Even in societies that have consolidated electoral democracy — a precondition for inclusive political institutions — remnants of extractive institutions often remain. One notable aspect of this is patronage politics (also called clientelistic politics), involving an informal exchange between a politician and citizens. Citizens vote for the politician or even turn out to demonstrations in exchange for patronage from the politician, which takes the form of providing jobs for the individual or members of his family, granting access to a resource such as land, or a service such as health care, or simply direct monetary or in-kind payments. As political scientist Martin Shefter put it in his classic paper “Patronage and its Opponents” :
A political party may employ one of two basic strategies in its efforts to attract voters, contributors, and activists to support its candidates. It may distribute divisible benefits – patronage of various sorts – to the individuals who support the party. Alternatively, it may distribute collective benefits or appeal to a collective interest in an effort to elicit contributions of money, labor or votes from its supporters.
By collective benefits Shefter meant something that benefits not just the individual himself but society more broadly. This includes provision of public goods or adoption of policies that improve living standards for the community at large. One problem even for democracies and inclusive political systems is that though from a social point of view it is desirable for the government to provide public goods, a purely rational politician often finds it more attractive to gain support through patronage.
The first scholar to understand the deep and perverse implications of this was Robert Bates, in his book Markets and States in Tropical Africa which is still one of the most important works in political economy in its ability to show how simple political reasoning turns economic relationships upside down.
Bates started with a puzzle: why was it that in Africa, a continent thought to have a comparative advantage in agriculture, governments discriminated against agriculture? It was already well understood that they did this through various means, for example, using marketing boards which were by law the only entity able to buy agricultural products. These boards paid farmers very low prices, far below international levels, and all but destroyed the price system, and thus sapped the incentives of farmers to invest or exert effort. Bates showed that this was all about politics. Marketing boards were in effect a way of levying punitive taxes on farmers with the resulting revenues going to subsidize urban elites and used (and often looted) by the government. More importantly, Bates illustrated more generally the political logic behind a whole gamut of “distortionary” policies. The crucial point was what looked like bad economics was really very good politics — for the politicians themselves and their survival.
Take overvalued exchange rates which made African goods expensive and imported goods cheap. This meant that imports exceeded exports and foreign exchange became a scarce resource that had to be rationed. It was of course the state and the politicians that allocated these rations — as a way of rewarding political friends, excluding political opponents, and making a good buck on the side. The distortions in the market artificially created a scarce resource which was a politically valuable tool to buy support.
The more general argument that Bates made, even if he did not put it this way, was that the provision of public goods, though it might be economically rational, was not politically rational. This was because public goods, by their nature, benefit everyone. But politicians did not want to benefit everyone; they wanted to benefit their existing or potential supporters, while excluding their opponents, something which providing public goods could not achieve.
Here’s one of many specific examples Bates gives. In Ghana in the 1960s, politicians began to see that paying farmers such low prices was leading to a collapse of the agricultural economy, particularly the critical cocoa sector that was Ghana’s main export crop. The sensible way to try to revive production would have been to raise prices or even better, let the price system work. But this would have been a “collective benefit” for cocoa farmers, benefiting everyone, including those who did not support the incumbent government. So that was out. Instead, the government decided to keep prices where they were and give out subsidized fertilizers to improve productivity. The advantage of this strategy wasn’t just in the continuation of the system based on the low prices and the rationing that they created, but also in the political benefits that the allocation of fertilizers would generate: fertilizer could be given to supporters and withheld from opponents.
Of course, Ghana in the 1960s was far from a consolidated, stable democracy. But even in a consolidated democracy such as Mexico, such patronage politics can prevail and it has a powerful political logic, in fact powerful enough to have kept the Institutional Revolutionary Party, the PRI, in control of Mexican politics for seven decades. It is obviously an impediment to inclusion, and often, the under provision of public goods is only one facet of the costs. Another is the almost complete inability of the electorate to hold politicians accountable when patron-client relationships are pervasive, which strengthen and deepen dysfunctional politics.
However, in the same way that extractive political institutions aren’t forever, neither is clientelism. In the next few blog posts we examine some cases where clientelism broke down and we study the lessons from this process.