Citizen beware: Benevolent dictatorship is like snake oil

Economics has a habit of encroaching into other social sciences. Very often it is economists who intrude, but sometimes it is other social scientists who raid.  Recently, political scholar Larry Diamond introduced the idea of recession into political science in an influential paper titled Facing Up to the Democratic Recession published in the January 2015 issue of the Journal of Democracy, in which he observes:

“Many democracies in lower-income and even middle- or upper-middle-income countries (notably, Argentina) struggle with the resurgence of what Francis Fukuyama calls “neo-patrimonial” tendencies.

Leaders who think that they can get away with it are eroding democratic checks and balances, hollowing out institutions of accountability, overriding term limits and normative restraints, and accumulating power and wealth for themselves and their families, cronies, clients, and parties. In the process, they demonise, intimidate, and victimise (and occasionally even jail or murder) opponents who get in their way. Space for opposition parties, civil society, and the media is shrinking, and international support for them is drying up.”

DICTATORSHIP

That Diamond’s prognosis has reached these shores is now difficult to refute.

There are no prizes for guessing why dictatorship is popular with leaders, but it could not be better put than Charlie Chaplin in the 1940 film, The Great Dictator, when he said: “Dictators free themselves, but they enslave the people.”

What calls for reflection then, is why people support it.

The defining difference between democracy and dictatorship is that the former seeks to express the will of the people, while a dictatorship seeks to impose its will on the people.

To impose their will, dictators resort to carrot and stick strategy, that is reward and repression. Why not carrot alone? Well, there is not enough resources to buy out everyone.  Moreover, there is the problem of enforcement. People can simply take the money and run. Why not repression alone? Repression is also costly. A police state is not a cheap or easy thing to run. Political scientist Ronald Wintrobe, one of the foremost scholars on dictatorship, has characterised this problem as the Dictator’s Dilemma. He writes:

REPRESSION

“The use of repression creates a problem for the autocrat. This is the Dictator’s Dilemma — the problem facing any ruler knowing how much support he has among the general population, as well as among smaller groups with the power to depose him.

The Dictator’s Dilemma originates from the lack of an enforcement mechanism in politics. It is advantageous for the dictator to “buy off” some of his constituents, especially those who may be too powerful to repress, and those whose demands are easily satisfied.

A simple trade of rents or policies for support would solve the dictator’s dilemma, and also allow his subjects to rest easy, but there is no mechanism analogous to legal contractual enforcement which would enforce this trade.

In general, the easiest way to overcome the problem of obtaining support is to “overpay” supporters, that is, to pay them more than they are worth by distributing rents to them.

The support of workers can be obtained through paying them excessive wages, of capitalists by giving them monopoly privileges, of particular regions by locating manufacturing facilities in places where they don’t really belong but where they are politically valuable, of ethnic groups by giving them special privileges and so on.

DEMOCRACY

Of course, similar practices are widespread in democracy where they are known as “pork barrel politics.” They are often decried as a failure of democracy. But if democracy may be likened to a pork barrel, the typical dictatorship is a temple of pork!”

The ideal democracy coupled with a market economy is a meritocracy where everyone gets an equal chance to benefit according to the rules of the game. Dictatorship is a patronage system. It is rational for people who expect to access patronage to prefer dictatorship, rather than face the vagaries of competition.  Who might these be? Ronald Wintrobe posits as follows:

“Consumer groups, environmental groups and other groups with a large number of potential supporters, each of which has a small stake in issues like the prices of goods or the state of the environment have difficulty surviving or forming under autocracy.  On the other hand, the weapons of small producer groups such as cash donations actually thrive in the closed environment and tame courts of a dictatorship. In exchange, dictators obviously have much to offer producers for their support including tariffs, subsidies and other rents, fewer problems from labour unions, and the removal of unfavourable regulations. So the possibilities of a trade of rents for support between the dictator and the small, concentrated interest group is actually enhanced under dictatorship, just as trades with representatives of broader public opinion are diminished. This implies that producers typically have more power under dictatorship than democracy.”

POOR

Business is more inclined to support and benefit from dictatorship, while citizens will be disempowered and repressed.  In general, Wintrobe contends that dictatorship benefits elites and oppresses the poor. Those in the middle can go either way:

“While there is always a class of people who are repressed under a dictatorship, there is also, in any successful dictatorship, another class —the overpaid. As far as the people in the middle are concerned, the sad thing is that they can side with either group. The general population may be repressed in that their civil liberties may be taken away, but other aspects of the regime may compensate for this as far as they are concerned.”

There is a school of thought that a dictatorship can pursue “encompassing interests” of society. This is the so-called “benevolent dictatorship” explanation of the “Asian Tigers.” Its a fallacy. 

The most coherent theory of Asian tigritude is the theory of the developmental state proposed by Chalmers Johnson in a 1982 book MITI and the Japanese Miracle: The Growth of Industrial Policy.  MITI is the acronym of the Japan’s Ministry of Trade and Industrialisation.  A developmental state is one organised to engineer rapid capitalist industrialisation. The key word here is “capitalist” as Johnson explains in a subsequent essay:

CAPITALIST

“One of my main purposes of introducing the idea of the “capitalist developmental state” into a history of modern Japanese industrial policy was to go beyond the contrast between the American and Soviet economies.

The American-Soviet comparison had become a feature of virtually all the canonical works of the American side during the cold war — such as Paul Samuelson’s economics textbook. I wanted, instead, to call attention to the differences, not similarities between the capitalist economies of the United States and Britain on the one hand, and Japan and its emulators elsewhere in East Asia on the other.

During the 1970s when I was doing research for MITI and the Japanese Miracle, these differences were beginning to show, even though there was, and is today, enormous ideological resistance in the English speaking countries to any attempt to take them seriously.”

The essence of a developmental state is a competent impartial bureaucracy that is able to administer the activist industrial policy without succumbing to corruption and cronyism.  It is a well known fact that all the Asian tigers pursued export-led industrialisation.  Much less appreciated is that this is also one of the model’s critical success factors. 

CORRUPTION

An export industry cannot survive the inefficiency that corruption and cronyism creates.

Exporting firms have to be able to compete in the global market place and there is only so much that government can do to help them. Export orientation provided the East Asian bureaucrats with objective performance indicators of the industries and enterprises that merited government support.

By contrast inefficient industries and firms that depend on domestic market can be sustained through protectionist measures and subsidies for a long time at the expense of domestic consumers. We need look no further than our very own sugar industry. If we were to mismanage the tea industry the way we do the sugar industry, it would collapse in no time. There is nothing the government could do to save it.

It should be clear from the foregoing that the developmental state and the so called benevolent dictatorship are not the same thing. Although Japan’s industrial rise predates democracy, it is in fact under democracy after World War II that the developmental state emerged as the defining feature of the Japanese state. Japan’s famously fractious politics has not hindered it.

FUTURE GENERATIONS

In economics, we recognise that a benevolent omniscient (i.e. all knowing) dictator would be the ideal economic decision maker for society as a whole. The benevolent dictator would entail coordinating and balancing the interests of all members of society, as well as the interests of current and future generations.

We call the solution that such a benevolent dictator would arrive at the “command optimum.”  Much economic theorising involves asking ourselves whether it is humanly possible to organise our political and economic affairs in a manner that approximates the command optimum. Right now, we could do with a global benevolent dictator to sort out this climate change conundrum.

In the developing country context, the developmental state is usually contrasted with the predatory state.

A predatory state is one where the political system is organised to increase the wealth and status of those who control it.

POWER

Because predatory states are very lucrative for wielders of power, they are characterised by vicious political competition between different factions in society including ethnic groups, economic interest groups as well as organs of the state notably the political class, bureaucracy, the military and the judiciary. Although predatory states can pursue a broad variety of economic systems, the most common type is crony capitalism.

Africa’s post-colonial states are predatory states by definition, that is, they came into being designed to repress and exploit. They, too, had to contend with the Dictators Dilemma.

This they solved by the creating a privileged class of overseers who were overcompensated for their loyalty in the manner postulated by Wintrobe.

By contrast, all the Asian Tigers are ancient polities, all with traditional political systems predating colonisation. 

It should not surprise then that Sub-Sahara Africa’s most socio-economically successful countries (Mauritius, Botswana, Cape Verde Namibia) are also our most progressed democracies, while our dictatorships are of the most malevolent kind.

Buyer beware. Benevolent dictatorship is snake oil. 

 David Ndii, an economist, is currently serving on the NASA technical and advisory committee. He leads the NASA policy team. [email protected]. @DavidNdii