Download Democracy, Development, and the International Political

Democracy, Development, and
the International Political
Economy
Tyson Roberts
EITM Presentation
July 18, 2007
Empirical phenomenon to explain: Why has the modal joint
political-economic strategy shifted from autocratic-statist to
democratic-capitalist? Why have some deviated from this pattern?
1970-1980
Authoritarian
Democratic
Statist
Capitalist
51%
27%
(Togo, Benin, Ghana)
14%
8%
Authoritarian
27%
43%
(Benin)
(Togo, Ghana)
Democratic
6%
1980-1990
(Ghana for 2 years)
27%
1990-2005
Authoritarian
16%
24%
Democratic
11%
49%
(Togo)
(Ghana, Benin)
N=66 for 1970-1980 and 72 for the other two periods. Low- and Middle-Income countries
with populations over 1M are included. Former Soviet Republics are excluded.
The General Argument
• Capital scarce countries policies and institutions
are affected by changes in the IPE
• Sensitivity to external changes depends on the
existing political institution and the domestic
distribution of power and preferences
• Decisions regarding political institutions interact
with decisions regarding the investment strategy
– Important to look at the joint strategy
The game:
Players
• Government (G)
• Political power pivot player (P): can overthrow G
with force. Collective action costs > 0.
• Median voter (M): can overthrow G electorally.
Collective action costs > 0.
• Foreign investors of all stripes are non-strategic
players whose preferences are reflected in the
payoffs.
The game:
Order of play
0.
1.
2.
3.
4.
External shock: level of foreign financial inflows,
conditional on government’s joint strategy, shifts
Government chooses a joint strategy - political regime
type and economic policy (may or may not be a change
from SQ)
The power pivot player chooses to acquiesce or mobilize
against the government
The median voter chooses to support or oppose the
government
The game ends and payoffs are consumed
Complete information - single-shot game
The game:
Outcomes
 P and M support the G: peaceful government success (no costs
incurred)
 P and M oppose the G: a popular coup (costs for P)
 If G chooses/retains democracy,
 and P acquiesces and M opposes G : electoral overthrow (costs for M)
 and P mobilizes and M supports G: failed coup (costs for P & M)
 If G chooses autocracy,
 and P acquiesces and M opposes G,
 and the autocracy is ongoing: suppressed rebellion (costs for P & M)
 and the SQ is democracy: electorally defeated regime change (costs for M)
 and P mobilizes against and M supports G: violent coup (costs for P & M)
Utility is function of policy and
regime type
Worker power pivot:
AS>DS>DC>AC
Landowner power pivot:
AC>DC>DS>AS
Urban median voter:
DS>DC>AS>AC
Rural median voter:
DC>DS>AC>AS
Government: AS>AC>DS>DC
U(G) = 0 if overthrown
Utility is also determined by the level of finance
inflows available conditional on regime type and
economic policy
UM
DS
DC
AS
AC
Financial inflows
under different conditions
An external shock in the international political
economy will affect the utility of each joint strategy.
For example, suppose all flows start as equally funded
DS
UM
DC
AS
AC
DS
DC
AS
AC
DS
DC
AS
AC
Supply of financial inflows
under different conditions
An external shock in the international political
economy will affect the utility of each joint strategy.
And then capitalist economies receive more inflows relative to statist economies.
The order of preferences may then change for each player.
DS
UM
DC
AS
DC’
AC
AC’
DS
AS
Marginal increase in flows from  S  C
DS
AS
DC’
AC’
Supply of financial inflows
under different conditions
An external shock may lead a government to
change its strategy in order to survive and
maximize utility
• U(G) for democracy > 0 if
– Utility gain for M from electoral overthrow < cm <
utility loss from autocratic takeover, OR
– Utility gain for M and P from mobilizing < c
• U(G) > 0 for an ongoing autocracy if
– Utility gain for P from coup < cp
• U(G) > 0 for a shift to autocracy if
– Utility gain for M and P from mobilizing < c
Comparative statics will predict how, conditional on
preferences, the SQ regime type, and mobilization costs, an
external shock will affect government decisions
Cm
High
UG(AS)<UG(AC)
AS
AC
DC
Low
Low
SQ: Aut; M: DC>DS>AC>AS; P: AS>DS>AS>AC
Marginal increase in flows from  S  C
Other predictions from the model
• Change in IPE -> change in stability->
change -> change in preferences for FDI re:
political institutions
• Preference for capital openness in laborabundant democracies is time-dependent
Operationalization
• Relative availability of foreign funds:
– Indifferent sources: low interest rates, high commodity prices (esp.
oil), Cold War
– Preference for capitalist: Total volume of FDI to LDCs, SAP
period (post-1982)
– Preference for democracy: Post-Cold War
– Affiliation with donors (UN voting record)
• Costs of mobilization for M: Experience with democracy,
education rates, low fractionalization
• Costs of mobilization for P: Experience with coups,
general strikes
• Democracy: Przeworski measure
• Economic policy: A challenge
Operationalization
• Indicators of statist policy:
– Communist (but what about China?)
– Increase in public enterprise as share of GDP
(Gwartney et al)
– High capital controls
– High risk of expropriation
– Nationalization of foreign assets
Stylized distribution of players:
A potential operationalization of player
preferences
Labor abundant, Land scarce
Low
urbanization
High
urbanization
Labor scarce, land abundant
Description: Land owners heavily outnumbered
by low-wage laborers
Description: Farmers with few if any high-wage
laborers
Power pivot: Organized rural
worker, prefers statist policies
Median voter: Non-union worker,
prefers capitalist policies (perhaps
due to influence from landowners)
Power pivot: Large landowner,
prefers capitalist policies
Median voter: Small landowner,
prefers capitalist policies
Description: Lots of workers in the city with low
wages; landowners wealthy
Description: Large plots of land with high-wage
workers; high-wage workers in urban areas
Power pivot: Organized labor,
prefers statist policies
Median voter: Urban labor,
prefers statist policies
Power pivot: Landowners, prefer
capitalist policies
Median voter: Urban worker,
prefers statist policies
Another potential operationalization
of player preferences
• Indicators of statist pivot player:
– Communist
– Single party dictatorship
– Military regime led by junior officer
• Indicators of capitalist pivot player
– Military regime led by senior officer
Conclusion
• R&R Rocks