Wednesday, 9 March 2011

Toppling dictators: The role of natural resources

2011 is not being a good year for Arab dictators. After 24 years of rule, Mr Zine El Abidine Ben Ali, Prime Minister and President of Tunisia was ousted from power. In Egypt, Mr Hosni Mubarak was forced to step down after having ruled the country for three decades. And now in Lybia, Mr Muammar Al-Qaddafi is using extreme violence to avoid being overthrown by masses of discontented citizens and factions of the army after holding an iron grip on the country for more than 40 years.

This has been a series of remarkable revolutions. Driven by the desire of people in these countries to end corruption, tyranny and to improve their economic conditions. These three rulers used their position to accumulate enormous amounts of wealth and to benefit their inner circle of relatives and friends by "privatising" national companies. For instance, Mubarak's family wealth was estimated to be between US $40 and $70 billion. Of course, one big question from an economist perspective is why these kleptocratic rulers, with their bad economic policies and corruption could stayed in power for so long. And, especially in the case of Qaddafi, why are they so difficult to overthrow.

The paper by Daron Acemoglu, Jim Robinson and Thierry Verdier entitled "Kleptocracy and Divide-and-Rule: A Model of Personal Rule" (Journal of the European Economic Association, 2004) addressed this problem. These authors developed a model aimed at answering this question and focused mostly on the cases of Mobutu Sese Seko in Congo (1965-1997) and Rafael Trujillo in the Dominican Republic (1930-1961), but it is possible to apply their ideas to these Arab autocrats. The main point of the paper is that a kleptocrat (from Greek, a ruler who steals) can stay in power if he is able to buy the support from the different groups that conform their country. These groups could oust the ruler if they were united but they fail to do so because the kleptocrat "bribes" pivotal groups and make them content, mostly by taxing and mistreating other social groups. That is the Divide and Rule strategy.

Critical to this strategy is the budget constraint of the ruler. The amount of income that it is at his disposal and that allows him to buy these groups. That is why Arab revolutions were sparked by the severely deteriorated economic conditions in these countries, poverty and unemployment. That is why these rulers and the rulers in other Arab countries such as Saudi Arabia or Morocco have used subsidies on food or massive housing programs to avoid revolts. Critical to this strategy is also foreign aid and natural resources. They can provide kleptocrats with more wealth they can then distribute across social groups to buy their support. This can help to explain the position of Qaddafi, who has been able to stay in power because of the revenues from the massive oil and natural gas reserves that Lybia enjoys, as well as the revenues derived from contracts with other nations on the supply of these resources

That is what is missing in Acemoglu, Robinson and Verdier's analysis. That in order to stay in power, autocratic rulers not only need to buy the support of pivotal groups within their countries but also of pivotal governments abroad.

1 comment:

  1. That's the list of 10 world's largest landowners from a recent Daily Mail's article, quite a few autocrats there (and Nicole Kidman:))

    1. The Queen

    2. King Abdullah of Saudi Arabia

    3. The Pope

    4. King Mohammed of Morocco

    5. King Bhumibhol of Thailand

    6. Sultan Qaboos of Oman

    7. King Gyanendra of Nepal

    8. Kidman Holdings

    9. King Abdullah of Jordan

    10. AA Company of Brisbane