Table of Contents
Title Page
Dedication
Epigraph
Introduction
Chapter 1 - The Rules of Politics
Three Political Dimensions
Virtues of 3 - D Politics
Change the Size of Dimensions and Change the World
Rules Ruling Rulers
Taxing
Shuffling the Essential Deck
Do the Rules Work in Democracies?
Chapter 2 - Coming to Power
Paths to Power with Few Essentials
Speed Is Essential
Pay to Play
Mortality: The Best Opportunity for Power
Inheritance and the Problem of Relatives
Papal Bull - ying for Power
Seizing Power from the Bankrupt
Silence Is Golden
Institutional Change
Coming to Power in Democracy
Democratic Inheritance
Democracy Is an Arms Race for Good Ideas
Coalition Dynamics
A Last Word on Coming to Power: The Ultimate Fate of Sergeant Doe
Chapter 3 - Staying in Power
Governance in Pursuit of Heads
The Perils of Meritocracy
Keep Essentials Off-Balance
Democrats Aren’t Angels
Bloc Voting
Leader Survival
Chapter 4 - Steal from the Poor, Give to the Rich
Taxation
Tax Collectors
Privatized Tax Collection
Extraction
Borrowing
Debt Forgiveness
Chapter 5 - Getting and Spending
Effective Policy Need Not Be Civic Minded
Bailouts and Coalition Size
Is Democracy a Luxury?
Public Goods Not for the Public’s Good
Who Doesn’t Love a Cute Baby?
Clean Drinking Water
Building Infrastructure
Public Goods for the Public Good
Earthquakes and Governance
Chapter 6 - If Corruption Empowers, Then Absolute Corruption Empowers Absolutely
Power and Corruption
Private Goods in Democracies
Private Goods in Small Coalition Settings
Wall Street: Small Coalitions at Work
Dealing with Good Deed Doers
Cautionary Tales: Never Take the Coalition for Granted
Discretionary Money
Chapter 7 - Foreign Aid
The Political Logic of Aid
The Impact of Aid
An Assessment of Foreign Aid
Aid Shakedowns
Fixing Aid Policy
Nation Building
Chapter 8 - The People in Revolt
To Protest or Not To Protest
Nipping Mass Movements in the Bud
Protest in Democracy and Autocracy
Shocks Raise Revolts
Are Disasters Always Disasters for Government Survival?
Responding to Revolution or Its Threat
Power to the People
Chapter 9 - War, Peace, and World Order
War Fighting
To Try Hard or Not
Fighting for Survival
Who Survives War
The Peace Between Democracies
Defending the Peace and Nation Building
Chapter 10 - What Is To Be Done?
Rules to Fix By
Lessons from Green Bay
Fixing Democracies
Removing Misery
Free and Fair Elections: False Hope
Acknowledgments
Notes
Index
Copyright Page
To our dictators, who have treated us so well—
Arlene and Fiona
What is important here is cash. [A] leader needs money, gold and diamonds to run his hundred castles, feed his thousand women, buy cars for the millions of boot-lickers under his heels, reinforce the loyal military forces and still have enough change left to deposit into his numbered Swiss accounts.
—MOBUTU SESE SEKO OF ZAIRE, PROBABLY APOCRYPHAL
Men at some time are masters of their fates. The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.
—WILLIAM SHAKESPEARE, Julius Caesar (I, II, 140-141)
Introduction
Rules to Rule By
What remarkable puzzles politics provides. Every day’s headlines shock and surprise us. Daily we hear of frauds, chicanery, and double-dealing by corporate executives, new lies, thefts, cruelties and even murders perpetrated by government leaders. We cannot help but wonder what flaws of culture, religion, upbringing, or historical circumstance explain the rise of these malevolent despots, greedy Wall Street bankers, and unctuous oil barons. Is it true, as Shakespeare’s Cassius said, that the fault lies not in the stars but in ourselves? Or, more particularly, in those who lead us? Most of us are content to believe that. And yet the truth is far different.
Too often we accept the accounts of historians, journalists, pundits, and poets without probing beneath the surface to discover deeper truths that point neither to the stars nor to ourselves. The world of politics is dictated by rules. Short is the term of any ruler foolish enough to govern without submitting to these rules to rule by.
Journalists, authors, and academics have endeavored to explain politics through storytelling. They’ll explore why this or that leader seized power, or how the population of a far-flung country came to revolt against their government, or why a specific policy enacted last year has reversed the fortunes of millions of lives. And in the explanations of these cases, a journalist or historian can usually tell us what happened, and to whom, and maybe even why. But beneath the particulars of the many political stories and histories we read are a few questions that seem to emerge time after time, some profound, some seemingly minor, but all nagging and enduring in the back of our minds: How do tyrants hold on to power for so long? For that matter, why is the tenure of successful democratic leaders so brief? How can countries with such misguided and corrupt economic policies survive for so long? Why are countries that are prone to natural disasters so often unprepared when they happen? And how can lands rich with natural resources at the same time support populations stricken with poverty?
Equally, we may well wonder: Why are Wall Street executives so politically tone-deaf that they dole out billions in bonuses while plunging the global economy into recession? Why is the leadership of a corporation, on whose shoulders so much responsibility rests, decided by so few people? Why are failed CEOs retained and paid handsomely even as their company’s shareholders lose their shirts?
In one form or another, these questions of political behavior pop up again and again. Each explanation, each story, treats the errant leader and his or her faulty decision making as a one-off, one-of-a-kind situation. But there is nothing unique about political behavior.
These stories of the horrible things politicians or business executives do are appealing in their own perverse way because they free us to believe we would behave differently if given the opportunity. They liberate us to cast blame on the flawed person who somehow, inexplicably, had the authority to make monumental—and monumentally bad—decisions. We are confident that we would never act like Libya’s Muammar Qaddafi who bombed his own people to keep himself in power. We look at the huge losses suffered under Kenneth Lay’s leadership by Enron’s employees, retirees, and shareholders and think we aren’t like Kenneth Lay. We look at each case and conclude they are different, uncharacteristic anomalies. Yet they are held together by the logic of politics, the rules ruling rulers.
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p; The pundits of politics and the nabobs of news have left us ignorant of these rules. They are content to blame the doers of evil without inquiring why the worlds of politics and business seem to succor miscreants or to turn good people into scoundrels. That’s why we are still asking the same old questions. We’re still surprised by the prevalence of drought-induced food shortages in Africa, 3,500 years after the pharaohs worked out how to store grain. We’re still shocked by the devastation of earthquakes and tsunamis in places like Haiti, Iran, Myanmar, and Sri Lanka, and by the seemingly lesser intensity of such natural disasters in North America and Europe. We’re still troubled by the friendly handshakes and winks exchanged between democratic leaders and the tyrants that they somehow justify empowering.
In this book, we’re going to provide a way to make sense of the miserable behavior that characterizes many—maybe most—leaders, whether in government or business. Our aim is to explain both good and bad conduct without resorting to ad hominem claims. At its heart, this will entail untangling the reasoning and reasons behind how we are governed and how we organize.
The picture we paint will not be pretty. It will not strengthen hope for humankind’s benevolence and altruism. But we believe it will be the truth and it will point the way to a brighter future. After all, even if politics is nothing more than a game that leaders play, if only we learn the rules, it becomes a game we can win.
To improve the world, however, all of us must first suspend faith in conventional wisdom. Let logic and evidence be the guide and our eyes will be opened to the reasons why politics works the way it does. Knowing how and why things are as they are is a first, crucial step toward learning how to make them better.
Bell’s Bottomless Blues
In politics, as in life, we all have desires and contend with obstacles that keep us from getting what we want. A government’s rules and laws, for example, limit what we can do. Those in power differ from the rest of us: they can design rules to their advantage and make it easier for them to get what they want. Understanding what people want and how they get it can go a long way to clarifying why those in power often do bad things. In fact, bad behavior is more often than not good politics. This dictum holds up whether one governs a tiny town, a mom-and-pop business, a megacorporation, or a global empire.
Let’s start with a tale of a small town’s team of seemingly greedy, grasping, avaricious louts so that we can appreciate how the world looks from a leader’s perspective. And yet it’s vital that we remember that this is a story about politics, not personality. Whether we’re discussing a cabal of corrupt reprobates or not, what really matters is that these are people who value power and recognize how to get it and keep it. Soon enough we will come to appreciate that this small tale of miserable conduct recurs at every level of politics and corporate governance, and that there is nothing out of the ordinary in the extraordinary story of Bell, California.
Robert Rizzo is a former city manager of the small town of Bell (population about 36,600). Bell, a suburb of Los Angeles, is a poor, mostly Hispanic and Latino town. Per capita income may be as low as $10,000 or as high as $25,000—estimates vary—but either way it is way below both the California and national average. More than a quarter of the town’s hard-working people live below the poverty line. Life is not easy in Bell.
Still, it is a community that takes pride in its accomplishments, its families, and its prospects. Despite its many challenges, Bell consistently outperforms other California communities in keeping violent crime and property crime below average. A cursory glance at Bell’s official website suggests a thriving, happy community brimming over with summer classes, library events, water play, and fun-filled family trips. And Bell seems to be a concerned community too. The town offers, for instance, Housing and Urban Development (HUD) grants to pay for repairs to single-family homes provided certain basic residency and income requirements are met.1
Robert Rizzo, in his job for seventeen years, must surely look back on his time as city manager with pride. In 2010, Bell’s then-mayor, Oscar Hernandez (later jailed on corruption charges), said the town had been on the verge of bankruptcy in 1993 when Rizzo (also ultimately charged with corruption) was hired. For fifteen consecutive years of Rizzo’s leadership, up until he stepped down in 2010, the city’s budget had been balanced. Hernandez credits Rizzo with making the town solvent and helping to keep it that way.2 That, of course, is no mean feat. Surely he and the town leaders with whom he worked were deserving of praise and tangible rewards for their good service to the people of Bell.
Behind the idyllic façade, however, lies a story that embodies how politics really works. You see, Robert Rizzo, hired at $72,000 a year in 1993, and in his job for seventeen years before being forced to step down in the summer of 2010, at the end of his tenure was earning a staggering $787,000 per year.
Let’s put that in perspective. If his salary had just kept up with inflation, he would have made $108,000 in 2010. He made seven times more! During long years of low inflation, his salary went up at an annual, compounded rate of more than 15 percent, almost exactly the return promised by Bernie Madoff, the master Ponzi schemer, to his hapless investors.
How does Rizzo’s city manager’s pay compare to other responsible government jobs? The president of the United States is paid $400,000.3 The governor of California’s salary is just over $200,000. The mayor of Los Angeles, just a hop, skip, and a jump from Bell, is paid only a bit over $200,000. To be sure, Robert Rizzo was not even close to the highest paid public employee in California. That distinction, as in most states, went to the coach of a university football team—UC Berkeley’s coach earned about $1,850,000 in 2010, but then he probably brought in a lot more revenue than Mr. Rizzo.4 Robert Rizzo was indeed credited with doing a good job for Bell, but was it really that good? It seems that he was the highest paid city manager in the entire United States (or at least until we discover another Bell).
The natural thought is that somehow Robert Rizzo must have been stealing money, dipping into the proverbial cookie jar, taking funds that were not rightfully and legally his or, at least, doing something or other that was immoral and illegal. The California attorney general (and Democratic candidate for governor) at the time of the Bell scandal in the summer of 2010, Jerry Brown, promised an investigation to find out if any laws had been violated. The implicit message in his action was clear enough: No one would pay a small town city manager nearly $800,000 a year. The truth, however, is quite a bit more complicated.
The actual story is one of clever (and reprehensible) political maneuvering implicitly sanctioned by Bell’s voters and the city council members who represent them, supplemented only by a touch of larceny.
Cities comparable to Bell pay their council members an average of $4,800 a year. But four of Bell’s five council members received close to $100,000 a year through the simple mechanism of being paid not only their (minimal) base council salaries but also nearly $8,000 per month to sit on city agency boards. Only poor councilman Lorenzo Velez failed to reap such rewards. Velez apparently received only $8,076 a year as a council member, approximately equal to what his fellow council members were getting each month. How can we possibly explain these disparities, let alone the outrageous salaries and pensions provided not only to Mr. Rizzo, but also to the assistant city manager and Bell’s chief of police (all subsequently jailed on corruption charges)?
The answers lie in a clever manipulation of election timing. The city’s leaders ensured that they depended on very few voters to hold power and to set their compensation. To see how a poor community could so handsomely reward its town leaders we must start with the 2005 special election to convert Bell from a “general city” to a “charter city.” What, you may well ask between yawns, is the difference between a general city and a charter city? The answer is day and night: decisions are made in the open daylight in general cities and often in secret, behind closed doors in charter cities. While a general city’s governing system is dictated by state
or federal law, a charter city’s governance is defined by—well, as you would expect—its own charter.
The California legislature decided in 2005 to limit salaries for city council members in general cities. No sooner did the state legislature move to impose limits than creative politicians in Bell—some allege Robert Rizzo led the way—found a way to insulate themselves from the “whims” of those sent to California’s state capitol, Sacramento. A special election was called, supported by all five council members, to turn Bell into a charter city. The selling point of the change to charter city was to give Bell greater autonomy from decisions by distant state officials. Local authorities know best what is right for their community, more so than distant politicians who are not in touch with local circumstances. Or, at least, so the leaders of Bell, California, argued.
Special elections on technical questions—to be a charter city or to remain a general city—are less than captivating to the general voter. Of course, if the decision had been made in the context of a major national or even statewide election, the proposition would likely have been scrutinized by many prospective voters, but as it happens—surely by political design—the special election, associated with no other ballot decisions, attracted fewer than 400 voters (336 in favor, 54 opposed) in a town of 36,000 people. And so the charter passed, placing within the control of a handful of people the right to allocate city revenues and form the city budget, and to do so behind closed doors. As best as one can tell, the charter changed nothing else of consequence concerning Bell’s governance. It just provided a means to give vast discretion over taxing and spending decisions to a tiny group of people who were, as it happens, making choices about their own compensation.
Lest one think the council members were stupid as well as venal, it is worth noting how clever they were in disguising what they had done. Should anyone care to ask a city council member’s part-time salary, any councilman or councilwoman could say openly and honestly that they were each paid just a few hundred dollars a month, a pittance for their services. As we have already seen, the bulk of their pay—the part denied to Lorenzo Velez—was for participation on city agency boards. That, as it turns out, may ultimately have been their Achilles’ heel.
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