The Dictator's Handbook (24 page)

Private goods make up a part of every government's spending just as they make up a part of every corporation's spending. But it is much tougher to get people to engage in truly nasty behavior in a large-coalition environment than it is in a small one even if the totals spent on private gains are equal. History has not produced large-coalition-dependent leaders as brutal as Genghis Khan. Equally, we must realize that the nature of private rewards in more democratic systems are likely to come in the form of distorted public policy rather than through more overt means such as outright bribery, black marketeering, or extreme favoritism.

What, then, are the private rewards provided in democracies? How might public policy be distorted to create benefits for some and costs for others?

It is fashionable to talk about politics in terms of concepts like ideology or left-right continuums. The standard mantras from either side of the left-right continuum go something like this: Liberals care about the poor and are dedicated to alleviating their misery. They are often stymied by the rich and powerful. Those very rich and powerful tend to be conservative. Conservatives care about the rich and are dedicated to protecting them from the taxing and spending inclinations of liberals, whose supporters, not surprisingly, tend to be relatively poor compared to conservative backers. As a simplification of politics that works fine. We do not challenge this view so much as offer a completely different way to think about it.

The rules governing how people rule inevitably divorce what policies politicians really desire from what they say and do. Not that we doubt that politicians hold sincere views of good and bad public policy—rather those views are not terribly important and, besides, there are few ways to tell the difference between declarations based on opportunistic political expediency and true beliefs.

From the perspective of this book, so-called liberals and so-called conservatives appear simply to have carved out separate electoral niches that give them a good chance of winning office. Democrats in the United States like to raise taxes on the rich, improve welfare for the poor, and seek heavy doses of benefits for the middle-class swing voters. Republicans in the United States like to reduce taxes on the rich, decrease welfare for the poor, relying on back-to-work programs instead, and, similarly, look for a heavy dose of benefits for the swing middle voters. Many of the taxing and spending policies, pork-barrel programs and the like, are simply private goods distributed to the relevant party's coalition of essentials. Both parties pay special attention to the middle-class because there are an awful lot of middle class voters and they can be tipped either way. They like to define the
rich—those who might be asked to pay higher taxes—as anyone whose income is higher than their own. They like to think of welfare payments as rife with fraud and cheating that needs to be ferreted out. And they are very happy to have government programs that disproportionately benefit them—no surprise there—such as tax deductions on mortgage interest, expanding Medicare benefits, subsidies for university tuition for their children, and increases in social security payments even in the absence of inflation.

The very poor are not likely to vote but the working poor are, and, of course, they are likely to vote for people who adopt policies that benefit them. The less well off love progressive taxes and hate sales taxes. Those who hope for expanded and more effective programs for jobs training, Medicaid, long-term unemployment insurance, and low or no taxes at their income level, tend to turn to candidates most likely to fulfill their wishes. These wishes are public policies to be sure, but they are public policies that benefit primarily the select group whose voting “bloc” is essential to the winning Democratic candidate. They are unlikely to vote Republican because, let's face it, a winning Republican candidate is not likely to support the programs we just mentioned, at least not on the same scale as a Democrat. So these policies are payments for political support, no more and no less so than any other private reward.

The rich like subsidies too. Republican candidates trying to build a coalition around the support of the relatively well-to-do are the candidates most likely to provide these subsidies. The well off and Republican candidates by and large favor, for instance, government support for medical research on cancer, Alzheimer's disease, and other ailments of the elderly who happen also to be the wealthiest age cohort in the United States. What is more, the well-to-do are more likely to live long enough to suffer from these diseases. They like lower capital gains taxes since they have enough money that they can invest in the pursuit of equity gains and they don't like inheritance taxes since they can save enough to leave a tidy sum to their heirs. The poor rarely consume any of these benefits but they pay for them to help the rich if they pay taxes at all. But with Democrats more often controlling legislatures at the federal and state level than Republicans, it is worth noting
that more than 40 percent of Americans—mostly at the lower income levels—pay no income taxes at all.
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That, after all, is one of the private rewards they covet just as in smaller coalition regimes the rich pay few taxes and covet their private gains. Private benefits, whether in large- or small-coalition environments, distort economies in exactly the self-serving ways we should expect. And even in the most democratic of polities these private benefits are perfectly explainable without appeal to high-falutin principles of equity, efficiency, or ideology. People support leaders who deliver policies that specifically benefit them. That's why earmarks—
pork
in colloquial terms—are reviled in general and beloved by each constituency when the money goes to them.

This is true outside of the United States as well. As governments shift toward or away from democracy, or leaders experience different degrees of dependence on large or small coalitions in different parts of their domain, they adjust their private goods giving accordingly. We can see this by comparing two transitional democracies: Tanzania, which seems on the way to expanding its coalition, and Russia, whose coalition seems to be shrinking.

 

Earlier we talked about how Tanzania's parliament, the Bunge, superficially looks like it reflects the structure of a large-coalition democratic government. We saw that, beneath the surface of apparent democracy, it is a transitional regime that retains many characteristics of a small-coalition environment. That is, the selectorate expanded more quickly that the winning coalition, emulating a rigged system. This standard problem of transitional regimes is accomplished through a variety of means that restrict how large the coalition can be even as universal suffrage is introduced. One of the ways in which the coalition is kept artificially small in Tanzania is by reserving many parliamentary seats for women who are indirectly elected by the parties in parliament and by permitting several members of the Bunge to be appointed by the president. The result is that the true size of the required winning coalition is much less than a majority of the legislature. And when we zoomed in on district-level elections in Tanzania, we realized that, just as in multicandidate elections in Bell, California,
in Tanzania's parliamentary districts a winning coalition only requires one more vote than the second largest of the many parties competing for office. This translates into needing less than 10 percent of the vote, and very often much less. To get that crucial percentage, the government doles out private rewards.

Tanzania's main crop is maize. The government therefore selectively provides vouchers for subsidized purchases of maize seed. The vouchers to different districts are of varying value, providing two opportunities to observe private rewards at work. Our perspective implies that who gets vouchers and how much the vouchers are worth should be driven by the size of the winning coalition in each district. After all, the voucher program could just be a central government reward to loyal, small-coalition constituencies. Large-coalition districts, in that case, would be unlikely to receive vouchers or would only receive vouchers of little value even if they are heavily dependent on maize production and are impoverished.
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In providing vouchers, the Tanzanian central government confronts an opportunity to equalize or distort economic and social conditions. It could make decisions purely on a needs basis (poverty and low productivity) or it could make decisions to dole out resources on a political survival basis; that is, rewards for the politically loyal rather than the economically needy. And what do you think they do? Without boring you with the details of the statistical analysis of the data, here are the essentials when it comes to maize vouchers in Tanzania.

As we have sadly come to expect, the impact of coalition size is substantial, with a doubling of the size of a district's presidential election–winning coalition being equal to about a 69 percent
decline
in the prospect of receiving vouchers. The value of the vouchers is even more dramatically responsive to coalition size than is the likelihood of receiving them. Looking only at the districts that actually received vouchers we found that doubling the number of district-level essentials (remembering that the districts receiving vouchers are selected on the basis of having a small coalition to begin with), produces about a one third reduction in the value of the vouchers they got. Thus we find that even among the small-coalition districts—those most likely to receive vouchers—the central government sharply discriminates
between those that value private goods the most (the smallest coalition districts) and those that value such goods least (the relatively larger small-coalition districts).

How about handing out vouchers on the basis of need? It turns out that productivity is linked to the odds of getting vouchers and to their worth—but it is the higher productivity districts that do better, not the ones needing help improving their productivity. As for poverty and vouchers—it turns out that need has no impact on the use of vouchers to help stimulate the agricultural economy, the very purpose the government gives for the program. Leader self-interest once again trumps a choice to do what's best for the people, except, as expected, when the district-level winning coalition is large. In those districts, just as we have learned to expect, there are more effective public policies. People living in the large-coalition districts, for instance, have better access to healthcare, lower infant mortality rates, and more residential electrification than those living in small-coalition districts.

Without a doubt, corruption is endemic to small-coalition regimes. Governments that transition from autocracy to democracy diminish corruption in the process. Tanzania, for instance, seems to be slowly improving in its governance. In 2010, Transparency International ranked it as 116 out of 178 in corruption, considerably better, for instance, than Russia. As we have come to expect, governments like Russia's, which are making the transition in the opposite direction, gradually abandoning their shifts toward democracy in favor of a smaller coalition autocracy, embrace corruption as crucial to their leadership's political survival.

 

As we have noted, Russia is among the world's most corrupt states. As such, the political logic of private goods can be seen vividly in the workings of its corruption.

Low salaries for police forces are a common feature of small coalition regimes and Russia is no exception. At first blush this might seem surprising. The police are crucial to a regime's survival. Police officers are charged with maintaining civil order—which often boils down to crushing antigovernment protests and bashing the heads of antigovernment activists. Surely inducing such behavior requires either great
commitment to the regime or good compensation. But as elsewhere, the logic of corruption takes a more complex turn.

Though private rewards can be provided directly out of the government's treasury, the easiest way to compensate the police for their loyalty—including their willingness to oppress their fellow citizens—is to give them free rein to be corrupt. Pay them so little that they can't help but realize it is not only acceptable but necessary for them to be corrupt. Then they will be doubly beholden to the regime: first, they will be grateful for the wealth the regime lets them accumulate; second, they will understand that if they waver in loyalty, they are at risk of losing their privileges and being prosecuted. Remember Mikhail Khodorkovsky? He used to be the richest man in Russia. We do not know whether he was corrupt or not, but we do know that he was not loyal to the Putin government and duly found himself prosecuted for corruption. Police face the same threat.

Consider former police major and whistleblower, Alexei Dymovsky.
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Mr. Dymovsky, by his own admission, was a corrupt policeman in Novorossiysk, a city of 225,000 people. He noted that on a new recruit's salary of $413 a month (12,000 rubles) he could not make ends meet and so had to turn to corruption. Dymovsky claims he personally only took very small amounts of money. Whether that is true or not, we cannot know. What we do know is what happened next.