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Kleptocracy and Divide- And- Rule

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Kleptocracy and Divide- And- Rule ALFRED MARSHALL LECTURE KLEPTOCRACY ANDDIVIDE-AND-RULE: AMODEL OFPERSONAL RULE DaronAcemoglu Thierry Verdier MassachusettsInstitute of Technology DELTA-ENS JamesA. Robinson Universityof California, Berkeley Abstract Manydeveloping countries have suffered under the personal rule of kleptocrats, who implementhighly inef cient economic policies, expropriate the wealth of their citizens, and usethe proceeds for their own glori cation or consumption. We argue that the success of kleptocratsrests, in part,on theirability to usea divide-and-rulestrategy, made possible by theweakness of institutionsin these societies. Members of society need to cooperate in order todepose a kleptocrat,yet such cooperation may be defused by imposing punitive rates of taxationon any citizen who proposes such a move,and redistributing the bene ts to those whoneed to agreeto it. Thus the collective action problem can be intensied bythreatswhich remainoff the equilibrium path. In equilibrium, all are exploited and no onechallenges the kleptocrat.Kleptocratic policies are more likely when foreign aid and rents from natural resourcesprovide rulers with substantial resources to buy off opponents; when opposition groupsare shortsighted; when the average productivity in the economy is low;and when there isgreater inequality between producer groups (because more productive groups are more difcult to buy off). (JEL: O12, H00) 1. Introduction Many countries in Africaand the Caribbean sufferunder “kleptocratic”regimes, wherethe state is controlled and run forthe benet of anindividual, or asmall group, who use their power to transfera large fraction of society’s resources to themselves. Examples of kleptocratic regimesinclude the DemocraticRepublic of the Congo (Zaire)under Mobutu Sese Seko, the Dominican Republic under RafaelTrujillo, Haiti under the Duvaliers, Nicaragua under the Somozas, Uganda under Idi Amin, Liberiaunder Charles Taylor, and the Philippines Acknowledgments: Paper presented as the Marshall Lecture at the European Economic Associ- ation’s Annual meetings in Stockholm, August 24, 2003. We thank Silje Aslaksen for pointing out an algebraic mistake in the rst version and Alexander Debs for excellent research assistance. E-mail addresses: Acemoglu: [email protected]; Robinson: [email protected]; Verdier: [email protected] Journal of the European Economic Association April–May 2004 2(2–3):162– 192 ©2004 by the European Economic Association Acemoglu, Robinson &VerdierKleptocracy and Divide-and-Rule 163 under Ferdinand Marcos. Inall these cases, kleptocratic regimesappear to have been disastrous foreconomic performanceand caused the impoverishment of the citizens. Astudy of the political economy of such regimesmust depart fromthe standard presumptions of most researchin economics and political science, which assume that rulers makechoices within strongly institutionalized poli- ties.1 In these polities, formalpolitical institutions, such as the constitution, the structure of the legislature, or electoral rules, place constraints on the behavior of politicians and political elites, and directly in uence political outcomes. In contrast, kleptocracy emergesin weakly institutionalized polities, whereformal institutions neither place signi cant restrictions on politicians ’ actions nor make them accountable to citizens. While the academicstudy of strongly institutionalized polities is well advanced (e.g., Shepsle and Weingast 1995; Cox 1997; Persson and Tabellini 2000, 2003), there arefew studies, and less of aconsensus, on the nature of weakly institutionalized polities. What determines corruption, rent extraction and bad policies when institutions areweak? Indeed, the qualitative nature of politics appears to differmarkedly between strongly and weakly institutional- ized polities: when institutions arestrong, citizens punish politicians by voting them out of power; when institutions areweak, politicians punish citizens who failto support them. When institutions arestrong, politicians vie forthe support and endorsement of interest groups; when institutions areweak, politicians createand control interest groups. When institutions arestrong, citizens demand rights; when institutions areweak, citizens beg forfavors. The researchprogram proposed in this paper is asystematic study of policymaking in weakly institutionalized societies, and ultimately, astudy of the process by which strongly institutionalized societies emerge(see North and Weingast (1989) fora classic account of such aprocess). Totake a rst step in this program, weconstruct amodel to study kleptocratic politics. Perhaps the most puzzling featureof kleptocracies, illustrated by the examples fromthe Congo, the Dominican Republic, Nicaragua, or Haiti, is their longevity, despite the disastrous policies pursued by the rulers. 2 This longevity is madeeven more paradoxical by the factthat such regimesapparently lacked apolitical base (a core constituency) that supported them. Despite the absence of formalinstitu- tional mechanisms fordeposing unpopular rulers, constraints on the behavior of rulers exist even in weakly-institutionalized societies (e.g., the threat of revo- 1. We owe this terminology and the distinction between strongly and weakly institutionalized polities to Robert Powell. 2. Despite the appealing intuition, perhaps derived from many political analyses of strongly institutionalized societies, that rulers who reduce the utility of citizens ought to be replaced, this appears not to be the case in weakly-institutionalized societies. Many kleptocrats rule for long periods, Mobutu for 32 years, Trujillo for 31 years, and the Somozas for 42 years. 164 Journal of the European Economic Association lution, or competition fromother strongmen). Why do, then, the heavily taxed producers or the poverty-stricken citizens not replacethe kleptocrat? Why do they rarelyform an effectiveopposition constraining the kleptocrat? How can a regimethat apparently bene ts nobody outside of the narrowest of cliques survive? Our basic answer is that this is because the absence of strong institu- tions allows rulers to adopt political strategies which arehighly effectiveat defusing any opposition to their regime. The seminal book by Robert Bates, Markets and States inTropical Africa, provides many clues towards an answer. Bates described the web of inef cient transfers and policies in effectin many parts of Africa,but most notably in Ghana and Zambia,and suggested the following logic: many of these inef cient policies arein place to transferresources fromthe population to the ruling groups, while at the sametime ensuring their political survival. Inparticular, the nexus of inef cient policies appeared to be useful forcreating anenvironment where any group that becamepolitically mobilized against the rulers could be punished, while those that remained loyal wererewarded. With this logic, the Ghanaian government heavily taxed cocoa producers, while atthe sametime subsidizing their inputs of seeds and fertilizers.The subsidies could be allocated selectively as apotential rewardfor not attempting to change the status quo. Similarly, the exchange ratewas kept overvalued because then the government could allocate or withhold valuable rations of foreign exchange in order to guarantee support. In this paper, wesuggest ageneralization of this reasoning, which wedub the divide-and-rule strategy. Divide-and-rule is amethod used by kleptocrats to maintain power in weakly-institutionalized polities while simultaneously pur- suing policies costly to society. The logic of the divide-and-rule strategy is to enable arulerto bribe politically pivotal groups offthe equilibrium path, ensuring that he can remainin power against challenges. To remove arulerfrom power requires the cooperation of distinct social groups which is madedif cult by the collective action problem (Olson 1965). By providing selective incentives and punishments, the divide-and-rule strategy exploits the fragility of social cooperation: when facedwith the threat of being ousted, the kleptocratic ruler intensi es the collective action problem and destroys the coalition against him by bribing the pivotal groups. Moreexplicitly, weconsider adynamic gamebetween the rulerand two producer groups. The kleptocratic rulertaxes production and uses the resulting tax revenue, the rents fromnatural resources and potential foreign aid from outside donors forhis own consumption. The two producer groups, ifthey can cooperate, can remove the rulerfrom power and establish democracy (aregime morefavorable to their interests). We model this cooperation asfollows: one of the two groups (the proposer) makes aproposal to remove the rulerfrom power, and ifthe other group (the proposed) agrees, the ruleris removed and democracy Acemoglu, Robinson &VerdierKleptocracy and Divide-and-Rule 165 is established. The ruler-friendly political institutions, however, imply that before the proposed group responds to the proposal, the rulercan makea counteroffer. This counteroffer enables him to use adivide-and-rule strategy: following achallenge, the ruleruses all his resources and tax revenues to bribe the proposed group (and compensate them forfuture higher taxes ifthey turn down the proposal and keep the rulerin power). Ifhe can do so successfully, he can ght offthe challenge, and anticipating this, no group will challenge the ruler. Therefore,the divide-and-rule strategy remainsoff the equilibrium path, and its anticipation implies that the rulercan follow highly distortionary
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