The Dictator's Handbook

by Bruce Bueno de Mesquita

  The leader in nation A only “buys” the anti-Soviet policy if its value to his supporters is greater than the amount given up by each. Since the fifty coalition members in A value the anti-Soviet policy at $1 each, the money they give up so that their government can buy an anti-Soviet stance from country B must be less than $1 each. Otherwise, they prefer the cash to the policy concession. Since the policy shift is worth $1 to each supporter in nation A and there are fifty member of the coalition, this means the leader in A would pay up to $50 in “aid” to B’s government to get B to become anti-Soviet.

  Provided the aid transfer is between $10 and $50, the essential backers in both nations are made better off by trading policy for aid. This enhances the survival of both leaders. However, it makes each of the remaining ninety-five people in nation B—those not in the winning coalition—the equivalent of $2 worse off. They are not compensated for the anti-Soviet policy that they don’t like.

  This example, while extremely simple, captures the logic of cold war aid flows. The United States provided Liberia’s Sergeant Doe with an average of $50 million per year in exchange for his anti-Soviet stance. This aid did not provide for the welfare of his people, and is coincidentally close to the amount of money Doe and his cronies are alleged to have stolen during his decade in power. From the perspective of survival-oriented leaders, the rationale for aid becomes clear. When the cold war ended, the United States no longer valued anti-Soviet policies and was no longer willing to pay for them. Doe’s government didn’t have much else to offer the United States that American voters valued, so he was cut off. Without aid revenue, Doe could no longer pay his supporters enough for them to suppress insurgencies, and so he died a gruesome death at the hands of Prince Johnson.

  For the reader who finds the above example too contrived, it is perhaps worthwhile to look at a recent failed United States attempt to buy policy. In the runup to the 2003 invasion of Iraq, the United States sought permission to base US troops in the predominantly Muslim nation of Turkey. Such basing rights would have improved the US army’s ability to engage the Iraqi army. Although Turkey is allied with the United States through NATO, the idea of assisting a predominately Christian nation to invade a fellow Muslim nation was domestically unpopular in Turkey. During negotiations in February 2003, the United States offered Turkey $6 billion in grants and up to $20 billion in loan guarantees. Given Turkey’s population of approximately 70 million, these aid totals amounted to about $370 per capita.10

  Turkey is relatively democratic. For a quick, back of the envelope calculation, let’s suppose its leader needs the support of a quarter of the people. So the value of the United States offer works out to nearly $1,500 per essential backer. This is a substantial amount (a bit over 10 percent of today’s Turkish income per capita), but then the policy concession sought was very politically risky. Indeed, it might be useful for the American reader to think about how much compensation they would need before agreeing to allow foreign troops a base in the United States in order to invade Canada.

  It appears that $1,500 per person was not enough. After much back and forth, the Turkish government rejected the offer. They were holding out for significantly more money so we know there was a price at which the policy concession could have been granted, but it was a high price. The United States was not willing to pay more and so the deal could not be struck. In the end, Turkey granted a much less controversial concession for a lot less money. The United States was allowed to rescue downed pilots using bases in Turkey.

  Buying policy from a democracy is expensive because many people need to be compensated for their dislike of the policy. Buying policies from autocracies is quite a bit easier. Suppose Turkey were an autocracy and its leaders were beholden to only 1 percent of the population. Under such a scenario, the value of the US offer rejected by Turkey would have approached $40,000 per essential backer. Thinking back to the challenge offered to Americans, while few might have sold out their northern neighbor for $1,500, $40,000 might start looking very attractive to many. It is probably not an accident that the US invasion of Iraq was launched from the decidedly very small coalition monarchies of Kuwait and Saudi Arabia.

  The logic of how coalitions operate gives us a good handle on who gives how much aid to whom. Getting the people what they want helps democratic leaders stay in office. It is therefore no surprise that most foreign aid originates in democracies. The price of buying concessions depends upon the salience of the issue and the size of the recipient leader’s coalition. As coalition size grows, the recipient leader needs to compensate more and more people for the adoption of the policy advocated by the donor. That means that the price of buying a policy concession rises with the size of the prospective recipient’s group of essential backers. This creates an interesting dynamic.

  As a nation becomes more democratic, the amount of aid required to buy its policy goes up. But because the price is higher, donors are less likely to buy the policy concession from it because it just gets to be too expensive. Poor autocracies are most likely to get aid, but they don’t get much. Although they may have great needs, they can be bought cheaply. We have confirmed this relationship between coalition size, the chance to get aid and the amount of aid received (if any) in detailed statistical studies of aid giving by the United States and other wealthy democratic nations, namely the members of the Organization for Economic Cooperation and Development (the OECD).11

  Coalition size is not the only factor determining who gets aid or how much is spent on buying concessions from them. The salience of the issues at stake—what the policy concessions are worth—is an important determinant of how much aid gets transferred. Notice that in the formula we just described, need is not a significant factor. In fact, because an extra dollar is worth more to a poor country than to a rich one, needier countries are likely to get less aid, not more than the less needy among those receiving aid at all.

  One extremely salient, and hence expensive aid for policy deal was the 1979 Egyptian-Israeli peace treaty. As part of this agreement, Egypt became the first Arab nation to officially recognize Israel. Israel and Egypt ended hostilities that had been nominally ongoing since the 1948 war (and had erupted into actual warfare in 1956, 1967, and 1973). As part of the 1979 deal, Israel withdrew from the Sinai Peninsula, which it had captured in the 1967 Six Day War and both sides agreed to the free passage of shipping through the Suez Canal. Peace between Israel and Egypt was of great importance to the United States. Beyond the strong domestic support for Israel, the United States was suffering the ill effects of oil shocks in the 1970s. The sharp rise in oil prices raised inflation and harmed the US and other Western economies dependent on oil imports. The United States, being desperate to avoid another oil crisis, underwrote the deal, thinking, perhaps, that doing so would help stabilize the situation in the region. As can be seen in Figure 7.1, the United States provided enormous economic incentives for the Egyptian president, Anwar Sadat, to visit Israel, attend the Camp David Peace Summit, and sign the treaty.

  The recognition of Israel was an extremely unpopular policy shift in Egypt. This is why Sadat could extract so much from the United States. Unfortunately for Sadat it also led to his assassination in 1981. Fundamentalists threw grenades and attacked with automatic rifle fire during an annual parade. Although it officially recognizes Israel, the Egyptian government has done almost nothing to encourage the Egyptian people to moderate their hatred for Israel. In a BBC survey conducted nearly thirty years after the Camp David agreement was struck, 78 percent of Egyptians indicated that they perceive Israel as having a negative impact in the world, far above the average in other countries whose citizens participated in the BBC survey on this question. 12 Of course, changing the negative attitude toward Israel in Egypt would just reduce the amount of aid the Egyptian government could extract from the United States.

  FIGURE 7.1 Total US Assistance to Egypt in Constant 2008 Million US$ from USAID Greenbook

  Recent movement toward a mo
re democratic government in Egypt highlights the dilemma faced by democratic donors. Those who celebrate the prospects of democracy in Egypt and favor peace with Israel have a problem. As we have noted, the aid-for-peace-with-Israel deal could be struck exactly because the autocratic Egyptian leadership and its coalition were compensated for the anti-Israeli sentiment among its citizenry, a sentiment they helped preserve. With the people now in charge, it would be natural for Egypt to shift away from its peace with Israel. To prevent that, greater amounts of foreign aid will be needed than was true under the Sadat-Mubarak dictatorships. Given the significance of Israeli-Egyptian peace to American and Israeli voters, it is likely that the higher price will be paid. That leaves the question, will that greater aid be used to strengthen the military or improve the lot of ordinary Egyptians?

  As with Egypt, US assistance to Pakistan is much easier to explain by looking at aid as a payment for favors rather than a tool for alleviating poverty. In 2001, the United States gave Pakistan $5.3 million and Nepal $30.4 million in aid. Pakistan’s aid had been greatly reduced by congressional mandate following their test of a nuclear weapon in 1998. Yet, on September 22, 2001, US president George W. Bush lifted restrictions on aid. Pakistan received more than $800 million in 2002. Meanwhile, Nepal, not on the frontline of the fight against Al Qaeda and the Taliban, received about $37 million, just modestly more than their 2001 receipts. India, also not front and center in the battle against terrorism in 2002, received $166 million from the United States, up barely from 2001 when they received about $163 million. Poverty had not changed in any meaningful way in any of these countries between 2001 and 2002, but their importance to American voters most assuredly had.

  Democrats are often perceived as being in the driver’s seat and dictating terms to autocrats. However, as in other matters, they are often the ones who are constrained. They need to deliver the policies their backers want. If they try to cut back on the aid they give or impose strict conditions, then autocrats simply end the policy concessions.

  Subsequent US relations with Pakistan offer clear evidence of this pattern of waning and waxing aid. As we saw, aid went up following the terrorist attacks of September 11, 2001, but then it began to taper as the war against the Taliban in Afghanistan seemed to have been won by 2003. Once Pakistan increasingly became a safe haven for the Taliban and Al Qaeda, everything changed. Pakistan now found itself in a tough spot. If the government opposed the Taliban who were infiltrating the Pakistani frontier with Afghanistan, they were likely to face a domestic insurgency. If they supported the Taliban they would face severe pressure from the United States. This dilemma offered an opportunity for Pakistan to make greater demands for US aid if Pakistan’s government was to be induced to resist the Taliban. The demands were made but the US Congress balked at giving Pakistan more, noting that much American aid to Pakistan was diverted to uses not intended by the Congress. These uses include the disappearance of some money and channeling much of the rest by Pakistan to stave off what the Pakistanis perceive to be the greater threat from India than from Muslim fundamentalist militants.

  The United States, disgruntled with Pakistan, did not initially agree to pay the higher price needed to get the Pakistani government to pursue the Taliban and Al Qaeda militants within Pakistan. What was the upshot? As we have learned to expect, the Pakistani leadership ignored US pressure and began looking for ways to work with the Taliban. Aid is basically a pay or don’t play program. The United States wouldn’t pay and Pakistan wouldn’t play.

  By 2008, the government of Pakistan’s leader Asif Ali Zardari, was paying only lip service to going after the militants. The Bush administration, lacking more aid to offer, proved unable to change Zardari’s mind. In fact, the second half of 2008 saw only a perfunctory effort by the Zardari government to fight the militants. There was a brief military offensive against the Taliban, starting on June 28 and ending in early July, with precisely one militant killed. After that, although the Taliban aggressively pursued their own territorial expansion in Pakistan, the Zardari government mostly looked the other way. Rather than fight the militants, Zardari’s regime made a deal with the Taliban in February 2009, paying them about $6 million and agreeing to the imposition of Sharia law in the Swat Valley in exchange for the Taliban agreeing to an indefinite ceasefire. The ceasefire unraveled by May. By this time, the Zardari government seemed in trouble and the US government was fearful that the Taliban might take control of Pakistan altogether. In the face of such dangers, the price for aid had risen but so too had the desire in the United States to motivate the Pakistanis to try harder to beat back the Taliban.

  Congress passed the Kerry-Lugar bill at the end of September 2009. It nearly tripled aid to Pakistan, increasing it to $1.5 billion. Even then the Pakistani government balked at taking the greatly increased aid because the bill included requirements that the Pakistanis be accountable for how the money was used. Facing resistance from Pakistan, Senator John Kerry clarified that the bill was not designed to interfere at all with sovereign Pakistani decisions; that is, he essentially assured the Pakistani leadership that the United States would not closely monitor use of the funds. Shortly after, the Pakistani government accepted the aid money and greatly stepped up its pursuit of militants operating within its borders. By February 2010 they had captured the number two Taliban leader, but, as we should expect, they have also been careful not to wipe out the Taliban threat. Doing so would just lead to a termination of US funds.

  The US government, for its part, is frustrated that even with $1.5 billion in aid, Pakistan is not sufficiently motivated to beat back the Taliban. As a result, the United States has stepped up drone attacks and the use of the American military to pursue the Taliban within Pakistani territory, much to the public—but we doubt private—dismay of the Zardari government. This is all just the dance of the donors and the takers, the recipients looking for as much money as possible and the donors looking for a highly salient, costly political concession: the destruction of the Taliban.

  Perhaps this is distasteful to those who would like to maintain the fiction that aid is about alleviating poverty. Naturally some aid is given with purely humanitarian motives, such as that given after a natural disaster. Yet it is hard to reconcile the large scale of aid flows to Egypt and Pakistan with idealistic goals. If aid actually helped the poor, then we might expect the people in recipient nations to be grateful and hold donor nations in esteem. Nothing could be further from the truth. In return for its “benevolence” to Egypt and Pakistan, the United States is widely reviled by the people in those two countries; and with good reason.

  In 2002, Pew undertook a study of values and opinion in forty-two nations. One question asked about people’s view of the United States. In Pakistan 69 percent of people reported an extremely unfavorable view of the United States. In Egypt the figure was 79 percent. In the other forty nations an average of only 11 percent of the people shared this extremely negative view of the United States. But then Pakistan and Egypt received an average of $1.6 billion in economic and military aid from the United States in 2002, while the other forty nations averaged only $97 million in aid. The pattern is borne out in detailed statistical analyses. People in nations receiving lots of US aid seem to hate the United States. Of course, much may have changed since 2002, and it would be fascinating to see whether our assessment continues to be borne out in future surveys.

  Our account of aid may seem to paint the United States as international bad guy number one. But the United States is far from the only aid donor. While the United States is the largest overall donor, as a proportion of its economic size it gives relatively little, about 0.2 percent of GDP. Scandinavian nations give over 1 percent of their economic output in foreign aid. Provided the policy rewards that a foreign power can provide to a democrat’s supporters are worth more to the supporters than the rewards that could be directly purchased with the money, democrats support aid. Other nations and agencies buy favors too, if not perhaps on th
e same grand scale that the United States can afford. In fact, careful analysis shows that even the seemingly generous Scandinavians give aid in exchange for policy concessions rather than for altruistic reasons. They particularly like to use aid to gain trade concessions and prosocialist ideologies in recipient regimes.13

  Aid agreements are notorious for being tied to conditions that help the donor. This means that the agreement often specifies how, and more importantly where, the money is spent. For instance, Germany might give a recipient money, but only if they use it to buy German tractors. This might seem an inefficient way to reward tractor manufacturers. However, international trade laws often forbid direct subsidies. Further, tied aid can bring future business, such as spare parts and service. Canada is notorious for high levels of tied aid, 60–75 percent of all its aid. Scandinavia and the UK claim to have the lowest levels of tied aid, but even there, informal tying is common. For instance, Denmark had allocated $45 million to repair ferries in Bangladesh. Rather than repair the ferries locally, Denmark proposed taking the ships to Denmark and repairing them there at four times the local cost. Amid protest from the Bangladeshi government, Denmark decided to simply cancel the whole scheme so neither the Bangladeshis nor the Danes benefited.

  Just as the United States buys security and trade concessions with aid, and the Europeans trade aid for business concessions, so too does Japan. Whales need to fear Japanese benevolence. American voters like pork. In contrast, Japanese voters like blubber, and Japanese leaders have been working hard to deliver. In 1986, the International Whaling Commission (IWC) instituted a moratorium on the commercial hunting of whales. While this ban was popular with the people of most nations, the citizens of Iceland, Norway, and Japan want to resume hunting. Currently the Japanese hunt a small number of whales through a loophole that allows hunting for scientific research. These whales, of course, end up being eaten. The Japanese government buys votes on the IWC with foreign aid. Recently, behind Japan’s efforts, the IWC’s membership has swelled to include nations with no history of whaling. Some of these recent members, such as Laos, Mali, and Mongolia, are landlocked. Japan’s efforts have been rewarded with growing support for the resumption of whale hunting.