The Story So Far
- Countries aren't poor out of ignorance or laziness
“[I]f ignorance were the problem, well-meaning leaders would quickly learn what types of policies increased their citizens' incomes and welfare, and would gravitate toward those policies.” (Why Nations Fail, p.65).
Institutions → outcomes, & politics (distribution of wealth & power) → institutions
Development and political-economic reform of institutions must be incentive-compatible
Countries remain poor because it's not in the interest of the elites to develop the country
Why Do Elites Permit Reform?
Daron Acemoglu and James Robinson
“To starkly illustrate our framework, consider a society in which there are two groups: an elite and the citizens. Nondemocracy is rule by the elite; democracy is rule by the more numerous groups who constitute the majority–in this case, the citizens. In nondemocracy, the elite gets the policies it wants; in democracy, the citizens have more power to get what they want. Because the elite loses under democracy, it naturally has an incentive to oppose or subvert it; yet, most democracies arise when they are created by the elite,” (p.10).
Acemoglu, Daron and James A. Robinson, (2006). Economic Origins of Dictatorship and Democracy
Recall AJR: Political Losers Block Development
"We argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked. In other words, we propose a “political-loser hypothesis.” We argue that it is groups whose political power (not economic rents) is eroded who will block technological advances. If agents are economic losers but have no political power, they cannot impede technological progress. If they have and maintain political power (i.e., are not political losers), then they have no incentive to block progress. It is therefore agents who have political power and fear losing it who will have incentives to block. Our analysis suggests that we should look more to the nature of political institutions and the determinants of the distribution of political power if we want to understand technological backwardness," (pp.126-127)
Acemoglu, Daron and James A. Robinson, 2000, "Political Losers as a Barrier to Economic Development," American Economic Review 90(2): 126-130
Recall: The Hobbesian View
The State is our commitment device
Citizens (in principle) sign a social contract, i.e. a "constitution" that deliberately restricts their liberties
In each of our interests to give up some liberties that restrict the liberties of others (e.g. theft, violence)
In exchange, we empower the State as our agent to punish those of us that fail to uphold the social contract
Politics: rules which we agree are legitimate, that determine an outcome for us all, even if we disagree (or are harmed by) with the outcome
Recall: The State
Max Weber
1864-1920
"[A] State is a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory."
Weber, Max, 1919, Politics as a Vocation
Recall: Madison's Paradox II
- Madison's Paradox: a State strong enough to protect rights is strong enough to violate them at its discretion
Recall: Credible Commitment
Odysseus and the Sirens by John William Waterhouse, Scene from Homer's The Odyssey
Recall: Olson's Roving vs. Stationary Bandits
Recall: State Capacity
Might simply be defined as the State’s ability to do things
In the simplest of early states, the stationary bandit just extracts taxes as ruling elite's revenues
Possibly to fund its armies
In more modern states, taxes used to provide public goods
One strong shorthand for state capacity: ability to raise tax revenue
A Typology of States by Capacity/Development
“Early” States
No monopoly on violence
Hierarchical and unequal
Weak fiscal and legal capacity
Coercive authority(ies)
Personal elite patronage networks
No organizations exist outside of state
“Modern” States
Centralized monopoly on violence within borders
Strong fiscal and legal capacity
Bureaucratic and impartial, rule-based
Competitive access to political power & economic activity
Individuals can create own non-state organizations
Two Models of State Development
Three Orders of Human History
1. Hunter-gatherers “stateless”)
2. Limited-access order (“natural state”)
3. Open-access order
Order I: Hunter-Gatherers
More egalitarian
Rule by consensus or council of elders
Small personal units
Often informal rules
Olson: little incentive to produce or to steal
Order II: Natural States
Limited Access Order (LAO) or “natural state”
Most common form of society for millennia
All societies since Neolithic Revolution of settled agriculture have been natural states until some transitioned in 19th-21st Centuries
Most States (by numbers) today remain natural states!
The Tudors of England
Order III: Open Access Orders
Open Access order or “liberal democracy”
Open competition in both economic and political spheres
Coalitions of multiplicity of groups required to enact national policy
Incumbents and rent-seeking will be opposed and checked by competitors
Rule of law, impartial, impersonal, professional bureaucracy
"The State" survives beyond any one ruler or regime
Patronage I
Patronage: elites with power provide access to political and economic resources to their allies
Entry into politics and the economy is controlled and permitted only to those with connections
People ally with powerful individuals for protection and access
Feudal Europe: lords have duty to protect serfs from invasion
Patronage II
Little/no separation between political, economic, and social spheres
Politics very high-stakes: decisions (or wars) determine who wins and who loses, at everything
Institutions are personal: who is king, lord, bishop matters
- Impossible to have rule of law!
Patronage III
A very clear hierarchy, often immutable
Very unequal society
A person is judged by their status, which is determined by their identity in the hierarchy
- Who they are connected to and who is their patron
Rule by the Clan
The "State" is patrimonial - an elaborate web of personal relationship
An elite group's power to threaten social order comes from their patrimonial relationships
- ability to sway decisions among large group of people
- ability to enforce a boycott, embargo, etc.
- ability to raise an army for rebellion
Strongest connections lie with kin, clan, religious sect, or other ethnic group
- often perceived as a moral obligation
"I am the State"
Louis XIV of France
(1638-1715)
“L’etat c’est moi!”
This is what North, Wallis, and Weingast would call a "mature" natural state
The point is, the State is synonymous with the ruling elite (it has no separate existence)
Multiple Groups Vie for Control
No single person or group rules society
States are weak and unable to project power
Elites may include military specialists, landlords, clergy, traders, etc.
Wealthy and powerful groups can threaten violence, social disorder, or withhold wealth or access
- Threat is often sufficient, fighting is costly
Multiple Groups Vie for Control
There is no territorial monopoly on violence!
- Multiple groups can credibly use or threaten violence
"The State" ≡ dominant coalition of powerful elite groups
Dominant coalition agrees not to fight each other, respect each other's ability to extract rents from society
The Proportionality Principle
Proportionality principle: for a stable political system, rents must be allocated in proportion to groups' capacity for violence
Rational elites will revolt if they believe their relative strength is greater than the rents they are earning
- Other elites need to “buy off” their support or else risk revolt
Dynamics: if distribution of wealth and power changes, the allocation of rents must change!
Power and Personality
Elites are loyal to the king as a person, not as an office!
Loyalty depends on king's ability to distribute loot & rents to elites
“King” or “Warlord” does not control territory, controls vassals based on social networks and bundle of privileges
No formal administration, staff, etc; all private servants to King's household
- The “Office of the Exchequer” was once a trunk of loot under the King's bed
Monarchs are Often Weak Relative to Other Elites I
Monarch is just one ruler with his/her own land
Barons, earls, dukes, etc. have their own realms and sources of power
- nominally loyal to the monarch
- but if unhappy, barons can (and did) revolt against monarchs they didn’t support
“France” in 1477
Monarchs are Often Weak Relative to Other Elites II
"XXIX. NO Freeman shall be taken or imprisoned, or be disseised of his Freehold, or Liberties, or free Customs, or be outlawed, or exiled, or any other wise destroyed; nor will We not pass upon him, nor condemn him, but by lawful judgment of his Peers, or by the Law of the land. We will sell to no man, we will not deny or defer to any man either Justice or Right"
- Magna Carta, 1215
English nobles forcing King John to sign the Magna Carta after defeating him in the First Barons’ War, 1215—1217
Economies in Natural States
Economy is entangled in monopolies, barriers to entry, rent extraction by elites
Often dominated by large landowners, merchant/craft guilds that set their own rules
Entry in markets requires patronage and protection of powerful elite
Regulated for “national security” — powerful groups not getting their cut ⟹ risk of rebellion and violence
Life for the Non-Elite
Non-elites have few rights and protections
Non-property owners, often work as agricultural laborers, tenants that rent out land from landowners
Often coerced labor: bonded labor, slavery, serfdom
Sometimes free laborers, but with no political or economic "rights" or power
Corruption
Is this system “corrupt?”
What would an anti-corruption law achieve?
Important: a successful Natural State wages peace
Elite groups do not disarm! Always must be able to credibly threaten violence against one another!
Weak States Struggle to Project Power
They had locally appointed officials – an agent to collect taxes and a guard to police the community. But laws, especially those relating to inheritance, were widely ignored and direct contact with the central power was extremely limited.
The state was perceived as a dangerous nuisance: its emissaries were soldiers who had to be fed and housed, bailiffs who seized property and lawyers who settled property disputes and took most of the proceeds.
Being French was not a source of personal pride, let alone the basis of a common identity. Before the mid-nineteenth century, few people had seen a map of France and few had heard of Charlemagne and Joan of Arc.
France was effectively a land of foreigners.
Robb, Graham, 2008, The Discovery of France
Their Rule Was Over People, Not Territory
Charlemagne, King of the Franks
(742–814)
Louis XIV, King of France
(1638-1715)
Statebuilding Took Centuries
- Even in 19th century, few “French” citizens spoke French
- Provincial loyalties > national identity
- Second Industrial Revolution (1870-1914): technology allows State to penetrate the isolated countryside:
- judicial systems
- school systems
- army
- railroads/roads
- market access
Power and Professional Bureaucracy I
State capacity and projection of power often requires a formal professional bureaucracy
Max Weber's “ideal types” of bureaucracy:
- Traditional/patrimonial
- rules and power arbitrary (come from ruler)
- hiring/firing/promotion based on personal connection
- Rational and legal
- staffed by professionals
- meritocratic hiring, firing, and internal promotion
- governed by objective legal rules
Power and Professional Bureaucracy II
Puck satirical cartoon of U.S. President Chester Arthur doling out patronage to his cronies
In United States, political offices were appointed according to the "spoils system" throughout 19th century
Pendleton Civil Service Act (1883): requires positions in the federal government to be awarded based on merit, not on political patronage
Natural States Today? III
“The political center in Kabul was not (and has never been) a collection of formal, bureaucratic institutions working in concert to penetrate the unwieldy periphery of wayward warlords, defiant mullahs, and rebellious tribal chieftains.
“It was, instead, a political center operating largely in the neopatrimonial image, and, much like many of its predecessors, forging links to the countryside through partnerships with power holders who could sometimes expand the scope of the state by engaging it.”
Mukhopadhyay, Dipali, (2014), Warlords, Strongman Governors and the State in Afghanistan
Natural States Today? IV
Afghan Governors meeting:
- Jamaluddin Badar, Nuristan governor (prosecuted for corruption)
- Lutfullah Mashal, Langham governor (writer & poet)
- Gul Agha Sherzai, Nangarhar governor (major anti-Taliban warlord and US ally, suspected of opium trafficking)
Natural States Today? IV
Hamid Karzai
President of Afghanistan (2001-2014)
"..the mere articulation of a democratic, centralized state would prove inadequate to shift the center of gravity in this state formation project from the provinces to Kabul."
Mukhopadhyay, Dipali, (2014), Warlords, Strongman Governors and the State in Afghanistan
NWW's Typology of Natural States: Fragile
Fragile Natural State: State can barely sustain itself
Constant internal and/or external violence
- Civil war or foreign invasion(s)
Unable to support any organization but the State itself
Small changes upset coalition and cause infighting and repositioning
All politics is high stakes - misstep risks death
NWW's Typology of Natural States: Basic
Basic Natural State: can support some elite organizations, but only within the State
Has public institutions that institutionalize the State: succession, tax rates, common beliefs
Organizations can only endure if connected to State, still personal and not perpetual
NWW's Typology of Natural States: Mature
Mature Natural State: has near-monopoly on use of violence
Has public and private institutions and organizations among elite, not extensions of the State
Rule of law for elite organizations
May be able to sustain perpetually lived impersonal organizations separate from individuals and State
The Transition
How can we get from natural states that benefit the elite to open access orders (that might harm elite?)
It must be in the interest of the elite to reform
But how??? (A BIG question for later!)
