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What’s in it for us then? – A book review

ECONOMIC ORIGINS OF DICTATORSHIP AND DEMOCRACY: Economic and Political Origins
by Daron Acemoglu and James A. Robinson
Cambridge University Press £25, 540 pages

The birth of British democracy was protracted, as the ruling classes slowly allowed the voting franchise to expand. In 1832 the first reform act increased the electorate from about 8 per cent of the population to 15 per cent; several further reform acts continued the process, and it was completed with near-universal suffrage in 1928. While the concessions were gradual, designed to stave off reform rather than hasten democracy, they all moved in the same direction.

Argentine democracy, by contrast, flickered on and off throughout the 20th century. Something resembling universal male suffrage was introduced in 1916 but was rendered irrelevant by coups in 1930, 1943, 1955, 1966 and 1976.

Non-democracies also differ from each other. Singapore’s dictatorship has delivered such riches that popular opposition is half-hearted; whereas South Africa’s apartheid regime was tempted into ever-greater acts of repression.

With these four cases, Daron Acemoglu of the Massachusetts Institute of Technology and James Robinson of Harvard begin an ambitious attempt to explain the different paths that democracies and non-democracies can take when viewed in retrospect: steady progress as in Britain; oscillation in Argentina; stable, high-performance dictatorship in Singapore or the repressive apartheid regime. What they produce is an abstract model that will infuriate historians but deserves their attention.

The authors are distinguished economists: Acemoglu recently won the John Bates Clark medal, a decoration rarer than the Nobel prize in economics (it’s awarded every two years, and never to multiple recipients). Acemoglu’s immediate predecessor was Steven Levitt, co-author of the best-selling book Freakonomics. Anyone expecting Acemoglu to produce something similarly crowd-pleasing will be disappointed. Acemoglu teamed up not with a professional writer but with a long-standing academic collaborator, and produced a book that will be impenetrable to the layman. Nevertheless, I expect Economic Origins of Dictatorship and Democracy to be highly influential.

Acemoglu and Robinson model the struggle for democracy as a piece of game theory – a strategic contest between a small number of players. Social classes are collapsed into individuals: the basic model is a two-player struggle between the “elite” player and the “citizens” player. The players are rational, foresighted, take each other’s responses into account and are motivated by economic interest rather than ideology.

Game theory is an ostentatiously spartan tool for analysing mass historical movements. Intra-group conflicts and distinctions between different types of democracy are swept aside.

Acemoglu and Robinson know they are simplifying aggressively: they often use the phrase “Occam’s Razor”, meaning that by shaving away superficial historical details, they will expose the underlying structure of the emergence of democracy. I think it’s worth suspending disbelief to see where the model goes – but historians and political scientists may be less patient with its reductionism.

Acemoglu and Robinson say the fundamental problem they expose is how rebellious citizens turn temporary opportunity into permanent advantage. The citizens have revolted, leaving the fields, taking the elites and their standing armies by surprise, and seizing the moment: how can they use their fleeting power to secure lasting concessions for the future? Faced with an imminent revolution, the elites will offer to change their ways. But since a revolutionary movement can’t be sustained forever, how can the citizens be sure the elites will deliver once they have picked up their ploughshares once again?

Viewed from the other side, how can the elites offer credible concessions to a temporary insurrection? The initial temptation is not to bother. For example, in 1905, mutiny on the Battleship Potemkin helped simmering discontent in Russia to boil over. Tsar Nicholas II published the October Manifesto, granting freedom of speech and association, guaranteeing no imprisonment without trial, and establishing an elected legislative body, the Duma. The revolutionary threat cooled, and Nicholas II promptly changed his mind, disbanding the Duma in less than three months.

Twelve years later, the revolutionaries were less interested in compromise.

Acemoglu and Robinson’s formulation reminded me of an old game theorist’s story, the kidnapper’s dilemma. The hostage is taken; the kidnappers have temporary power. But how to swap the hostage for the ransom, or for safe passage? A Woody Allen routine once captured the inherent difficulty of the negotiations: “The FBI surround the house. ‘Throw the kid out,’ they say, ‘give us your guns, and come out with your hands up.’ The kidnappers say, ‘We’ll throw the kid out, but let us keep our guns, and get to our car.’ The FBI say, ‘Throw the kid out, we’ll let you get to your car, but give us your guns.’ The kidnappers say, ‘We’ll throw the kid out, but let us keep our guns – we don’t have to get to our car.’ The FBI say, ‘Keep the kid.’”

Acemoglu and Robinson argue that for the elites as well as the FBI, the answer to this dilemma is to give up the kid. That is, the elites can irrevocably hand over some power to the masses by creating democratic institutions. By doing so they dissipate the threat of revolution and keep some power for themselves, too. The concession is more credible than offering a change in policy (such as bigger welfare payments or lower taxes) because policies are easily changed but democratic institutions are not easily disbanded. Because the concession is more credible, it is also more effective: by making such concessions the elites avoid revolution.

That, then, is the story of how democracy emerges: it’s a way of committing to reforms when the likely alternative is the guillotine or the firing squad. But what about those cases when democracy does not emerge, or does not last? Or the revolutionary forces ignore concessions from the elites and seize power in a civil war, perhaps destroying much of what they sought to control in the process. Or some general decides that a coup is in order after democracy appears to have developed. Or the elites decide that they would rather repress rebellions with ever-greater violence than concede anything.

Acemoglu and Robinson argue that these scenarios tend to hinge on predictable factors. For example, the elites will concede democracy more readily if they have less reason to fear severely redistributive taxes. Land is especially easy to tax, so landed gentry will oppose democracy more violently than industrialists would. Other important determinants include the level of inequality, the ease with which civil society organises itself, and the frequency of economic crises. In practice, this is a model that may prove helpful in explaining long-term patterns of emerging democracies; it will not serve as a handbook for today’s nation builders.

The thesis is compellingly inventive. It has to be: Acemoglu and Robinson do not back it up with empirical work. Their case studies are sparsely distributed in the book, and designed only to illustrate its argument. This is a surprise, because both writers, with Simon Johnson of MIT, have done breathtakingly inventive empirical studies of economics and political institutions.

The use of game theory is not wholly satisfying, either. Social or economic classes do not act in unison. Acemoglu and Robinson recognise this – indeed, the fact that citizens cannot organise a rebellion on a whim is the pivotal point of the argument. But the flexible assumption that a social class can sometimes be treated as a single decision maker, and sometimes cannot, is a worrying weak link in the chain of reasoning.

Despite these imperfections and their highly technical models, Acemoglu and Robinson will deservedly win an audience. Students of economics will study this text as much for its methodical exposition and academic proofs as for its conclusions. They will find the effort well worthwhile.

21st of January, 2006Other Writing • Comments off