Bangladesh is going through the latest round of seemingly interminable political clash. The current round is about the forced disappearance of a popular, ‘next generation’ leader of the opposition BNP. But make no mistake, if it wasn’t about Ilias Ali, we would have seen confrontation over something else.
Indeed, the lead up to the next general election, due in late 2013, is likely to resemble the one scheduled for January 2007, except, like bad Hollywood sequels, this one promises to be bigger and louder. Exactly how the Ilias Ali issue plays out I have no idea. Nor do I want to predict how the eventual election crisis will evolve.
Mushtaq Khan doesn’t quite do the same kind of quantitative, empirical macroeconomics that I sometime dabble in. He is more of a political economy type. And whereas if I were serious about my ideas (on say, dynasties), I’d be writing down fairly tight algebra, yielding a regression line (with pretty high error margins — this isn’t physics!), Khan is more of a literary type who tells his story using words. In the paper under discussion, he gets to the really interesting stuff — his ‘model’ (or what would be a model if he wrote down the maths) of democracy in capitalist and pre-capitalist countries — towards the end of the paper. Let me brutally summarise/simplify his argument, and draw out some implications for Bangladesh.
His basic assumption is that politics is about redistribution of a society’s available resources. In an advanced capitalist country, the resources up for redistribution is fairly closely connected to the health of the capitalist economy. This limits the scope for politics — no matter what happens, the capitalist order needs to be preserved because all the political players understand that if capitalism falls, there won’t be much to redistribute. It also means that politics becomes either about taxes/subsidies/regulations, or about ‘cultural issues’ that can serve as a smokescreen for changes to taxes/subsidies/regulations.
Now, I am not sure whether this model of politics holds true in all advanced capitalist countries all the time. Perhaps one large country in North America can be used as a counterexample? Or perhaps not. Perhaps American politics is also about redistribution, and working class redneck Americans are just dupes who vote for the rich guys. I am sure the interested American reader can find hundreds of articles on the subject. For now, let’s accept Khan’s premise.
Given that premise, democratic politics provide for a feedback loop where politicians compete to produce the best economic outcomes possible for their constituents. In general, this means that parties try to govern well, and change policies to benefit their members.
What happens in the developing world?
Here, the formal capitalist sector is a small part of the economy. In Bangladesh, for example, perhaps well over half the people are not in the formal, tax paying / regulated sectors. In such an economy, political disputes over taxes / subsidies / regulations make little sense.
Okay, so far so good. I am not sure I follow Khan’s story thereafter.
Remember, politics in developing countries, as it is in advanced capitalist countries, is about redistribution. If you are a politician, and you can’t tax/subsidise/regulate your way to give your followers ‘stuff’, what do you do? According to Khan, you grab the stuff, and give it your followers.
What political factions seek is not the construction of a coalition that can mobilize votes to allow a transparent renegotiation of taxes and subsidies, but a coalition that can mobilize organizational power at the lowest cost to the faction leader, to achieve a redistribution of assets and incomes using a combination of legal, quasi-legal, or even illegal methods. The organizational power of the faction is then used either directly to capture state power or to force an accommodation in the form of payoffs from the factions who are currently controlling the state. The faction’s access to economic resources either in the form of revenue or in the power to grab valuable economic resources legally or otherwise is then used to benefit faction members all the way down the pyramid, though the payoffs may be very unequal for different levels of the faction.
While factions may use generalized arguments based on class, region, or interest in its public discourse, no-one in society is under any illusion that the faction is out to look after itself at the least cost in terms of paying off voters and others who need to be mobilized occasionally. When factions do not deliver on these generalized aims, broader social constituencies may grumble but they do not really expect anyone to deliver on the publicly stated general social goals. However, if factions cannot deliver acceptable payoffs to faction members, the leaders are likely to get into serious trouble. Factions rarely fear a general public revolt, given that no other political organization can deliver what the public wants. What factions actually fear is that their sub-factions may be bribed away by other factions and that the coalition may crumble. Indeed, this often happens and accounts for the frequent changes of government in developing countries that usually lead to no discernible changes in government policies, but do lead to different sets of individuals making money in turn. Given the opportunistic nature of factional membership and the shifting offers and counter-offers made by different factional leaders, it is possible to explain the extreme volatility in the factional politics of developing countries in a context where government policies are often remarkably constant.
As I said above, methodologically, it’s not the kind of economics I am used to where a testable hypothesis comes out of the maths. So I am not sure how good a descriptive model Khan’s is. But arguably, it does describe Bangladesh pretty well.
The question then is, what are the model’s predictive, and prescriptive qualities? I suspect if this model is written down properly, it would have multiple equilibria, with advanced capitalist countries being the ‘good equilibrium’ and developing countries being the ‘bad’ one. The question then is, how does a country like Bangladesh transition to the good equilibrium?
One possible channel might be through economic transition, which is exogenous to the model. Suppose the capitalist sector expanded in Bangladesh to reach a critical mass. At such point, would a politician say “a-ha, I don’t need these grubby sub-factions, I can do better by promising and delivering ‘reform’”?
Of course, this isn’t a satisfactory account at all. Where would this ‘capitalist transformation’ come from? Resources from abroad (aid, or remittance) isn’t enough — any significant aid or remittance flow would be just grabbed up by the existing factions. One actually needs to an important capitalist sector for there to be functioning democracy — that’s Khan’s implicit message. But there is nothing in Khan’s story about the dynamics that produces the capitalist sector.
The corollary is that if we take Khan seriously, we have a very bleak conclusion — we are doomed to continue the cycle. Bleak this may be. And obviously I hope Khan’s analysis is wrong.
But is it?