The March of Folly Part 2: Political Leaders do not have the same interests as the people they rule, By Publius
The Politics
In a prior column I discussed the explanation of why political leaders so often pursue policies that damage the economies of the nations they rule. I argued that, at first glance, such behaviour is puzzling, since economic progress delivers substantial gains in political power. However, such gains do not always benefit the incumbent ruler.
Perhaps the most obvious case is that of a powerful ruler who nevertheless does not expect to be in power for very much longer. An elected leader who expects to lose the next election, an old and childless absolute monarch, or a warlord losing to a rival warlord are all examples of this kind of leader. Such rulers not only do not benefit from the longer-term gains arising from economic success, they may also be unwilling to let their successors benefit from such gains. Such leaders may be quite willing to embark on economically destructive policies in order to deny their successors resources.
Economists tend to describe such players as having very high discount rates, placing a low value to themselves on any gains which arrive beyond their short-term horizons. Even so, the constituencies of these leaders, their political parties or supporting coalitions, may have much longer horizons, and exercise conservative restraints from behind the scenes. The damage inflicted on economies by these types of leaders may therefore be much worse when they have been in power for a long time, enabling them to cement control of their supporters, effectively silencing opposition.
While obviously answering the question, such leaders are in fact unusual. It is rare for a ruler to have built up enough power to be able to embark on wholesale economic destruction without also having a very good chance of surviving in power for a long time. Vladimir Putin, for example, is a leader who appears to be securely tenured for the rest of his life in the absolute rule of Russia. Why should he not wish to benefit from longer-term growth and a much bigger Russian economy?
This leads us to the second problem with political incumbents: Their supporters do not necessarily amount to the wider nation. Many strong political leaders rely on a power base which amounts to no more than a powerful minority of their people – a good example are the Assad family of Syria, who benefit from the support of the powerful Alawite minority in that country, but who do not enjoy the support of the majority. Such rulers may wish to deprive their rivals of resources, and so may even fear the creation of a stronger economy not controlled by their supporters. This syndrome has been a perennial problem in former European colonies, with their arbitrary straight-line borders often mixing dozens of disparate tribal groupings. Zimbabwe, Indonesia, Sierra Leone and Pakistan all spring to mind.
Perhaps even more damaging in the long term are leaders who enjoy the loyal support of a narrow majority of citizens but endure unwavering hostility from a large minority. For such leaders, the overwhelming priority is to ensure that their supporting coalition remains a majority, and they will do whatever it takes to keep the hostile minority weak and divided. Erdogan’s Turkey is a classic case. With his program to empower devout Turkish Muslims, mainly the rural poor and less educated of the Turks, he doesn’t care if the more secular middle class lose everything: They don’t vote for him. In consequence, Turkey, once one of Europe’s most promising emerging neighbours, a NATO member with theoretical prospects to join the EU, a powerful country of 84 million people, is on a pathway to becoming an economic basket case. In fact several commentators have remarked on how utterly divided Turkey’s secular, well-off and educated are even more than usually isolated from their devout Muslim cousins. The two groups barely acknowledge each other, even though they may be of the same family. Seldom can formal education be such a door-closer.
All of this benefits Erdogan in the short to medium term. He can blame foreigners for his domestic economic woes, appeal to conservative Muslim Turks to keep the faith, and pursue economically destructive policies which weaken his secular middle-class opponents. In the longer term, Turkey has gone from a promising destination for inward investment to the brink of disaster. But Erdogan is not alone. Even provincial leaders in Western democracies behave in a similar way.
A classic study of a politician who pursued economically destructive policies for his own political benefit was Mayor Curley of Boston, Massachusetts, around the time of World War 1. Boston had benefited from significant migration of settlers from Ireland in the previous decades fleeing the effects of incompetent and uncaring British rule. Understandably, these new Irish Bostonians were hostile to the British and by extension to the entrenched, and wealthy, WASP majority in Boston. Curley did everything he could, over four terms in office, to drive out WASP voters, jacking up his Irish-American majority, even encouraging WASP adult men to volunteer to enlist in the British Army fighting the Germans. He actually welcomed destructive economic outcomes, because these mostly harmed his Anglo-Saxon opponents while leaving his poor Irish voters comparatively unaffected.
Mayor Curley was merely a well-documented case. Far too many American local politicians have pursued agendas like Curley’s at times in the twentieth century in cities such as New Orleans, Chicago and New York. Usually the ending of their policies came from outside the system in the form of a crisis or external economic shock. Once entrenched, these rulers are hard to shift. (An excellent exception is the ousting of Jacob Zuma in South Africa.)
Perhaps most striking of all, although further away in time, is the observation in a classic study by De Long and Shleifer (1993) that princes had only about a 25% chance of passing their throne to their own grandchild in pre-industrial Europe. Such incentives made them very wary of independent wealth creators such as towns (no upside for them, only potential competitors), and tended to induce them to spend most of their revenues on aggressive wars. In such a lineage, today’s Putin seems very easy to recognise.
One of the crucial differences between the modern world and past times is that even moderately successful people are internationally mobile in far greater numbers than was ever the case before. Instead of staying and (perhaps passively) opposing terrible domestic governments, Russians, Turks, Venezuelans, Argentines, and many others can exercise their new technological freedom simply to move to a better country. In other words, the factors that make political strongmen want to pursue economically damaging policies to keep themselves in power are likely to have become stronger, not weaker, in the past three decades.
So where does that leave Putin? For now popular with ordinary Russians (as the independent Levada Center polling attests to); but, as the economic winter bites, he may find it much harder to keep the support of his majority. And how do such harmful leaders get entrenched in the first place? In a later column I’ll propose an answer.