Алистер Смит - The Dictator's Handbook - Why Bad Behavior is Almost Always Good Politics

Those seeking to regulate corporate compensation and put businesses on the straight and narrow path of enhancing shareholder welfare would do well to examine closely the rules by which corporations are ruled. First-blush fixes, such as are often proposed by government officials, play well with their political constituencies but also violate the fundamental logic of governance and so are likely to undermine good corporate governance. Consider the problem of corporate fraud. We have amassed considerable evidence that securities fraud is more likely to be committed by firms with financial problems and a large coalition than by firms with comparable financial problems and a small coalition. After all, executives who depend on a relatively large coalition are particularly vulnerable to being replaced when corporate performance is poor. Being at greater risk of deposition, larger coalition executives try to hide poor corporate performance through fraudulent reporting.20 What is more, one of the best early-warning indicators of corporate fraud is that senior management is paid less—not more—than one would expect given the firm’s reported performance!

The same issues hold when examining governments. Politicians can introduce all sorts of legislation and administrations to seek out and prosecute corruption. This looks good to the voters. But such measures are either a façade behind which it is business as usual, or they are designed as a weapon to be used against political opponents. Neither a smokescreen nor a witch hunt will root out sleaze. But make political leaders accountable to more people and politics becomes a competition for good ideas, not bribes and corruption. Of course leaders don’t want to be more accountable. It reduces their tenure in office and gives them less discretion. That’s why we must next turn to the difficult problem of how to get leaders to agree to such actions.

7

Foreign Aid

A DEMOCRAT’S LOT IS NOT A HAPPY ONE. SHE MUST continually try to find better policy solutions to reward her large number of supporters. And yet her hands are tied. She has little discretion in her policy choices. Her pet projects must be subjugated to the wishes of her large body of supporters, and she can steal virtually nothing for herself. She is like a selfless angel, appearing to place the concerns of her people over her own interests. That is, until she turns her attention overseas.

When it comes to foreign policy, a democrat is prone to behave more like a devil than an angel. In fact, in targeting her policies at foreign governments she is likely to be little better than the tyrannical leaders who rule those very foreign regimes.

In this chapter we explore five questions about foreign aid. Who gives aid to whom? How much do they give? Why do they give it? What are the political and economic consequences of aid? And what do the answers to these questions teach us about nation building?

For any who were starting to think of democrats as the good guys, this will serve as a wakeup call. Most of us would like to believe that foreign aid is about helping impoverished people. The United States Agency for International Development (USAID), the primary organization for allocating US aid, advertises itself as “extending a helping hand to those people overseas struggling to make a better life, recover from a disaster or striving to live in a free and democratic country. It is this caring that stands as a hallmark of the United States around the world.” Making the world a better place for its inhabitants is a laudable goal for donors. Yet the people in recipient nations often develop a hatred for the donor. And recipient governments (and donors too) often have different views about what the money should be for. As we will see, democrats are constrained by their big coalition to do the right thing at home. However, these very domestic constraints can lead them to exploit the peoples of other nations almost without mercy.

The Political Logic of Aid

Heart-wrenching images of starving children are a surefire way to stimulate aid donations. Since the technology to store grain has been known since the time of the pharaohs, we cannot help but wonder why the children of North Africa remain vulnerable to famine. A possible explanation lies in the observations of Ryszard Kapuscinski. Writing about the court of the Ethiopian emperor Haile Selassie, Kapuscinski describes its response to efforts by aid agencies to assist millions of Ethiopians affected by drought and famine in 1972:1

Suddenly reports came in that those overseas benefactors who had taken upon themselves the trouble of feeding our ever-insatiable people had rebelled and were suspending shipments because our Finance Minister, Mr. Yelma Deresa, wanting to enrich the Imperial treasury, had ordered the benefactors to pay high customs fees on the aid. “You want to help?” the minister asked. “Please do, but you must pay.” And they said, “What do you mean, pay? We give help! And we’re supposed to pay?” “Yes,” says the minister, “those are the regulations. Do you want to help in such a way that our Empire gains nothing by it?”

The antics of the Ethiopian government should perhaps come as little surprise. Autocrats need money to pay their coalition. Haile Selassie, although temporarily displaced by Italy’s invasion in the 1930s, held the throne from 1930 until overcome by decrepitude in 1974. As a long-term, successful autocrat, Selassie knew not to put the needs of the people above the wants of his essential supporters. To continue with Kapuscinski’s description:

First of all, death from hunger had existed in our Empire for hundreds of years, an everyday, natural thing, and it never occurred to anyone to make any noise about it. Drought would come and the earth would dry up, the cattle would drop dead, the peasants would starve. Ordinary, in accordance with the laws of nature and the eternal order of things. Since this was eternal and normal, none of the dignitaries would dare to bother His Most Exalted Highness with the news that in such and such a province a given person had died of hunger.... So how were we to know that there was unusual hunger up north?

Selassie fed his supporters first and himself second; the starving masses had to wait their turn, which might never come. His callous disregard for the suffering of the people is chilling, at least until you compare it to his successor. Mengistu Haile Mariam led the Derg military regime that followed Selassie’s reign. He carried out policies that exacerbated drought in the Northern Provinces of Tigray and Wollo in the mid 1980s.2 With civil war raging in these provinces and a two-year drought, he engaged in forced collectivization. Millions were forced into collective farms and hundreds of thousands forced out of the province entirely. Mass starvation resulted. Estimates of the death toll are between 300,000 and 1 million people. From the Derg’s perspective the famine seriously weakened the rebels, a good thing as Mengistu saw it. Many of us remember Live Aid, a series of records and concerts organized by Bob Geldof to raise disaster relief. Unfortunately, as well intentioned as these efforts were, much of the aid fell under the influence of the government.3 For instance, trucks meant for delivering aid were requisitioned to forcibly move people into collective farms all around the country. Perhaps 100,000 people died in these relocations.

There is no shortage of similar instances, where aid is misappropriated and misdirected by the recipient governments. To take just one prominent example, the United States gave Pakistan $6.6 billion in military aid to combat the Taliban between 2001 and 2008. Only $500 million is estimated to have ever reached the army.4 Nevertheless, aid continues to flow into Pakistani coffers. Given the stated goals of aid agencies, once it becomes clear that money is being stolen, one would expect them to stop giving. Alas, they do not.