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Optimal Coercion Optimal Coercion Sandeep Baliga Tomas Sjöström Northwestern University Rutgers University Abstract A protagonist (hegemon, rebel group) faces an antagonist (hostile country, colonial power) and a third party (representative citizen of the antagonist’s country). The protagonist wants the antagonist to cooperate (give up WMDs, share power). The protagonist can use targeted interventions that directly harm the antagonist, and compre- hensive interventions that provoke social unrest by harming the rep- resentative citizen. The antagonist’sinterests are imperfectly aligned with his citizen’s. Targeted interventions reduce the misalignment, so the stronger are the targeted measures, the less likely is social unrest — the “rally around the flag”effect. To provoke social unrest, the protagonist may reduce the targeted measures, but this policy is only credible if the protagonist does not know the antagonist’s true mo- tives. An exogenous constraint on comprehensive interventions may make it optimal to reduce the targeted measures even further, making the citizen worse off, in contrast to the common belief that compre- hensive and targeted measures are substitutes. But if social unrest is suffi ciently unlikely to trigger cooperation (e.g., in a totalitarian state), then it is optimal to abolish the comprehensive measures and maximize the targeted measures, making the citizen better off. 1 Introduction A protagonist uses coercion to change the behavior of an antagonist. In in- ternational relations, the protagonist may be a hegemonic power who uses economic sanctions to coerce a minor power (the antagonist) into disarming. In a civil conflict, the protagonist may be a rebel group who uses terrorism to coerce the government (the antagonist) into power-sharing. Our aim is 1 to study when and how coercion might be effective. In particular, we will contrast comprehensive measures that impose costs on the population as a whole (comprehensive economic sanctions, the bombing of marketplaces) with measures that target a political elite (“smart”sanctions, the assassina- tion of political leaders). Will such interventions unite or divide the popula- tion and the elite? What is the optimal mix of targeted and comprehensive interventions? Do these different types of interventions work with or against each other? The United States has frequently imposed comprehensive economic sanc- tions (e.g., trade embargoes) on countries that are perceived as threats against international peace and stability. More recently, there has been a push to- wards targeted sanctions (blocking the elite’s financial assets and transac- tions, restricting their ability to travel etc.). For example, Iran has long been subject to comprehensive sanctions which restrict its fuel imports and access to U.S. technology and investment. The Obama administration added tar- geted sanctions, including sanctions on financial transactions with the Iranian Revolutionary Guard, and blocked U.S. backed assets of Iranian government- controlled entities.1 The Trump administration went yet further and singled out specific individuals in the Iranian government for targeted sanctions. North Korea has faced comprehensive U.S. sanctions that restrict trade and damage the North Korean economy; targeted sanctions on foreign financial transactions were introduced after nuclear tests.2 By contrast, South Africa, Iraq and Libya faced mainly comprehensive sanctions.3 In a different context, a rebel group faces a similar strategic choice of targeted versus comprehensive measures. It may target a political elite in order to persuade the regime to share power or relinquish control of territory. Alternatively, it may attack the population at large in order to destabilize the regime or subject it to popular pressure to satisfy its demands. For example, the I.R.A. staged “spectaculars”or “massive attacks with maximum impact” such as the bombing of a military procession and a military band in Hyde Park and Regent’sPark in 1982 (Foxwell, 2013). These attacks harmed both 1 See Department of Treasury (2013) for details. 2 See Reynolds and Tan (2012) for an overview of sanctions on Iran, North Korea and others. 3 Similarly, after the collapse of the Soviet Union, Russia used economic coercion against the new independent states which relied on Russia to export their products, import energy and other inputs in production and to transport oil and natural gas to the West (see Drezner (1999)). 2 civilians and soldiers. The I.R.A. also bombed Prime Minister Margaret Thatcher and her Cabinet in Brighton in 1984, killing or injuring members of the ruling Conservative Party. The Taliban and other insurgents have attacked civilians, but also government offi cials.4 In general, targeted measures are meant to incentivize the political elite to change course by directly impacting its cost-benefit analysis. Compre- hensive measures have a more indirect purpose: to cause social and popular unrest which either destabilizes the regime or forces it to change course to avoid being destabilized.5 However, coercive measures may backfire if, in- stead of creating popular unrest, the population unites with the elite and “rallies around the flag”(Ostrom and Job, 1986). For example, the bombing of Buckingham Palace by the German Luftwaffe during World War II only served to endear the monarchy to the population.6 Margaret Thatcher and the Conservative Party gained popularity after the Brighton attack (Lanoue and Headrick, 1998). The average citizen will often be poorly informed about the nature of external threats. The government will use espionage, expert advisors, diplo- macy and other forms of information gathering to become better informed. In view of this information asymmetry, the citizen’s response to coercive measures will depend on his beliefs about how well his country’sleaders use their superior information to represent his interests. If the average Iranian citizen blames Iran’sleaders for their dispute with the U.S., the result may be social unrest. But if the citizen believes the dispute is caused by the in- herent hostility of the U.S., then he will rally around the flag. In this paper we consider how these beliefs depend on the nature of sanctions, and how optimal sanctions take this into account. Our model has three players: the protagonist, the antagonist, and a third party referred to as the (representative) citizen. The antagonist may de- cide to cooperate with the protagonist, who is either a hostile “Hawk”or a 4 See the U.N. report on civilian casualties (2018) and Sediqi (2019). 5 Strategic bombing of population centers in wartime is another “comprehen- sive”measure which can be justified in a similar way: it may cause uprisings which will persuade the government to surrender or else be destabilized (Douhet 1921). 6 Queen Elizabeth the Queen Mother said, “I am glad we have been bombed. Now we can look the East End in the eye”(Shew (1954, p. 76). King George VI said, “[W]e have found a new bond with them [the citizens] as Buckingham Palace has been bombed as well as their homes and nobody is immune”(Shawcross (2009)). 3 benevolent “Dove”. The incentives of the antagonist are partially, but not perfectly, aligned with those of the citizen. Both favor non-cooperation if the protagonist is a Hawk. However, the citizen would prefer cooperation with a Dove, while the antagonist may prefer non-cooperation even in this case. The reason for this misalignment is that the antagonist derives a private benefit from the “strength”projected by non-cooperation, while the citizen benefits from the “peace dividend” of cooperation. The private benefit the antagonist derives from non-cooperation, and hence his inclination to coop- erate, depends on his (privately known) type. If the citizen does not trust the antagonist to make the right decision, he may stage an uprising which, if successful, will lead to cooperation. A successful uprising can be interpreted as either causing the antagonist to lose offi ce (“regime change”), or forcing the antagonist to cooperate in order to avoid losing offi ce. However, because the citizen does not know the protagonist’strue type, the uprising is a risky gamble which may lead to a bad outcome if the protagonist is a Hawk. In the leading interpretation of the model, the protagonist is the leader of a hegemonic country, the antagonist is the leader of a small country with a program for developing WMD, and the third party is the representative citizen of the small country. To cooperate means to terminate the program (“disarm”). Non-cooperation (i.e., not disarming) means the country misses out on a peace-dividend if the protagonist is a Dove, but it deters the protag- onist from taking hostile actions (e.g., invading the small country) if he is a hostile Hawk.7 In addition, the leader of the small country derives a private benefit from the “strength”afforded by developing WMD. For example, the WMD might be used to deter local competitors for regional influence or to control a restive population, or may simply be a source of prestige. In an alternative interpretation of the model, there is only one country. The protagonist is the leader of a rebel group, the antagonist the leader of the government, and the third party is (again) the representative citizen. The cooperative decision is to share power with the rebel group (or concede territory). If the rebel group has truly circumscribed motives (a Dove), then power-sharing will lead to peaceful coexistence (the peace dividend). But if the rebel group has hostile intent (a Hawk), then power sharing may lead to a slippery slope where the rebel group eventually takes over completely and 7 For example, North Korea sees nuclear inspections “as only the first wedge in opening the entire North Korean state to penetration...The North would be accepting a sure path to change in regime and society and ultimately, state survival”(Bracken, 1993, p.
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