The Dictator's Handbook

by Bruce Bueno de Mesquita

  We should dismiss any pretense that such policies are paternal and imposed with the foreigners’ long-term best interests in mind. They are not. They are done for the benefit of the democrat’s supporters and sometimes these policies can be very unpleasant. For instance, the opium wars (1839–1842 and 1856–1860) got their name because the British wanted to finance their purchases of Chinese exports by selling the Chinese opium grown in India. China was reluctant to become a nation of addicts. The British used force to open up China to the drugs market. Hong Kong started out as a base from which the British could enforce this trade openness. It is telling that, while the settlements that ended the wars are officially known as the Treaties of Nanking and Tianjin, the Chinese often refer to them as the Unequal Treaties.

  One of the problems with seeking a policy solution is that after the democrat’s army leaves, the vanquished nation can renege. Enforcing the settlement can be very expensive, as was the case after the Gulf War. A common solution, and the one eventually used against Saddam Hussein, is leader replacement. Democrats remove foreign leaders who are troublesome to them and replace them with puppets. The leaders that rise to the top after an invasion are more often than not handpicked by the victor.

  A difficult leader whom democrats don’t trust to honor an agreement will often find himself replaced. The Congo’s Patrice Lumumba, democratically elected, didn’t have policies that pleased the Belgian or American governments and before you knew it, Lumumba was dead, replaced by horrible successors who also happened to be prepared to toe the line favored by the United States and Belgium. France has been no different, stepping into its ex-colony of Chad to make sure that a French-friendly government is in charge rather a Libyan-friendly or Arab-friendly regime.

  Democratic leaders profess a desire for democratization. Yet the reality is that it is rarely in their interest. As the coalition size grows in a foreign nation, its leader becomes more and more compelled to enact policies that his people want and not the policies desired by the puppeteer’s people. If a democratic leader wants a foreign leader to follow his prescribed policies then he needs to insulate his puppet from domestic pressures. This means reducing coalition size in vanquished states. This makes it cheaper and easier to sustain puppets and buy policy. US foreign policy is awash with examples where the United States overtly or covertly undermines the development of democracy because it promoted the policies counter to US interests. Queen Liliuokalani of Hawaii in 1893, Salvador Allende of Chile in 1973, Mohammad Mosaddegh of Iran in 1953, and Jacobo Arbenz of Guatemala in 1954 all suffered such fates.

  Democracy overseas is a nice thing to believe in, in the abstract. In practice it’s probably not what we, the people want. Let’s return to reconsider Egypt and Israel and the case for democratization. Western democracies used to complain, albeit not too emphatically, about electoral malpractice in Egypt under Mubarak. With Mubarak gone, they now worry that true democracy in Egypt might be contrary to the interests of friends of Israel. Buying peace with Israel under Mubarak was costly but moves toward democracy in Egypt will make continued peace costlier at least until and if Egypt becomes a full-fledged, mature democracy whose leaders will then only fight if they are virtually sure of victory. We can hope that in the long run a democratized Egypt and democratic Israel might develop mutual trust, understanding, and tolerance. However, there is also a chance that Israel would not survive long enough to reach this long run.

  While it is true that democracies generally don’t fight each other, we have also noted that they do have lopsided conflicts, and those conflicts often end with the weaker side capitulating. If a democratic Egypt mobilizes and arms itself, tiny Israel would have little hope of resisting unless the United States or NATO were prepared to make a large effort to defend it. Anyone who thinks a democratic Egypt attacking Israel is too fanciful a scenario might ask democratic Native American tribes from the American plains about their dealings with the expanding United States in the 1800s. Democratization sounds good in principle only.

  Of course, many may think that we are just too cynical. Advocates of democratization are fond of pointing out the success stories. Yet all of these cases—Germany, Japan, South Korea, and Taiwan—also happen to involve countries whose population’s values largely coincide with American values in resisting for decades large communist neighbors.

  The big problem with democratizing overseas continues to lie with we, the people. In most cases we seem to prefer that foreign nations do what we want, not what they want. However, if our interests align then successful democratization is more likely. This is particularly so if there is a rival power that wishes to influence policy. The postwar success stories fit this category well. Generally, the people of West Germany and Japan preferred what the United States wanted to the vision expounded by the Soviet Union. Creating powerful states that wanted to resist communism and would try hard was in the US interest. As occupying powers, the United States, Britain, and France might have set Germany on a course to democracy but they did so only because it was advantageous for them. This confluence of interests is rare, and so is externally imposed democratization.

  Sun Tzu exerted a lasting influence on the study of war precisely because his recommendations are the right recommendations for leaders, like monarchs and autocrats, who rule based on a small coalition. The Weinberger Doctrine—like its more recent replacement, the Powell Doctrine—exerts influence over American security policy precisely because it recommends the most appropriate actions for leaders who are beholden to a large coalition.

  We have seen that larger coalition systems are extremely selective in their decisions about waging war and smaller coalition systems are not. Democracies only fight when negotiation proves unfruitful and the democrat’s military advantage is overwhelming, or when, without fighting, the democrat’s chances of political survival are slim to none. Furthermore, when war becomes necessary, large-coalition regimes make an extra effort to win if the fight proves difficult. Small-coalition leaders do not if doing so uses up so much treasure that would be better spent on private rewards that keep their cronies loyal. And finally, when a war is over, larger coalition leaders make more effort to enforce the peace and the policy gains they sought through occupation or the imposition of a puppet regime. Small-coalition leaders mostly take the valuable private goods for which they fought and go home, or take over the territory they conquered so as to enjoy the economic fruits of their victory for a long time.

  Clausewitz had war right. War, it seems, truly is just domestic politics as usual. For all the philosophical talk of “a just war,” and all the strategizing about balances of power and national interests, in the end, war, like all politics, is about staying in power and controlling as many resources as possible. It is precisely this predictability and normality of war that makes it, like all the pathologies of politics we have discussed, susceptible to being understood and fixed.

  10

  What Is To Be Done?

  A man always has two reasons for doing anything: a good reason and the real reason.

  —J. P. MORGAN

  IN LATE 1901, VLADIMIR ILYICH LENIN WROTE A revolutionary essay called “What is to be Done?” His question was directed at justifying the creation of the communist party as the vanguard of the people. We are more interested in his literal question than in his reason for asking it and, equally, we are intrigued by his unintended answer three years later (really in a different context, but nevertheless, apt) in the title to another essay, “One Step Forward, Two Steps Back.” Too often, the real world of politics and business responds to problems by taking one step forward and two steps back, resulting in no progress on the problem at hand. Backsliding is, and should be, the way leaders deal with problems. It is the existing rules that have allowed them to seize and control resources to date. A headlong plunge into new ways of conducting politics might only heighten a leader’s risk of being overthrown.

  After the past nine chapters of our cynical—but we fear,
accurate—portrayal of politics, it is time at last to more seriously confront Lenin’s first question: What is to be done? We hope that, informed by the lessons of leadership, we can offer a much better and more democratic answer than he provided.

  It is an understatement to say that making the world better is a difficult task. If it were not, then it would already have been improved. The misery in which so many live would already have been overcome. The enrichment of CEOs while their stockholders lose their shirts would be a thing of the past. However, the inherent problem with change is that improving life for one group generally means making at least one other person worse off, and that other person is likely to be a leader if change really will solve the people’s problems. If the individual harmed by change is the ruler or the CEO—the same person who has to initiate the changes in the first place—then we can be confident that change is never going to happen.

  From the beginning we said we would focus on what is rather than what ought to be. Now we need to talk a bit about what ought to be. In doing so, we want to lay down the ground rules. First among these is that we should never let the quest for perfection block the way to lesser improvement. Utopian dreams of a perfect world are just that: utopian. Pursuing the perfect world for everyone is a waste of time and an excuse for not doing the hard work of making the world better for many.

  It is impossible to make the world great for everyone. Everyone doesn’t want the same thing. Think about what is good for interchangeables, influentials, and essentials, the three dimensions of political life: hardly ever is it true that what is good for leaders and their essential backers is good for everyone else. If they all had the same wants there wouldn’t be misery in the world. So, even as we are trying to change the world for the better, we are tied to the dictates of political reality. A fix is not a fix unless it can actually be done! What can be done must satisfy the needs of everyone required to implement change. Wishful thinking is not a fix and a perfect solution is not our goal and should not be any well-intentioned person’s goal. Even minor improvements in governance can result in significant improvements in the welfare of potentially millions of people or shareholders.

  Rules to Fix By

  Whether we are looking at the welfare of shareholders in publicly traded corporations, the quality of life for citizens in a democracy or the conditions under which billions live in oppressive and impoverished third-world countries, there are certain common principles behind bettering the world. These commonalities need to be laid bare before we tackle the specifics of fixing particular problems in particular places.

  If we have learned anything in the preceding pages it is to be suspicious of people’s motives. Appeals to ideological principles and rights are generally a cover. J. P. Morgan had it right: There is always some principled way to defend any position, especially one’s own interests. In one overseas nation, our government supports protest and advocates the will of the people to determine their own future. That is, for instance, a popular refrain for leaders in the United States when it comes to places like Hugo Chavez’s Venezuela or Kim Jong Il’s North Korea. Elsewhere we call for stability. That’s the principle invoked when people try to bring down a government that is our friend and ally, such as the governments of Bahrain or Saudi Arabia. Both freedom and stability are principled positions (the good reason) selectively asserted depending upon how we like the incumbent (the real reason). In devising fixes to the world’s ills, the essential first step is to understand what the protagonists want and how different policies and changes will affect their welfare. A reformer who takes what people say at face value will quickly find their reforms at a dead end.

  Everyone has an interest in change, but interchangeables, influentials, essentials, and leaders don’t often agree on what changes they want. Leaders, given their druthers, would always like the set of interchangeables to be very large, and the groups of influentials and essentials to be very small. That’s why the world of business has so many massive corporations with millions of shareholders, a few influential large owners, and a handful of essentials on the board of directors who agree to pay CEOs handsomely regardless of how the company fares. That’s why so much of humanity for so much of human history has been governed by petty despots who steal from the poor to enrich the rich.

  The masses—whether members of the selectorate or the wholly disenfranchised—agree that their group, the interchangeables, should be large but they want all other groups to be big as well. Their best chance at having a better life comes from the coalition and the influential group growing in size, such that they have a realistic chance of becoming one of its members and of benefiting from the profusion of public goods such governance provides, even if they remain excluded from the coalition. As we have seen, it is this very hope of improving the people’s lot that revolutionaries use as their rallying cry to get them to take to the streets. But even in a large-coalition system, these masses are unlikely to get what they want all the time. Their hope is to get what they want more of the time.

  The group whose desires are most interesting from the perspective of lasting betterment is the set of essentials. More often than not, they are the people who can make things happen. You see, they don’t like the idea that they might be purged to make the coalition smaller. But at the same time, ending up in a smaller coalition can provide them with fabulous wealth. Remember Saddam Hussein’s videotaped takeover: at the outset everyone in the audience was terrified. At the end, those still sitting in the auditorium were thrilled. They knew they had survived to collect their rewards for another day. What political insiders want when it comes to institutional change is complex, but to understand the reforms they can be expected to support and those they will oppose we need to understand their wants.

  Coalition members like small selectorates. Their welfare is enhanced if there are relatively few replacements for them. The incumbent cannot use the implicit threat of replacing them with a cheaper backer as a way to keep more benefits for himself rather than paying his essentials their due. This creates tension between a leader and his coalition. The leader would like to establish a Leninist style, corrupt, rigged electoral system that guarantees him an eager supply of replacement supporters. The coalition prefers monarchical, theocratic, or junta style institutional arrangements that restrict those who can be brought into the coalition to a select group of aristocrats, clerics, or military elites.

  Leaders and their essentials share a preference for dependence upon a small coalition, at least so long as the coalition is very small. However, as the coalition continues to expand, a wedge is eventually driven between what a king wants and what his court needs. When that wedge gets big enough we have an explanation for the emergence of a mature democracy that is so stable it will almost certainly remain democratic and not backslide into autocratic rule. The switch in the coalition’s desires for institutional change results from tradeoffs between declines in private goods as the coalition expands, and the increase in public goods and societal productivity that accompanies such enlargement.

  Given the complexity of the trade-off between declining private rewards and increased societal rewards, it is useful to look at a simple graphical illustration, which, although based on specific numbers, reinforces the relationships highlighted throughout this book. Imagine a country of 100 people that initially has a government with two people in the winning coalition. With so few essentials and so many interchangeables, taxes will be high, people won’t work very hard, productivity will be low, and therefore the country’s total income will be small. Let’s suppose the country’s income is $100,000 and that half of it goes to the coalition and the other half is left to the people to feed, clothe, shelter themselves and to pay for everything else they can purchase. Ignoring the leader’s take, we assume the two coalition members get to split the $50,000 of government revenue, earning $25,000 a piece from the government plus their own untaxed income. We’ll assume they earn neither more nor less than anyone else based on wh
atever work they do outside the coalition.

  Now we illustrate the consequences of enlarging the coalition. Figure 10.1 shows how the rewards directed towards those in the coalition (that is, private and public benefits) compare to the public rewards received by everyone as more people enter the coalition. Suppose that for each additional essential member of the winning coalition taxes decrease by half of 1 percent (so with three members the tax rate drops from 50 percent to 49.5 percent), and national income improves by 1 percent for each extra coalition member. Suppose also that spending on public goods increases by 2 percent for each added coalition member. As coalition size grows, tax rates drop, productivity increases, and the proportion of government revenue spent on public goods increases at the expense of private rewards. That is exactly the general pattern of change we explained in the previous chapters.

  FIGURE 10.1 The Welfare of Essentials and of Ordinary Citizens

  What we see in Figure 10.1 is that as the coalition initially expands, the welfare of its essential members declines. These supporters are made worse off because their share of private goods is greatly diluted as additional supporters are brought onboard. However, as the coalition gets ever larger, the extent of the dilution declines. As a rough approximation, each of the two original coalition members must give up a third of their lucrative private rewards to compensate bringing in a third coalition member. They are in part compensated for this loss by the greater availability of public goods and a more productive society, but they take huge personal losses in exchange for their societal gains. The trade-off works out differently in an initially larger coalition. Again, as a rough approximation, consider the costs and benefits for a coalition of six members. To bring in a seventh coalition member each of the six existing coalition members forsake about a seventh of their private benefits in exchange for the societal gain. As the losses in private rewards from an expanded coalition decline, the coalition’s members, far from continuing to oppose expansion, support additional members being brought into the coalition. From this point onwards, which occurs at a coalition size of around seven members in our admittedly simple example, the essentials prefer to continue expanding the coalition. This puts them at odds with their leader who remains committed to the first rule of staying in power: keep the coalition small.