward organizer, a church leader, or a union boss. The real decisions are made by the group leaders who deliver blocs of votes. They are the true influentials. It is therefore unsurprising that it is common for the rewards to flow through them, so that they can take their cut, rather than go directly to the people. Milton Rakove describes the process of handing out rewards to different ethnic groups under Mayor Richard Daley’s party machine in Chicago in the early 1970s: “The machine co-opts those emerging leaders in the black and Spanishspeaking communities who are willing to cooperate; reallocates perquisites and prerogatives to the blacks and the Spanish speaking, taking them from ethnic groups such as the Jews and Germans, who do not support the machine as loyally as their fathers did. . . .”17

  Of course, leaders can use sticks as well as carrots. Lee Kuan Yew ruled Singapore from 1959 until 1990, making him, we believe, the longest serving prime minister anywhere. His party, the People’s Action Party (PAP), dominated elections and that dominance was reinforced by the allocation of public housing, upon which most people in Singapore rely. Neighborhoods that fail to deliver PAP votes come election time found the provision and maintenance of housing cut off.18 In Zimbabwe, Robert Mugabe went one step further. In an operation called Murambatsvina (Operation Drive Out the Rubbish), he used bulldozers to demolish the houses and markets in neighborhoods that failed to support him in the 2005 election.

  Ownership of a public company works in the same way as bloc voting. We could hold our shares in our own name and vote at stockholder meetings. However, except for a very wealthy few of us, our votes are inconsequential and turning up is burdensome. Thus we hold stock via mutual funds and pensions (there are tax and management reasons to do so too, but then think about who has the incentive to lobby for these regulations). These institutional investors, like village elders, are influential enough that CEOs court their support. But it is much cheaper to buy the loyalty of the institutional investor by private goods, such as fees for board membership, than it is to reward all the little investors he represents with great stock performance.

  So what can a politician do when elections are fair and the risk of electoral defeat is rising? When an incumbent is at risk of electoral defeat, he can always mitigate that risk by redrawing the boundaries of the constituency to exclude opposition voters. That is to say, the district can be gerrymandered, although this opportunity only comes once in a while so it may come too late to save an unpopular incumbent. The practice of gerrymandering has made it such that the odds of being voted out of a US congressional seat are not that different from the odds of defeat faced by members of the Supreme Soviet under the Soviet Union’s one-party communist regime. And, while gerrymandering virtually ensures reelection, it also makes the voters in a congressional district happy. After all, the gerrymander means that they get the candidate favored by a majority in the district. If gerrymandering isn’t an option, then other rule changes can be instituted, such as prohibiting rallies—in the name, of course, of public safety.

  Have a look at the map of Maryland’s 3rd Congressional district in Figure 3.1. Need any more be said about why, in many districts, one party always wins?

  Leader Survival<
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  Building a small coalition is key to survival. The smaller the number of people to whom a leader is beholden the easier it is for her to persist in office. Autocrats and democrats alike try to cull supporters. It remains very difficult to measure the size of coalitions precisely. However, if we arrange political systems into broad groups of autocracy and democracy, then we can compare the survival of different political leaders.

  FIGURE 3.1 Maryland’s 3rd Congressional District

  Figure 3.2 looks at the risk for democrats and autocrats of being replaced given different lengths of time that they have already been in office. On average, for instance, democrats who make it through the first six months in office have about a 43 percent chance of being out by the end of their second year; autocrats only have about a 29 percent chance of being ousted in the same amount of time.19 Making it to ten years, democrats are three times more likely to be replaced than their autocratic, small-coalition counterparts.

  These simple comparisons, however, miss an interesting and important detail. Although autocrats survive longer, they find surviving the initial period in office particularly difficult. During their first half year they are nearly twice as likely to be deposed as their democratic counterparts. However, if they survive those first turbulent months, then they have a much better chance of staying in power than democrats. Those early months are difficult because they have not yet worked out where the money is, making them unreliable sources of wealth for their coalition, and they have yet to work out whose support they really need and who they can dump from their transitional coalition. But once autocrats have reshaped and purged their supporters, survival becomes easier. Democrats, in contrast, are constantly engaged in a battle for the best policy ideas to keep their large constituencies happy. As a result, although democrats survive the early months in office more easily (they get a honeymoon), the perpetual quest for good policy takes a toll, such that only 4 percent of democrats survive in office for ten or more years. Nearly three times as many autocrats manage to accomplish this feat, 11 percent.

  FIGURE 3.2 The Risk of Ouster by Type of Government

  Staying in power right after having come to power is tough, but a successful leader will seize power, then reshuffle the coalition that brought him there to redouble his strength. A smart leader sacks some early backers, replacing them with more reliable and cheaper supporters. But no matter how much he packs the coalition with his friends and supporters, they will not remain loyal unless he rewards them. And as we will see in the next chapter, rewards don’t come cheaply.

  4

  Steal from the Poor, Give to the Rich

  WHETHER YOU’RE TAKING CHARGE OF THE OTTOMAN Empire, a corporation, or Liberia, controlling the flow of funds is essential to buying support. However once you’ve emptied the state’s or the corporate coffers by buying off both your essential supporters and their replacements, if necessary, you must reckon with the entirely new challenge of refilling the treasury. If a leader cannot find a reliable source of income, then it is only a matter of time until someone else will offer his supporters greater rewards than he can.

  Money is essential for anyone who wants to run any organization. Without their share of the state’s rewards, hardly anyone will stick with an incumbent for long. Liberia’s Prince Johnson knew this when he tortured Samuel Doe, demanding the number of the bank accounts where the state’s treasure had been hidden. Without getting his question answered, Johnson would not be able to secure power for himself. In fact, neither he nor rival insurgent Charles Taylor could secure state revenue enough to buy control of Liberia’s government immediately after Doe was overthrown. The upshot: Samuel Doe died under Prince Johnson’s torture without answering the question, and Liberia degenerated into civil war. Each faction was able to extract enough resources to buy support in a small region, but no one could control the state as a whole.

  The succession process in the Ottoman Empire is another illustration of the same point. Upon the death of their father, the Ottoman princes rushed from their provinces to secure the treasury, buy the loyalty of the army and have all their potential rivals (also known as brothers) strangled. Whoever first secured control over the money was likely to win. If no one son triumphed, cleanly wresting the treasury out of his siblings’ control, then no one could summon up the necessary revenues to pay his backers. The common result, as in Liberia, was civil war.

  “Knowing where the money is” is particularly important in autocracies—and particularly difficult. Such systems are shrouded in secrecy. Supporters must be paid but there are no accurate accounts detailing stocks and flows of wealth. Of course, this lack of transparency is by design.1 Thus does chaotic bookkeeping become a kind of insurance policy: it becomes vastly more difficult for a rival to promise to pay supporters if he cannot match existing bribes, or, for that matter, put his hands on the money. Indeed, secrecy not only provides insurance against rivals, it also keeps supporters in the dark about what other supporters are getting. Anyone who has tried to read the annual reports of publicly traded firms will quickly realize that this is a practice induced by dependence on a small winning coalition. In the corporate setting opacity occurs despite having to satisfy strict regulations and accounting standards. Secrecy ensures that everyone gets the deal they can negotiate, not knowing how much it might cost to replace them. Thus every supporter’s price is kept as low as possible, and woe to any supporter who is discovered trying to coordinate with his fellow coalition members to raise their price.

  As we saw at the end of the last chapter, it is very difficult for autocrats to survive their early months in office. Good governance is a luxury they cannot afford at a time when they must scramble to find revenues. Little surprise, then, that we so often see looting, confiscations, extraction, and fire sales during political transitions, or conversely, and perhaps ironically, temporary liberal reforms by would-be dictators who are mindful that it is easier for a public goods–producing democrat than an autocrat to survive the first months in office. Thus it is that in the immediate aftermath of a leadership transition we see a few new leaders acting as if they care about the people and many new leaders seizing the people’s wealth and property. Such confiscations of property might well damage long-run revenue, but if a leader does not find money in the short term then the long run is someone else’s problem.

  Democrats are generally fortunate enough to know where most of the money is. When David Cameron became prime minister of Britain or Barack Obama became president of the United States, neither needed to torture their predecessor to find the money. Because democracies have well-organized and relatively transparent treasuries, their flow of funds is left undisturbed by leader turnover. There are two reasons for this transparency. First, as we are about to explore, democratic leaders best promote their survival through policies of open government. Second, a larger proportion of revenue in democracies than in autocracies tends to be from the taxation of people at work. Such taxes need to be levied in a clear and transparent way, because just as surely as leaders need money, their constituents want to avoid taxes.

  Taxation

  We all hate taxes and are impressively inventive in looking for ways to avoid them. Leaders, however, are rather fond of taxes—as long as they don’t have to pay them. Being a dictator can be a terrific job, but it also can be terribly stressful, especially if money is in short supply. Taxes are one of the great antidotes to stress for heads of governments. Taxes, after all, generate much-needed revenue, which can then reward supporters. As a general principle leaders always want to increase taxes. That gives them more resources with which to reward their backers and, not to be forgotten, themselves. Nevertheless, they will find it difficult to raise taxes with impunity.

  Leaders face three constraints on how much money they can skim from their subjects. First, taxes diminish how hard people work. Second, some of the tax burden inevitably will fall upon the essential backers of the leader. (In general, the first constraint limits taxe
s in autocracies and the second constraint sets the boundary on taxes in democracies.) The third consideration is that tax collection requires both expertise and resources. The costs associated with collecting taxes limit what leaders can extract and shapes the choice of taxation methods.

  The first and most common complaint about taxes is that they discourage hard work, enterprise, and investment. This is true. People are unlikely to work as hard to put money in government coffers as they do to put money in their own pocket. Economists often like to express taxation and economic activity in terms of pies—when taxes are low, they say, the people work hard to enlarge the pie, but the government only gets a thin slice of the pie. As the government increases taxes, its share of the pie increases but people begin to do less work so the overall size of the pie shrinks. If the government sets tax rates to be extremely low or extremely high, its take will approach zero. In the first case it gets very little of a large pie; in the latter case there is hardly any pie because hardly anyone works. Somewhere between these extremes there is an ideal tax rate that produces the most revenue the state can get from taxation. What that ideal rate is depends on the precise size of the winning coalition. That, in fact, is one of many reasons that it is more helpful to talk about organizations in terms of how many essentials they depend on than to talk about imprecise notions such as autocracy or democracy. The general rule is that the larger the group of essentials, the lower the tax rate. Having said that, we return to the less precise vocabulary of autocracy and democracy, but always mindful that we really mean smaller or bigger coalitions.