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Thursday
Oct252012

Patronage or Programmatic Politics?

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.

Tuesday
Oct232012

Disrupting Dysfunctional Equilibria

In Why Nations Fail we characterize poor countries as being in an equilibrium where extractive political institutions lead to extractive economic institutions. To experience economic growth a country has to move out of this situation. It can secure growth, even in the short run, by moving economic institutions in a more inclusive direction, as China did in the late 1970s. For such growth to be sustained, however, it also needs to move to inclusive political institutions. In the book, we emphasized how institutional transitions occur at critical junctures which disrupt the balance of political power and often solve the collective action problems for those wishing to challenge extractive institutions.

In the next few blogs we examine what sorts of things, even “interventions”, might break up extractive equilibria. These may give hints about what types of policies might have similar effects.

Though in the book we presented our framework using a dichotomy between inclusive and extractive at a national level, in reality shades of grey are everywhere. Some societies are more extractive than others, and even within a broadly inclusive society there are places which are deeply extractive as the South of the United States was prior to the 1960s. Indeed, the story of the US South is a vivid example of how bottom-up discontent and movements combined with interventions from outside can help break up dysfunctional equilibria.

In this context, it is useful to recall that despite President Eisenhower’s claim that “law and force cannot change a man’s heart” — implying that there were deep cultural roots to the ‘Southern equilibrium’ — in fact law and force did exactly that (see our post on this). The Southern equilibrium was disrupted by such interventions as Brown versus Board of Education, and perhaps more centrally by such things as the Voting Rights Act, which politically empowered black voters.

This breaking of the “Southern equilibrium” is one example of a much broader type of change from which we might be able to learn how to make society more inclusive.

In the next few posts, we will focus on how dysfunctional political equilibria can be disrupted and broken, starting with the unraveling of clientelism.

Wednesday
Oct172012

An Unusually Worthy Nobel Prize  

We weren’t actually referring to the Nobel Prize in economics, which was awarded to Al Roth and Lloyd Shapley. That’s an excellent award too, and it’s no big surprise. Both men have done foundational work in the theory of matching, markets and market design — work that deepens our understanding of how our society allocates resources, which doesn’t just happen through the miraculous invisible hand of the Walrasian auctioneer. There are often no prices to guide such allocations or prices are severely constrained by institutional, social or informational factors. These issues are paramount in many key “markets” and social allocation problems, including in marriage, kidney and other organ exchange, the allocation of school slots to students, and the allocation of candidates to positions including the matching of medical interns the hospitals, of military cadets to different programs and of students classes. In all of these cases, the allocation of resources has both decentralized elements and design elements, and the work by Al Roth, Lloyd Shapley and their followers and collaborators has enabled us to study these problems systematically and also improve the rules and algorithms that certain centralized institutions can use to achieve and control these allocations according to their objective functions.

Moreover, though no committee can claim not to misfire from time to time, the Nobel Prize in economics has generally been awarded to worthy recipients, with important contributions to the advancement of the science of economics.

The same cannot be said of the peace prize, which has had a decidedly mixed track record. Recently, it’s been awarded, for example, to Barack Obama, exactly for what it’s not clear (we hope it’s not for his tireless work for the cause of world peace through his drone attacks and kill orders). It’s been awarded to Ellen Johnson Sirleaf, the Liberian president previously implicated and indicted for her involvement with Charles Taylor’s rebellion and crimes against humanity by the Liberian Truth and Reconciliation Committee (see our previous posts on this, here, here and here). Of course, there have been some pretty good ones also, including recently the prize for Liu Xiaobo, the jailed Chinese activist for his long and painful struggle for human rights and civil liberties in China, and the one to the International Panel on Climate Change and Al Gore for their work on building and disseminating knowledge — and sounding the alarm bells — on man-made climate change.

But the one to the European Union is a bolder and a more important prize. Here is why.

At the end of World War II, Europe was devastated and economically backward. The Red Army bent on destruction and revenge had occupied parts of Germany and much of Eastern Europe. Hamburg, Cologne, Dusseldorf, Dresden and many other German cities had been flattened by carpet bombing. In the last 14 days of the Battle for Berlin alone, the Red Army fired 40,000 tons of shells, leaving barely a quarter of its buildings inhabitable. Possibly 20 million Germans were homeless and 10% of the pre-war population dead. Over 12 million Germans from Eastern Europe would soon start coming in waves, homeless and often destitute. France, Belgium and the Netherlands were no better after the carnage and pillage caused by German occupation, and Britain would need years to recoil from its huge war effort and the aftershocks of the war and German bombing.

Economically things were similarly dire. Few in Europe had access to technologies that people in the United States took for granted such as refrigerators, central heating and indoor plumbing. In Britain only half the houses had hot water or an inside toilet, slightly more had a fixed bath to wash in and there were only 5,000 televisions sets between 40 million inhabitants. The residential capital stock was destroyed, and the buildup to the war and the war itself meant that there was little equipment capital that would be useful for non-armament industries.

Politically and socially there was little to be optimistic about. Many thought that democracy would not take root in much of continental Europe; some countries would turn conservative authoritarian while others succumbed to communism. Many viewed another war as inevitable and imminent.

In the event, something entirely different happened. Europeans did not fight another war. European democracies flourished and became stronger. None of the Western European countries experienced a coup or brought an authoritarian regime or communists to power. Perhaps most strikingly, all of Western Europe had the most successful three decades of economic growth in its history until the oil price shock of 1973. Though many European nations had a bumpy ride in the late 70s and early 80s, and some of them experienced sky-high unemployment rates, on the whole the last 30 years have been pretty good for Europe.

Our answer to why and how this happened will be no surprise to the readers of this blog: post-war European institutions have been fairly inclusive and democratic, characterized by broad participation in elections and politics both at the national and the local level. They have also been much more robust in handling conflicts and challenges, avoiding the sort of pitfalls that became the undoing of nascent democratic regimes such as the Weimar Republic.

But national institutions are situated in the context created by international ones. It wasn’t just the hostility of traditional elites and the various institutions they controlled that destroyed the Weimar Republic, but also the European context. It was the Nazi regime that arose out of the ashes of the Weimar Republic and its international aggression that decimated the struggling regimes in Belgium, France, the Netherlands, Czechoslovakia and Poland. It was then clear that inclusive political institutions, and consequently inclusive economic institutions, would be impossible in Western Europe without international institutions ensuring peace and stability.

One central institution was transformative for European inclusive institutions: the European Union.

The European Union project worked. Europe didn’t even come close to a war since 1951, and its member countries did not see their democracies threatened. The exceptions here prove the rule. Spain famously averted a military coup in 1981 after Franco’s death but this was before it joined the European Community in 1986. Europe experienced a bloody civil war in Yugoslavia, but this was outside the institutions and the remit of the European Union.

For this, especially at a time when many are turning against the European Union and despairing of the European project, it is an unusually worthy Nobel Prize and unusually astute move by the Norwegian Nobel Prize committee.

Tuesday
Oct162012

The Sad State of Civil Liberties (continued)

Following up on our post on civil liberties in the United States and especially in New York, it is no surprise to see that Mayor Bloomberg and the ever powerful New York security establishment are opposed to a bill proposing to introduce an Inspector General for oversight of the NYPD.

The New York Times draws the parallel to the Mollen Commission investigation. Not to take anything away from the Mollen Commission, which was very much on target and quite transformative for cleaning up the NYPD practices (their excellent report can be found here), the situation is rather different.

The Mollen Commission was largely about cleaning up police practices and corruption. Though unpleasant and difficult for the political elites controlling the city, reducing police crime and corruption is not necessarily inconsistent with their objectives (think of this as a version of political centralization).

The main issues now concern investigating the erosion of civil rights under Mayor Bloomberg and the NYPD leadership in the context of the illegal surveillance and entrapment of Muslim residents by the NYPD’s Intel division, the evermore intrusive stop-and-frisk program targeted at African Americans and Hispanics, and the NYPD’s heavy-handed and illegal suppression of any sort of dissent as witnessed by their intimidation of Occupy Wall Street activists. This makes external investigation by an Inspector General and preferably also by other organizations directly accountable to New Yorkers and human rights organizations such as the ACLU even more important today, and even more likely to be steadfastly opposed by those busy clawing back most of the civil liberties Americans and New Yorkers have enjoyed for the last several decades.

Thursday
Oct112012

The Sad State of Civil Liberties  

Two excellent articles in the latest issue of The New York Review of Books powerfully underscore the sad state that respect for civil liberties has sunk in the United States in the 11 years since the war on terror was declared (and yes, we know that US record of civil liberties wasn’t always exemplary before then, but still). Perhaps it’s in the nature of declaring war against concepts that takes us down the slippery slope.

Steve Coll in his review of No Easy Day: The First-Hand Account of the Mission That Killed Osama Bin Laden by one of the Navy SEAL team leaders in the Abbottabad raid zeroes in on our very troubling collective acceptance of the de facto order to kill Osama bin Laden — rather than capture and bring him to court. Of course there is no doubt that Osama bin Laden was guilty of planning, financing and masterminding a series of heinous crimes against US targets including the September 11 attacks. And yes, there was no actual order to have him killed. But Coll makes it clear that the mission essentially left no possibility for bin Laden to be captured alive (“The only way bin Laden was going to be taken alive was if he was naked, had his hands in the air, was waving a white flag, and was unambiguously shouting ‘I surrender’” in the words of a Pentagon official is quoted by Coll), and thus intentionally and clearly amounted to a de facto kill order.

There was also no doubt that Hitler was guilty of planning and masterminding atrocities of much greater enormity. But the orders of the allied forces were not to kill him. And it was arguably a turning point for Western civilization that people like Hermann Goering were tried at Nuremberg rather than executed in cold blooded revenge upon capture.

More troubling than the Obama administration’s decision on this is the ensuing public reaction. Almost no mainstream source criticized or questioned the kill order. It seems that we have come to expect much less from our politicians and ourselves.

This, unfortunately, is confirmed by Michael Greenberg’s article on the New York Police Department’s (NYPD) anti-terror tactics, which make even the FBI and the CIA appear soft-touched. The NYPD’s Intel division tasked with tracking and capture of “homegrown terrorists” routinely entraps Muslim young men, and seems to presume that they are guilty unless proven otherwise — both in its intrusive surveillance and in hatching plans to catch them red-handed. Equally disturbing is that Intel seems to particularly favor those with mental instability and IQs far less than 100. In fact, in the two most advertised cases of homegrown terrorism supposedly foiled by Intel, that of Jose Pimentel arrested in November 2010 and of Ahmed Ferhani and Mohamed Mandouh arrested in May 2011, the FBI declined to be involved with Intel on the grounds that these were not serious terrorist threats and federal courts have refused to hear them. Greenberg paints a very troubling picture of the only federal conviction to come out of Intel operations, that of Shahawar Matin Siraj, a likely case of entrapment of a man with an IQ of 78.

Greenberg correctly identifies why this slide of our respect for civil rights and liberties is so dangerous for our cherished institutions (what we would call the US inclusive institutions): the NYPD has now come to add to its highly discriminatory and in all likelihood illegal stop-and-frisk tactics in African-American neighborhoods and its surveillance, abuse and entrapment against the city’s Muslim population the routine deployment of the same heavy-handed tactics against any kind of dissent — especially against members of the Occupy Wall Street movement.

Sure we should worry about inequality, unemployment, money in politics, the fiscal cliff, all the disingenuous rhetoric from both parties on our budget deficit, our failing schools and all that. And we do. But a complete collapse of inclusive institutions can only happen if political institutions turn extractive and repressive. So what’s happening in Zuccotti Park and during the May Day demonstrations in New York City may have as much relevance as a warning sign on how close we have come to destroying our largely inclusive institutions.