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

In nation A, the leader has $100 to make fifty people happy. If he hands out the money to his supporters then each gets $2. The leader in nation B has fewer people to satisfy. If he handed out all his money, then each of his five supporters would get $20. Now, suppose the leader in B agrees to change to the anti-Soviet policy in exchange for cash. The essential questions are how much does B need and how much is A willing to pay to make this deal work?

The leader of B would only agree to trade policy for aid if it made his coalition better off. The switch in policy is equivalent to a $2 loss for each of his supporters (and each of the inconsequential remaining 95 people in B who are not influential), because they don’t like the policy. So the leader of B would never agree to the anti-Soviet stance unless the “aid” money he gets for doing so is larger than this loss. Since he has 5 supporters to keep happy, and each supporter suffers a $2 loss, he needs at least $10 in aid to offset the political cost of turning anti-Soviet. That is, an extra $2 for each of his 5 essential backers is the minimum required to change B’s policy to anti-Soviet.

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.