Obama’s superior foreign-policy acumen has been part and parcel of
the Beltway narrative. “I killed Osama and I Got Us Out of Iraq” were
supposed to offset the awful economy. Pundits were sure that
youth-lived-in-Indonesia and college-traveler-to-Pakistan Obama could
easily dispatch provincial “businessman” Romney in the final debate – a
fitting climax to the President’s inevitable reelection. As Obama
whispered to Putin’s envoy: “Tell Vladimir to wait until the election.
Then I will be flexible,” he could not even imagine a loss to such a
weak opponent.
The Benghazi tragedy of 9/11 shook the foundations of this narrative.
For weeks, the administration kept changing its story, as if in a
panic. On the eve of the final debate, foreign policy has moved to the
front burner to decide an election that was supposed to be about the
economy. The rough-and-tumble of the last debate will swell an audience
waiting for blood.
Obama entered the first two debates with weak cards, but he was
supposed to contest the final debate from a position of strength. All
that has changed. Romney can produce a devastating laundry list of
Obama’s foreign policy defeats to an audience that is actually
listening. And Obama will not have Candy Crowley, unless Bob Shieffer
wants to join her in the tank.
go to forbes.com
Showing posts with label Mubarak. Show all posts
Showing posts with label Mubarak. Show all posts
Sunday, October 21, 2012
Thursday, March 1, 2012
Kleptocrats, Oligarchs, and Billionaire Entrepreneurs
(Note: I posted this back in 2011. Someone stole my domain name back then so I am reposting it now. It seems relevant given Russia's March 4 presidential election)
Personal wealth is created in one of two ways. On the positive side, it arises as a result of innovation, hard work, brilliant insights, or even luck. Entrepreneurs create enormous wealth when they have a better idea (Henry Ford’s assembly line), discover and develop new products (Microsoft Windows or Google’s search engine), see a new business model (Sam Walton), or are simply at the right place at the right time. Often, it is a combination of innovation and timing, something economists call network externalities.
A second and negative route to personal wealth is through political connections, lobbying to obtain benefits from the state, violence to remove competitors, or outright theft of public resources. Those who earn their fortunes the first way create jobs, raise productivity, and contribute to economic welfare. Those who use the second route are “rent seekers” who subtract from growth and welfare for their own benefit.
Bill Gates, Sam Walton, and Sergei Brin represent wealth earned through entrepreneurship. Their Microsoft, Walmart, and Google made them not only among the richest persons in the world. They have created new technologies, hundreds of thousands of jobs, new business models, and have revolutionized they way we gather and process information. Carlos Slim, the world’s wealthiest man, made his fortune by monopolizing Mexico’s telecommunications market (presumably with help from government regulators). Poor Mexicans have been denied the wide range of choice of telephone services that others have and pay for his wealth in the form of the highest telephone rates on the continent.
The most egregious rent seeking occurs in autocratic and dictatorial regimes in which wealth accumulation is not constrained by an electorate, corporate transparency, or a free press. Such authoritarian regimes breed kleptocrats –those who accumulate wealth for themselves through their official positions. Oligarchs are those who use their access to those in power to accumulate wealth. Both kleptocrats and oligarchs transfer assets from society or from others to themselves; they do not create new products or additional jobs. They reduce economic welfare by crowding out real entrepreneurs, who refrain from economic activity knowing the fruits of their labor will be stolen. Kleptocracy and oligarchy are determined by the quality of society’s institutions and rule of law. The better the institutions, the more limited kleptocracy and oligarchy.
I present here some data on the world’s kleptocrats, oligarchs, and top entrepreneurs. The wealth of kleptocrats cannot be measured with any degree of precision because, as heads of state or government officials, they wish to conceal it. However, the figures capture rough orders of magnitude. Oligarchs, not being government heads or officials, are less prone to conceal their wealth. They may even feel a sense of pride when they see their names listed in Forbes.
I begin with a ranking of kleptocrat heads of state by absolute wealth. (I convert the wealth of past kleptocrats into current dollars). Four of the top six rule (or ruled) countries with rich natural resources (Putin, Nazarbaev, Aliev, Mobutu), such as energy or diamonds. The real “oil curse” is therefore the tendency of the rulers of mineral-rich countries to steal the national wealth. Other kleptocrats controlled poor countries lacking access to rich natural resources. The recently deposed Mubarak (whose personal wealth is listed at the maximum estimate) is in the middle range of notable kleptocrats. Of the eleven countries represented, four (Philippines, Indonesia, Nicaragua, and Peru) have subsequently democratized, although Nicaragua’s democracy may be shaky. Democracy strikes at the root causes of kleptocracy by making the rulers accountable to an electorate and investigative journalists.
Heads of state who steal from less populous countries (Serbia, Haiti, and Nicaragua) accumulate less wealth ceteris paribus than those in populous economies (Russia, Indonesia and Nigeria). The grazing ground for kleptocrats is less spacious in poor countries than in rich countries. The percentage of the kleptocrat’s wealth to GDP is a measure of the kleptocrat-head-of-state’s s burden on society. This table shows that Mobutu, at the end of his reign in Congo, had accumulated wealth equal to more than forty percent of the nation’s meager output. Duvalier had accumulated an estimated ten percent – a figure comparable to the Central Asian oil magnates of Kazakhstan and Azerbaijan. Marcos and Suharto are in the three to four percent range, whereas Putin and Milosevic are in the one to two percent range.
It should be noted that these figures show the economic burden imposed only by the head of state. Heads of state have their courts, which share in the plunder of resources. The court’s assets are not calculable, but we imagine that, if they could be included as well, the kleptocratic burden would be multiplied many times over.
The next table shows the cumulated wealth of the ten wealthiest persons in industrialized democracies (the United States, the European Union, and South Korea), in two former Soviet states (Russia and Ukraine), Mexico and in China. These figures omit the wealth of the head of state.
The table shows that the top ten have more wealth in the large and wealthy United States and European Union (between 170 and 270 billion). Relatively poor Mexico and Russia both have nearly one hundred billion. (There are as many billionaires listed for “poor” Russia as for the “rich” United States – a remarkable testimony to rent seeking in Putin’s Russia.) The top ten in South Korea and Ukraine have the same amount of wealth even though South Korea is five times richer. China lies between Mexico and Ukraine although it has the world’s second largest economy.
The US top 10 list is comprised largely of entrepreneurs whose ideas and business methods changed whole industries (Gates, Buffet, Walton, and Brin). The Russian top 10 list is made up of Kremlin-favored oligarchs who were awarded extremely valuable assets that had previously belonged to the state. The South Korean list is populated by industrialists who formed conglomerate businesses that compete in world markets, while the Ukrainian list is made up of those who received valuable state assets during privatization. China’s list is of industrialist owners of successful Chinese companies (most partially owned with the state), who could not have been successful without the support of the Chinese state.
The next table shows the wealth of the top ten as a percent of GDP. In those countries (US, EU, South Korea) where the top wealth holders play primarily entrepreneurial roles, their share is between one and two percent. Viewed in the light of their contribution to the economy, their wealth reward seems rather modest. In Ukraine and Russia, the share of GDP of the top ten is between four and six percent – a rather substantial return to those making a negative or questionable contributions to output and welfare. The high Mexican share is due to the “Carlos Slim Effect.” He alone accounts for most of the high Mexican figure.
China is an outlier. The wealth of its richest persons is small relative to the size of the Chinese economy. What this suggests is that there are forces at play, other than the usual constraints imposed by democracy and a free press, that have limited rapacious rent seeking on the part of connected Chinese businessmen . At this juncture, we do not know enough about the internal workings of large Chinese businesses to define the entrepreneurial roles played by their chief executives. These constraints on rent seeking in China may be one of the many (still unexplored) reasons for China’s rapid growth.
The basic message of this analysis is that, in countries with good institutions, generous wealth accumulation is a reward for positive contributions to the economy. These are rewards for innovation, radically new ideas, persistence, and risk taking. In societies with good institutions, the rewards are relatively modest as a percent of total economic activity. These rewards are constrained by competition, social morays, and the rule of law. In countries with poor institution, wealth is accumulated either by the head of state or by oligarch cronies by transferring assets from others or from society itself. Such transfers not only do not increase national wealth; they reduce it insofar as real entrepreneurs cannot prosper in such an environment.
We are often reminded of the greed of those at the top. Little attention is devoted to the contributions of those entrepreneurs whose ideas and methods have contributed to economic growth. Walmart, Microsoft and Google currently employ 2.1 million, 93,000, and 22,000 respectively. The indirect employment they create through suppliers, vendors and other stakeholders is a multiple of these figures. Their annual payrolls equal a large fraction of the accumulated wealth of their founders.
Warnings about the growing concentration of wealth at the very top must be considered in proportion to the size of economic activity, whose increase is in fact positively affected by those at the top. Today, the top ten account for less than two percent of GDP in the United States. At the turn of the twentieth century, the top ten accounted for more than five percent! In a ranking of the 100 top wealth holders from the founding of the United States to the present (as a percent of GDP), only five living persons are listed, and Gates and Buffet are ranked only numbers 31 and 39 respectively.
Data sources: This data is drawn from Forbes rankings of the world’s richest people, from estimates of Transparency International, and independent estimates of the wealth of Vladimir Putin and informal estimates of the wealth of Nazarbaev of Kazakhstan and the Aliev family of Azerbaijan. The wealth of other kleptocrats is given as of the date of their removal from power converted into 2010 US dollars. The top five Ukrainian oligarchs are taken from http://ukrainianguide.com/5-wealthiest-ukrainian-oligarchs/2/ Only five Ukrainian oligarchs made the billionaire list; so I assume there are five more slightly below one billion. Mubarak’s wealth is taken from an ABC News report of February 11, 2011 citing U.S. intelligence sources. These sources dismiss the high figures cited in the press and place Mubarak’s wealth between $1 and $5 billion. I take the upper figure to avoid underestimation. The wealthiest 100 Americans throughout history is taken from http://www.getrichslowly.org/blog/2006/07/29/the-wealthy-100-a-ranking-of-the-richest-americans-past-and-present/
Personal wealth is created in one of two ways. On the positive side, it arises as a result of innovation, hard work, brilliant insights, or even luck. Entrepreneurs create enormous wealth when they have a better idea (Henry Ford’s assembly line), discover and develop new products (Microsoft Windows or Google’s search engine), see a new business model (Sam Walton), or are simply at the right place at the right time. Often, it is a combination of innovation and timing, something economists call network externalities.
A second and negative route to personal wealth is through political connections, lobbying to obtain benefits from the state, violence to remove competitors, or outright theft of public resources. Those who earn their fortunes the first way create jobs, raise productivity, and contribute to economic welfare. Those who use the second route are “rent seekers” who subtract from growth and welfare for their own benefit.
Bill Gates, Sam Walton, and Sergei Brin represent wealth earned through entrepreneurship. Their Microsoft, Walmart, and Google made them not only among the richest persons in the world. They have created new technologies, hundreds of thousands of jobs, new business models, and have revolutionized they way we gather and process information. Carlos Slim, the world’s wealthiest man, made his fortune by monopolizing Mexico’s telecommunications market (presumably with help from government regulators). Poor Mexicans have been denied the wide range of choice of telephone services that others have and pay for his wealth in the form of the highest telephone rates on the continent.
The most egregious rent seeking occurs in autocratic and dictatorial regimes in which wealth accumulation is not constrained by an electorate, corporate transparency, or a free press. Such authoritarian regimes breed kleptocrats –those who accumulate wealth for themselves through their official positions. Oligarchs are those who use their access to those in power to accumulate wealth. Both kleptocrats and oligarchs transfer assets from society or from others to themselves; they do not create new products or additional jobs. They reduce economic welfare by crowding out real entrepreneurs, who refrain from economic activity knowing the fruits of their labor will be stolen. Kleptocracy and oligarchy are determined by the quality of society’s institutions and rule of law. The better the institutions, the more limited kleptocracy and oligarchy.
I present here some data on the world’s kleptocrats, oligarchs, and top entrepreneurs. The wealth of kleptocrats cannot be measured with any degree of precision because, as heads of state or government officials, they wish to conceal it. However, the figures capture rough orders of magnitude. Oligarchs, not being government heads or officials, are less prone to conceal their wealth. They may even feel a sense of pride when they see their names listed in Forbes.
I begin with a ranking of kleptocrat heads of state by absolute wealth. (I convert the wealth of past kleptocrats into current dollars). Four of the top six rule (or ruled) countries with rich natural resources (Putin, Nazarbaev, Aliev, Mobutu), such as energy or diamonds. The real “oil curse” is therefore the tendency of the rulers of mineral-rich countries to steal the national wealth. Other kleptocrats controlled poor countries lacking access to rich natural resources. The recently deposed Mubarak (whose personal wealth is listed at the maximum estimate) is in the middle range of notable kleptocrats. Of the eleven countries represented, four (Philippines, Indonesia, Nicaragua, and Peru) have subsequently democratized, although Nicaragua’s democracy may be shaky. Democracy strikes at the root causes of kleptocracy by making the rulers accountable to an electorate and investigative journalists.
| Ruler(ranked top to bottom) | Year | Wealth (bl. 2010 $) | ||
| Putin (Russia) | 2011 | 40 | ||
| Suharto (Indonesia) | 1998 | 25 | ||
| Nazarbaev Kazakhstan) | 2011 | 20 | ||
| Marcos (Philippines) | 1986 | 7.5 | ||
| Aliev (Azerbaijan) | 2011 | 10 | ||
| Mobutu (Congo, Zaire) | 1997 | 5 | ||
| Mubarak (Egypt) | 2011 | 5 | ||
| Abacha (Nigeria) | 1998 | 3.5 | ||
| Milosevich (Serbia) | 2000 | 1 | ||
| Duvalier (Haiti) | 1986 | 0.55 | ||
| Fujimori (Peru) | 2000 | 0.6 | ||
| Alemain (Nicaragua) | 2002 | 0.1 | ||
| Estrada (Philippines) | 2001 | 0.08 |
Heads of state who steal from less populous countries (Serbia, Haiti, and Nicaragua) accumulate less wealth ceteris paribus than those in populous economies (Russia, Indonesia and Nigeria). The grazing ground for kleptocrats is less spacious in poor countries than in rich countries. The percentage of the kleptocrat’s wealth to GDP is a measure of the kleptocrat-head-of-state’s s burden on society. This table shows that Mobutu, at the end of his reign in Congo, had accumulated wealth equal to more than forty percent of the nation’s meager output. Duvalier had accumulated an estimated ten percent – a figure comparable to the Central Asian oil magnates of Kazakhstan and Azerbaijan. Marcos and Suharto are in the three to four percent range, whereas Putin and Milosevic are in the one to two percent range.
| Ranked top to bottom | Year | Percent of GDP | ||
| Mobutu (Congo, Zaire) | 1997 | 0.4202 | ||
| Aliev (Azerbaijan) | 2011 | 0.1111 | ||
| Nazarbaev (Kazakhstan) | 2011 | 0.1036 | ||
| Duvalier (Haiti) | 1986 | 0.1000 | ||
| Marcos (Philippines) | 1986 | 0.0429 | ||
| Suharto (Indonesia) | 1998 | 0.0331 | ||
| Putin (Russia) | 2011 | 0.0180 | ||
| Milosevich (Serbia) | 2000 | 0.0165 | ||
| Abacha (Nigeria) | 1998 | 0.0127 | ||
| Mubarak (Egypt) | 2011 | 0.0100 | ||
| Alemain (Nicaragua) | 2002 | 0.0073 | ||
| Fujimori (Peru) | 2000 | 0.0029 | ||
| Estrada (Philippines) | 2001 | 0.0003 |
It should be noted that these figures show the economic burden imposed only by the head of state. Heads of state have their courts, which share in the plunder of resources. The court’s assets are not calculable, but we imagine that, if they could be included as well, the kleptocratic burden would be multiplied many times over.
The next table shows the cumulated wealth of the ten wealthiest persons in industrialized democracies (the United States, the European Union, and South Korea), in two former Soviet states (Russia and Ukraine), Mexico and in China. These figures omit the wealth of the head of state.
The table shows that the top ten have more wealth in the large and wealthy United States and European Union (between 170 and 270 billion). Relatively poor Mexico and Russia both have nearly one hundred billion. (There are as many billionaires listed for “poor” Russia as for the “rich” United States – a remarkable testimony to rent seeking in Putin’s Russia.) The top ten in South Korea and Ukraine have the same amount of wealth even though South Korea is five times richer. China lies between Mexico and Ukraine although it has the world’s second largest economy.
| Ranked top to bottom | Wealth of Top 10 (bln $) | ||
| US | 264.8 | ||
| EU (without UK) | 171.5 | ||
| Russia | 97.0 | ||
| Mexico | 90.3 | ||
| China | 42.3 | ||
| South Korea | 21.4 | ||
| Ukraine | 17.7 |
The US top 10 list is comprised largely of entrepreneurs whose ideas and business methods changed whole industries (Gates, Buffet, Walton, and Brin). The Russian top 10 list is made up of Kremlin-favored oligarchs who were awarded extremely valuable assets that had previously belonged to the state. The South Korean list is populated by industrialists who formed conglomerate businesses that compete in world markets, while the Ukrainian list is made up of those who received valuable state assets during privatization. China’s list is of industrialist owners of successful Chinese companies (most partially owned with the state), who could not have been successful without the support of the Chinese state.
The next table shows the wealth of the top ten as a percent of GDP. In those countries (US, EU, South Korea) where the top wealth holders play primarily entrepreneurial roles, their share is between one and two percent. Viewed in the light of their contribution to the economy, their wealth reward seems rather modest. In Ukraine and Russia, the share of GDP of the top ten is between four and six percent – a rather substantial return to those making a negative or questionable contributions to output and welfare. The high Mexican share is due to the “Carlos Slim Effect.” He alone accounts for most of the high Mexican figure.
| Top 10 Persons | Wealth of top 10 as percent of GDP | ||
| Ukraine | 0.0586 | ||
| Mexico | 0.0583 | ||
| Russia | 0.0437 | ||
| US | 0.0184 | ||
| South Korea | 0.0147 | ||
| EU (without UK) | 0.0113 | ||
| China | 0.0042 |
China is an outlier. The wealth of its richest persons is small relative to the size of the Chinese economy. What this suggests is that there are forces at play, other than the usual constraints imposed by democracy and a free press, that have limited rapacious rent seeking on the part of connected Chinese businessmen . At this juncture, we do not know enough about the internal workings of large Chinese businesses to define the entrepreneurial roles played by their chief executives. These constraints on rent seeking in China may be one of the many (still unexplored) reasons for China’s rapid growth.
The basic message of this analysis is that, in countries with good institutions, generous wealth accumulation is a reward for positive contributions to the economy. These are rewards for innovation, radically new ideas, persistence, and risk taking. In societies with good institutions, the rewards are relatively modest as a percent of total economic activity. These rewards are constrained by competition, social morays, and the rule of law. In countries with poor institution, wealth is accumulated either by the head of state or by oligarch cronies by transferring assets from others or from society itself. Such transfers not only do not increase national wealth; they reduce it insofar as real entrepreneurs cannot prosper in such an environment.
We are often reminded of the greed of those at the top. Little attention is devoted to the contributions of those entrepreneurs whose ideas and methods have contributed to economic growth. Walmart, Microsoft and Google currently employ 2.1 million, 93,000, and 22,000 respectively. The indirect employment they create through suppliers, vendors and other stakeholders is a multiple of these figures. Their annual payrolls equal a large fraction of the accumulated wealth of their founders.
Warnings about the growing concentration of wealth at the very top must be considered in proportion to the size of economic activity, whose increase is in fact positively affected by those at the top. Today, the top ten account for less than two percent of GDP in the United States. At the turn of the twentieth century, the top ten accounted for more than five percent! In a ranking of the 100 top wealth holders from the founding of the United States to the present (as a percent of GDP), only five living persons are listed, and Gates and Buffet are ranked only numbers 31 and 39 respectively.
Data sources: This data is drawn from Forbes rankings of the world’s richest people, from estimates of Transparency International, and independent estimates of the wealth of Vladimir Putin and informal estimates of the wealth of Nazarbaev of Kazakhstan and the Aliev family of Azerbaijan. The wealth of other kleptocrats is given as of the date of their removal from power converted into 2010 US dollars. The top five Ukrainian oligarchs are taken from http://ukrainianguide.com/5-wealthiest-ukrainian-oligarchs/2/ Only five Ukrainian oligarchs made the billionaire list; so I assume there are five more slightly below one billion. Mubarak’s wealth is taken from an ABC News report of February 11, 2011 citing U.S. intelligence sources. These sources dismiss the high figures cited in the press and place Mubarak’s wealth between $1 and $5 billion. I take the upper figure to avoid underestimation. The wealthiest 100 Americans throughout history is taken from http://www.getrichslowly.org/blog/2006/07/29/the-wealthy-100-a-ranking-of-the-richest-americans-past-and-present/
Thursday, August 11, 2011
If the UN Wants to be Useful: Build Villas for Dictators
Egypt is prosecuting Mubarak in a hospital bed inside a cage. He faces the death penalty. An international court has indicted Kaddafi. If his Libyan enemies get their hands on him first, he will be killed. Pinochet was hounded to the end of his life despite a grant of immunity after he turned over power following a democratic election.
What signals do these three cases send out? They tell dictators to fight on, to the bitter end if necessary. In the meantime, NATO warplanes must be deployed, national treasure lost, and thousands of innocent civilians killed. In many cases, the dictator will prevail and continue in office. Nothing has been gained. The costs have been high.
If the UN wanted to make itself useful, it should have a protection program for dictators who negotiate to leave office. The compound should be heavily guarded, have all the latest luxuries, and the staff must be attentive and deferential. A deserted island might do the trick or a scenic down-on-its-luck country may want the business.
Those countries that want to extract revenge from fallen dictators would find this a tough proposition to accept. They are already rid of their dictator. Why should they help other countries get rid of theirs? But from a cost-benefit perspective, the UN-sponsored retirement community makes a lot of sense. This is one case where we need an “international community” to persuade reluctant members to do what is best.
I can imagine such a dictator-retirement community. Robert Mugabe takes a leisurely stroll, chatting with Mohammar Kaddafi and Bahsar Assad as Raul and Fidel Castro nap on chaise lounges at the pool. Their mistresses would be welcome as well. What a sight!
Wednesday, June 1, 2011
My Arab April Spring Scorecard
Losses:
Syria’s Assad remains in power despite (thanks to?) brutal suppression. The modest sanctions imposed on his regime will make no difference. Despite Assad’s close alliance with Iran, the political assassinations in Lebanon, and support of Hezbollah, the strange argument still prevails that we would be worse off without the “potential reformer” Assad.
Bad Mistakes:
The Egyptian military’s decision to try Mubarak and the international court indictment of Kaddafi send the message that dictators should hold on to power until their last breath. There is no such thing as a graceful exit. Yemen’s President Saleh got the message and is now refusing to resign. Kaddafi and sons have received the message as well.
Unlikely Wins:
Egypt’s military understands that real democracy can cost it its control of Egypt’s economy and wealth. It will not allow liberal democratic forces time to form real political parties. Egypt’s military will remain in control perhaps in cahoots with the Muslim Brotherhood. They will increasingly suppress true democratic reformers in subtle but effective ways.
Possible Wins:
Even uncoordinated and weak support from NATO is preventing a defeat of rebel forces by Kaddafi loyalists. As hostilities drag on, a missile is likely to get Kaddafi. Until that happens, there will be a protracted civil war in Libya. If Kaddafi is not killed, NATO countries will lose the will to fight and Kaddafi survives.
Syria’s Assad remains in power despite (thanks to?) brutal suppression. The modest sanctions imposed on his regime will make no difference. Despite Assad’s close alliance with Iran, the political assassinations in Lebanon, and support of Hezbollah, the strange argument still prevails that we would be worse off without the “potential reformer” Assad.
Bad Mistakes:
The Egyptian military’s decision to try Mubarak and the international court indictment of Kaddafi send the message that dictators should hold on to power until their last breath. There is no such thing as a graceful exit. Yemen’s President Saleh got the message and is now refusing to resign. Kaddafi and sons have received the message as well.
Unlikely Wins:
Egypt’s military understands that real democracy can cost it its control of Egypt’s economy and wealth. It will not allow liberal democratic forces time to form real political parties. Egypt’s military will remain in control perhaps in cahoots with the Muslim Brotherhood. They will increasingly suppress true democratic reformers in subtle but effective ways.
Possible Wins:
Even uncoordinated and weak support from NATO is preventing a defeat of rebel forces by Kaddafi loyalists. As hostilities drag on, a missile is likely to get Kaddafi. Until that happens, there will be a protracted civil war in Libya. If Kaddafi is not killed, NATO countries will lose the will to fight and Kaddafi survives.
Friday, March 11, 2011
Let’s Face It. Gaddafi Has Won
As the Western powers dither and deliberate, Gaddafi has won. He will stay in power even if we establish no-fly zones or impose sanctions with sharp teeth. Short of actual invasion, Gaddafi will stay in power and will likely pass his power on to his sons when he dies. The Western press will continue to hope as a civil war continues, but its outcome is preordained.
There is a prominent historical pattern which explains why Gaddafi has won. There are virtually no cases of unconstrained dictators being overthrown. An unconstrained dictator is a Stalin, a Kim Il Sung, a Saddam, and a Gaddafi who is willing to take any measure, no matter how brutal or repulsive, to stay in power.
The state security organizations of unconstrained dictators reach even down into neighborhoods and report directly to them; prison or worse is the price even modest dissidents pay; they shoot first, not particularly worrying whether their victim is a threat or not. They make the price of resistance of any kind so high that only a brave few are willing to take the risk. Any potential rival is a dead man.
These brutal measures have served unconstrained dictators well. Stalin in his three decades of rule faced not a single assassination attempt. (There were two attempts on Lenin’s life in the early days of Bolshevik power. He had not yet had time to build his state security network). Father and son, Kim Jong Il and Kim Il Sung, ruled North Korea for a half century despite incredible economic failure and deprivation of their people too downtrodden to resist.
The recent events in the Middle East have taught us a new and bitter lesson: Even mass popular uprisings are not enough to topple an unconstrained dictator. We had hoped that popular uprisings would eventually topple the Iranian mullahs, Syria’s Assad, and Kim Il Sung. The Libyan experience proves that they can survive almost an entire nation rising up against them. They do so by killing as many people as necessary and by placing a high price on any form of resistance.
Popular uprisings are, however, sufficient to topple constrained dictators, as Mubarak’s experience in Egypt shows. Earlier the constrained Shah fell to a popular uprising and even the East German dictatorship was unwilling to use force against demonstrators in Leipzig.
The few cases of overthrow of unconstrained dictator take the form of internal coups and invasions. The Romanian dictator Ceausescu was shot dead by his inner circle after being booed by a crowd. Beria, Stalin’s head of state security, was executed by his Kremlin colleagues, when he tried to succeed the deceased Stalin. Hitler committed suicide before Soviet troops reached his bunker.
What signal does past and current history send to constrained dictators? What message does it send to Chavez in Venezuela, Ortega in Nicaragua, Hamas in Lebanon, or Assad in Syria? The message is that only the most vicious and brutal dictators survive. There is no payoff from restraint. “Reforms” will do them no good and are to the contrary quite dangerous. They will heed Machiavelli’s advice that the “prince must learn to be less good..
A Libyan civil war will likely follow the pattern of the Russian civil war. In this civil war, there were almost a half million executions, as the Red Army and the Cheka carried out Lenin’s Red Terror. The White forces were divided and more timid (except the Cossacks, who matched the Reds in brutality). The interventionist forces used only half measures and pulled out with their tales between their legs. Tribal enmity will likely keep a Libyan war going for a while but the outcome is not in question.
If history shows that palace coups are the most likely way to topple an unconstrained dictator, should US policy aim at promoting an insider conspiracy among Gaddafi's lieutenants? I am sure that Gaddafi has organized his state security to prevent just that. The odds of an outsider successfully organizing a palace coup are about zero. Even if a palace coup worked, the result would likely be a new leader slightly less bad than Gaddafi.
There is a prominent historical pattern which explains why Gaddafi has won. There are virtually no cases of unconstrained dictators being overthrown. An unconstrained dictator is a Stalin, a Kim Il Sung, a Saddam, and a Gaddafi who is willing to take any measure, no matter how brutal or repulsive, to stay in power.
The state security organizations of unconstrained dictators reach even down into neighborhoods and report directly to them; prison or worse is the price even modest dissidents pay; they shoot first, not particularly worrying whether their victim is a threat or not. They make the price of resistance of any kind so high that only a brave few are willing to take the risk. Any potential rival is a dead man.
These brutal measures have served unconstrained dictators well. Stalin in his three decades of rule faced not a single assassination attempt. (There were two attempts on Lenin’s life in the early days of Bolshevik power. He had not yet had time to build his state security network). Father and son, Kim Jong Il and Kim Il Sung, ruled North Korea for a half century despite incredible economic failure and deprivation of their people too downtrodden to resist.
The recent events in the Middle East have taught us a new and bitter lesson: Even mass popular uprisings are not enough to topple an unconstrained dictator. We had hoped that popular uprisings would eventually topple the Iranian mullahs, Syria’s Assad, and Kim Il Sung. The Libyan experience proves that they can survive almost an entire nation rising up against them. They do so by killing as many people as necessary and by placing a high price on any form of resistance.
Popular uprisings are, however, sufficient to topple constrained dictators, as Mubarak’s experience in Egypt shows. Earlier the constrained Shah fell to a popular uprising and even the East German dictatorship was unwilling to use force against demonstrators in Leipzig.
The few cases of overthrow of unconstrained dictator take the form of internal coups and invasions. The Romanian dictator Ceausescu was shot dead by his inner circle after being booed by a crowd. Beria, Stalin’s head of state security, was executed by his Kremlin colleagues, when he tried to succeed the deceased Stalin. Hitler committed suicide before Soviet troops reached his bunker.
What signal does past and current history send to constrained dictators? What message does it send to Chavez in Venezuela, Ortega in Nicaragua, Hamas in Lebanon, or Assad in Syria? The message is that only the most vicious and brutal dictators survive. There is no payoff from restraint. “Reforms” will do them no good and are to the contrary quite dangerous. They will heed Machiavelli’s advice that the “prince must learn to be less good..
A Libyan civil war will likely follow the pattern of the Russian civil war. In this civil war, there were almost a half million executions, as the Red Army and the Cheka carried out Lenin’s Red Terror. The White forces were divided and more timid (except the Cossacks, who matched the Reds in brutality). The interventionist forces used only half measures and pulled out with their tales between their legs. Tribal enmity will likely keep a Libyan war going for a while but the outcome is not in question.
If history shows that palace coups are the most likely way to topple an unconstrained dictator, should US policy aim at promoting an insider conspiracy among Gaddafi's lieutenants? I am sure that Gaddafi has organized his state security to prevent just that. The odds of an outsider successfully organizing a palace coup are about zero. Even if a palace coup worked, the result would likely be a new leader slightly less bad than Gaddafi.
Monday, February 28, 2011
Kaddafi and His Ilk Are Not Crazy: Are Dictators Predictable?
As Kaddafi machine guns demonstrators, we are told these are acts of an insane man. We must be careful what we say or do because the criminally insane are erratic and unpredictable. Using such logic, the U.S. was among the last to call for his ouster. Examples of insanity are his public rants, the ordering of the bombing of Pan Am 103 (for which he thought he would never be caught), the ludicrous philosophizing in his Green book, the pitching of his tent in New Jersey, and his refusal to ride elevators. Other dictators are pictured in the same way: Iran’s ruling mullahs are religious fanatics; Stalin was a psychotic paranoid.
Insanity is the easiest explanation of dictatorial atrocities for Western minds to fathom. That “criminally insane” dictators follow a common pattern, transcending time and place, argues however that they share a common goal and use the same instruments and practices to achieve it. Just as we can explain business behavior through the profit motive, so can we understand and even predict dictatorial behavior by analyzing how they generate and use political power. If their actions consistently promote the paramount goal of power, their actions are completely “rational,” no matter how morally repugnant or obscene. Rational behavior can be analyzed; insane behavior cannot.
None of these dictators was offered power on a silver platter. They “had to earn it” as a famous brokerage house commercial used to say. Kaddafi gained power as a young military officer by skillfully outmaneuvering rivals and manipulating one tribe against another. Iran’s ruling mullahs won a fierce and bloody power struggle in which a large number of the ruling elite were assassinated. Stalin was the victor in one of the bloodiest succession struggles in history against better know and seemingly superior rivals. Kaddafi, Iran’s ruling mullahs, and Stalin won because they were better at accumulating and using power than their rivals. These were not accidental victories. They held on to power by skillfully playing one rival against the other and using ideology, propaganda, patronage, and religion to their advantage.
There is a growing theoretical literature that provides systematic insights into the behavior of dictators. It assumes, quite unobjectionably, that dictators aim to accumulate sufficient political power to hold on to power. They “produce” power by combining loyalty and repression (the carrot and the stick). They keep the secret police or army in check by appointing relatives or incriminated associates as its head and by removing intermediate links between operatives and the dictator. Some results are non-intuitive, such as the greater stability of dictatorships (due to the incumbent’s immense advantages) and the fact that a rational dictator will kill innocent people (a practice often used as proof of insanity).
Democratic rulers must offer platforms that please the median voter, thus the scramble to the middle in elections. Dictators can offer their platform and then “eliminate” (by jail, execution, disenfranchisement, or exile) those who disagree with it.
Public demonstrations reflect general disaffection with the dictator’s “platform.” The dictator can respond by “reforms” that move his platform closer to the public’s, by ramping up repression, or by a combination of the two. In general, public demonstrations threaten to weaken the dictator’s power below the threshold necessary to stay in power. The dictator must do something to prevent this from happening.
The response of “constrained” (Mubarak) and “unconstrained” (Iran and Kaddafi) rulers has been strikingly different in the Middle East. The former have unsuccessfully used limited repression, concessions and material rewards in a vain effort to boost their political power. The morally-unconstrained have used as much repression as necessary while offering targeted material incentives (such as increased army pay and according to recent reports handing out cash). This strategy will likely work in Iran but fail in Libya.
For unconstrained dictators such as Kaddafi, there are eventually diminishing returns to repression. At some point, more and more segments of the population understand that they themselves are at risk and withdraw their loyalty. As the loyalty of the neutral or even loyal population collapses, the regime falls below the threshold necessary to stay in power and the dictator is overthrown. This is Kaddafi’s likely impending fate.
Notes: Research conducted in the Hoover Institution Soviet State and Party Archives over the past decade has aimed at applying the theory of dictatorship to the Stalin period. For those interested in our results, see: Paul Gregory, Terror by Quota (Yale –Hoover, 2009), Paul Gregory and Norman Naimark (eds.), The Lost Politburo Transcripts (Yale-Hoover, 2008), Paul Gregory and Valery Lazarev eds., The Economics of Forced Labor: The Soviet Gulag (Hoover, 2003); and Eugenia Belova and Valery Lazarev, Funding Loyalty (Yale-Hoover, forthcoming). The theory of dictatorship has been developed, among others, by Ronald Wintrobe, Bruce Bueno de la Mesquita, James Robinson and Daron Ademoglu.
Insanity is the easiest explanation of dictatorial atrocities for Western minds to fathom. That “criminally insane” dictators follow a common pattern, transcending time and place, argues however that they share a common goal and use the same instruments and practices to achieve it. Just as we can explain business behavior through the profit motive, so can we understand and even predict dictatorial behavior by analyzing how they generate and use political power. If their actions consistently promote the paramount goal of power, their actions are completely “rational,” no matter how morally repugnant or obscene. Rational behavior can be analyzed; insane behavior cannot.
None of these dictators was offered power on a silver platter. They “had to earn it” as a famous brokerage house commercial used to say. Kaddafi gained power as a young military officer by skillfully outmaneuvering rivals and manipulating one tribe against another. Iran’s ruling mullahs won a fierce and bloody power struggle in which a large number of the ruling elite were assassinated. Stalin was the victor in one of the bloodiest succession struggles in history against better know and seemingly superior rivals. Kaddafi, Iran’s ruling mullahs, and Stalin won because they were better at accumulating and using power than their rivals. These were not accidental victories. They held on to power by skillfully playing one rival against the other and using ideology, propaganda, patronage, and religion to their advantage.
There is a growing theoretical literature that provides systematic insights into the behavior of dictators. It assumes, quite unobjectionably, that dictators aim to accumulate sufficient political power to hold on to power. They “produce” power by combining loyalty and repression (the carrot and the stick). They keep the secret police or army in check by appointing relatives or incriminated associates as its head and by removing intermediate links between operatives and the dictator. Some results are non-intuitive, such as the greater stability of dictatorships (due to the incumbent’s immense advantages) and the fact that a rational dictator will kill innocent people (a practice often used as proof of insanity).
Democratic rulers must offer platforms that please the median voter, thus the scramble to the middle in elections. Dictators can offer their platform and then “eliminate” (by jail, execution, disenfranchisement, or exile) those who disagree with it.
Public demonstrations reflect general disaffection with the dictator’s “platform.” The dictator can respond by “reforms” that move his platform closer to the public’s, by ramping up repression, or by a combination of the two. In general, public demonstrations threaten to weaken the dictator’s power below the threshold necessary to stay in power. The dictator must do something to prevent this from happening.
The response of “constrained” (Mubarak) and “unconstrained” (Iran and Kaddafi) rulers has been strikingly different in the Middle East. The former have unsuccessfully used limited repression, concessions and material rewards in a vain effort to boost their political power. The morally-unconstrained have used as much repression as necessary while offering targeted material incentives (such as increased army pay and according to recent reports handing out cash). This strategy will likely work in Iran but fail in Libya.
For unconstrained dictators such as Kaddafi, there are eventually diminishing returns to repression. At some point, more and more segments of the population understand that they themselves are at risk and withdraw their loyalty. As the loyalty of the neutral or even loyal population collapses, the regime falls below the threshold necessary to stay in power and the dictator is overthrown. This is Kaddafi’s likely impending fate.
Notes: Research conducted in the Hoover Institution Soviet State and Party Archives over the past decade has aimed at applying the theory of dictatorship to the Stalin period. For those interested in our results, see: Paul Gregory, Terror by Quota (Yale –Hoover, 2009), Paul Gregory and Norman Naimark (eds.), The Lost Politburo Transcripts (Yale-Hoover, 2008), Paul Gregory and Valery Lazarev eds., The Economics of Forced Labor: The Soviet Gulag (Hoover, 2003); and Eugenia Belova and Valery Lazarev, Funding Loyalty (Yale-Hoover, forthcoming). The theory of dictatorship has been developed, among others, by Ronald Wintrobe, Bruce Bueno de la Mesquita, James Robinson and Daron Ademoglu.
Sunday, February 20, 2011
Hayek’s Gloomy Prognosis for Egypt
F.A. Hayek’s most important insight is that we cannot have political freedom without economic freedom. Hayek’s inexorable Road to Serfdom, from which it is difficult if not impossible to return, describes a number of today’s troubled countries, and it likely portends the future of post-Mubarak Egypt. Those caught up in the euphoria of democratic street demonstrations must confront the reality that the long-run outcome is likely to be bad.
Take Russia and Iran as possible role models for Egypt. Despite their huge differences (a KGB state versus an Islamic theocracy), they share a common and sinister pattern: A revolution occurs (the collapse of the Soviet Union, the Iranian revolution); a nominal democracy is established; the democracy is hijacked by the ruling elite; the ruling elite (Kremlin-favored oligarchs, the Revolutionary Guard) gains control of the commanding heights of the economy; the ruling elite viciously blocks democracy and liberalization as mortal threats to their vested interests. Anyone who stands in their way is dealt with harshly as corrupt or traitorous.
Egypt is poised to follow this same path. Its private economy is weak. Some thirty five percent of Egyptians work for the state. Ninety percent of cotton spinning and sixty percent of fabric manufacture is in the hands of the state. The poor Egyptian public receives its food through state ration coupons as it did 3,000 years ago. Only ten percent of property rights are secure.
Egypt is currently a democracy in name only; the goal of its idealistic young “tweeter-generation” demonstrators is to make it a real democracy with real elections. Egypt has thrown out Mubarak and will surely punish the corruption of Mubarak, his family, and associates. The country is ruled by the military, who will oversee the transition to something that will be called “democracy” no matter what the outcome.
Herein lies the rub: Egypt’s commanding heights were under the shared control of Mubarak and associates and the military. His removal places a vast amount of Egyptian wealth up for grabs. Mubarak’s share may go to “society” or it may be gobbled up by the military, giving the military even more incentive to avoid the voter scrutiny and transparency of true democracy.
The truth of Egypt’s military’s economic clout is just coming out: The ruling military council is a strong advocate of state controls and a staunch opponent of economic liberalization. The military owns day care centers and beach resorts, makes television sets, jeeps, washing machines, furniture, olive oil and bottled water. Estimates of the military’s share of economic output range from ten to thirty percent. It enjoys huge advantages over private enterprises. Military enterprises pay no taxes, use conscripted soldiers, buy public land on favorable terms and have no obligation to disclose their activities to the Parliament or the public.
As in Putin’s Russia and the Mullah’s Iran, the Egyptian military can eliminate opponents through charges of corruption, collaboration, or other misdeeds. Threat alone will be enough to silence most advocates of reform and change. As in Russia, liberalization can be discredited by associating marketization and privatization with chaos and corruption.
Real revolutions always redistribute society’s wealth. This is why entrenched elites resist change and protect their vested interests. The Bolshevik revolution redistributed wealth from the nobility and landlords to what Lenin and Stalin called “the worker state.” The Putin revolution redistributed Russian wealth from one group of oligarchs to another. The Iranian revolution redistributed wealth from the Shah and associated businesses to the Mullahs and Revolutionary Guard. In a real Egyptian democratic revolution, the military would lose its wealth – either to a true democracy or to a triumphant Muslim Brotherhood, and it understands this fact clearly.
Among the first moves of the military government was to charge with corruption or force from their jobs businessmen and public officials favoring opening the economy and liberalization. The military is satisfied with the status quo of its monopolies, economic privilege, and insecure private property rights.
The Hayek model points to the incredible obstacles facing the true Egyptian democrats. The military “fox” is “guarding the hen house.” The young democrats must somehow figure a way to persuade the military to sacrifice its own economic interests and to do the “right thing” for the country. Judging from past history, their chances of doing so are remote.
Take Russia and Iran as possible role models for Egypt. Despite their huge differences (a KGB state versus an Islamic theocracy), they share a common and sinister pattern: A revolution occurs (the collapse of the Soviet Union, the Iranian revolution); a nominal democracy is established; the democracy is hijacked by the ruling elite; the ruling elite (Kremlin-favored oligarchs, the Revolutionary Guard) gains control of the commanding heights of the economy; the ruling elite viciously blocks democracy and liberalization as mortal threats to their vested interests. Anyone who stands in their way is dealt with harshly as corrupt or traitorous.
Egypt is poised to follow this same path. Its private economy is weak. Some thirty five percent of Egyptians work for the state. Ninety percent of cotton spinning and sixty percent of fabric manufacture is in the hands of the state. The poor Egyptian public receives its food through state ration coupons as it did 3,000 years ago. Only ten percent of property rights are secure.
Egypt is currently a democracy in name only; the goal of its idealistic young “tweeter-generation” demonstrators is to make it a real democracy with real elections. Egypt has thrown out Mubarak and will surely punish the corruption of Mubarak, his family, and associates. The country is ruled by the military, who will oversee the transition to something that will be called “democracy” no matter what the outcome.
Herein lies the rub: Egypt’s commanding heights were under the shared control of Mubarak and associates and the military. His removal places a vast amount of Egyptian wealth up for grabs. Mubarak’s share may go to “society” or it may be gobbled up by the military, giving the military even more incentive to avoid the voter scrutiny and transparency of true democracy.
The truth of Egypt’s military’s economic clout is just coming out: The ruling military council is a strong advocate of state controls and a staunch opponent of economic liberalization. The military owns day care centers and beach resorts, makes television sets, jeeps, washing machines, furniture, olive oil and bottled water. Estimates of the military’s share of economic output range from ten to thirty percent. It enjoys huge advantages over private enterprises. Military enterprises pay no taxes, use conscripted soldiers, buy public land on favorable terms and have no obligation to disclose their activities to the Parliament or the public.
As in Putin’s Russia and the Mullah’s Iran, the Egyptian military can eliminate opponents through charges of corruption, collaboration, or other misdeeds. Threat alone will be enough to silence most advocates of reform and change. As in Russia, liberalization can be discredited by associating marketization and privatization with chaos and corruption.
Real revolutions always redistribute society’s wealth. This is why entrenched elites resist change and protect their vested interests. The Bolshevik revolution redistributed wealth from the nobility and landlords to what Lenin and Stalin called “the worker state.” The Putin revolution redistributed Russian wealth from one group of oligarchs to another. The Iranian revolution redistributed wealth from the Shah and associated businesses to the Mullahs and Revolutionary Guard. In a real Egyptian democratic revolution, the military would lose its wealth – either to a true democracy or to a triumphant Muslim Brotherhood, and it understands this fact clearly.
Among the first moves of the military government was to charge with corruption or force from their jobs businessmen and public officials favoring opening the economy and liberalization. The military is satisfied with the status quo of its monopolies, economic privilege, and insecure private property rights.
The Hayek model points to the incredible obstacles facing the true Egyptian democrats. The military “fox” is “guarding the hen house.” The young democrats must somehow figure a way to persuade the military to sacrifice its own economic interests and to do the “right thing” for the country. Judging from past history, their chances of doing so are remote.
Tuesday, February 15, 2011
Straight Talk: Why Would a Dictator “Reform?”
Dictators in the Middle East are advised by Western politicians that they should introduce democratic reforms if they want to stay in office. This might work for the most moderate of rulers, such as in Jordan. It worked in Spain and Portugal, but only after the death or incapacitation of the dictator made a smooth transition possible. For other dictators, there is no way to split the difference between a dictatorship and a democracy. No brutal dictator can navigate the fine line between meaningful reform and remaining in office. True reform requires transferring or sharing power with others. Once your democratic partners have some degree of power, they will make sure that you will be out of office. Pinochet tried to protect himself by parliamentary immunity and spent the final years of his life fighting off criminal charges. The “power sharing arrangements” in Iran and Zimbabwe have been shams in which the democratically elected partner (Khatami and Tsvangirai) is rendered powerless by the Mullahs or Mugabe.
Any brutal dictator who allows a meaningful reform is, in effect, committing political suicide. There was no chance for a Mubarak to continue in office in a “reformed” Egypt. Under the best of circumstances, he could have been a transitory figure head. At the worst, he would have been put before a firing squad like Ceausescu. Mubarak had no way of winning once the democratic genie was let out of the bottle. It was in his interest to keep the genie firmly locked in the bottle.
The current reform advice to dictators reminds me of earlier advice to Soviet rulers to allow meaningful reform of their political-economic system. The aging Soviet leaders after Stalin were not particularly bright, but they understood one basic fact: Real reform meant the end of the system as they knew it. It was not until Gorbachev – the first Soviet leader too young to be part of Stalin’s coterie – that the USSR was led by a communist party leader who did not understand that real reform would destroy the pillars of the entire system, which it did.
I presume that brutal dictators throughout the Mid East -- Kaddafi, Assad, the Iranian mullahs -- understand better than Gorbachev that meaningful reform means the end of their careers. Our pleas for them to become “democrats” will go unheeded. From their perspective, this is very bad advice.
Any brutal dictator who allows a meaningful reform is, in effect, committing political suicide. There was no chance for a Mubarak to continue in office in a “reformed” Egypt. Under the best of circumstances, he could have been a transitory figure head. At the worst, he would have been put before a firing squad like Ceausescu. Mubarak had no way of winning once the democratic genie was let out of the bottle. It was in his interest to keep the genie firmly locked in the bottle.
The current reform advice to dictators reminds me of earlier advice to Soviet rulers to allow meaningful reform of their political-economic system. The aging Soviet leaders after Stalin were not particularly bright, but they understood one basic fact: Real reform meant the end of the system as they knew it. It was not until Gorbachev – the first Soviet leader too young to be part of Stalin’s coterie – that the USSR was led by a communist party leader who did not understand that real reform would destroy the pillars of the entire system, which it did.
I presume that brutal dictators throughout the Mid East -- Kaddafi, Assad, the Iranian mullahs -- understand better than Gorbachev that meaningful reform means the end of their careers. Our pleas for them to become “democrats” will go unheeded. From their perspective, this is very bad advice.
Sunday, February 13, 2011
Kleptocrats, Oligarchs, and Billionaire Entrepreneurs (In this Game Mubarak Is a Piker)
Kleptocrats, Oligarchs, and Billionaire Entrepreneurs (In this Game Mubarak Is a Piker)
Personal wealth is created in one of two ways. On the positive side, it arises as a result of innovation, hard work, brilliant insights, or even luck. Entrepreneurs create enormous wealth when they have a better idea (Henry Ford’s assembly line), discover and develop new products (Microsoft Windows or Google’s search engine), see a new business model (Sam Walton), or are simply at the right place at the right time. Often, it is a combination of innovation and timing, something economists call network externalities.
A second and negative route to personal wealth is through political connections, lobbying to obtain benefits from the state, violence to remove competitors, or outright theft of public resources. Those who earn their fortunes the first way create jobs, raise productivity, and contribute to economic welfare. Those who use the second route are “rent seekers” who subtract from growth and welfare for their own benefit.
Bill Gates, Sam Walton, and Sergei Brin represent wealth earned through entrepreneurship. Their Microsoft, Walmart, and Google made them not only among the richest persons in the world. They have created new technologies, hundreds of thousands of jobs, new business models, and have revolutionized they way we gather and process information. Carlos Slim, the world’s wealthiest man, made his fortune by monopolizing Mexico’s telecommunications market (presumably with help from government regulators). Poor Mexicans have been denied the wide range of choice of telephone services that others have and pay for his wealth in the form of the highest telephone rates on the continent.
The most egregious rent seeking occurs in autocratic and dictatorial regimes in which wealth accumulation is not constrained by an electorate, corporate transparency, or a free press. Such authoritarian regimes breed kleptocrats –those who accumulate wealth for themselves through their official positions. Oligarchs are those who use their access to those in power to accumulate wealth. Both kleptocrats and oligarchs transfer assets from society or from others to themselves; they do not create new products or additional jobs. They reduce economic welfare by crowding out real entrepreneurs, who refrain from economic activity knowing the fruits of their labor will be stolen. Kleptocracy and oligarchy are determined by the quality of society’s institutions and rule of law. The better the institutions, the more limited kleptocracy and oligarchy.
I present here some data on the world’s kleptocrats, oligarchs, and top entrepreneurs. The wealth of kleptocrats cannot be measured with any degree of precision because, as heads of state or government officials, they wish to conceal it. However, the figures capture rough orders of magnitude. Oligarchs, not being government heads or officials, are less prone to conceal their wealth. They may even feel a sense of pride when they see their names listed in Forbes.
I begin with a ranking of kleptocrat heads of state by absolute wealth. (I convert the wealth of past kleptocrats into current dollars). Four of the top six rule (or ruled) countries with rich natural resources (Putin, Nazarbaev, Aliev, Mobutu), such as energy or diamonds. The real “oil curse” is therefore the tendency of the rulers of mineral-rich countries to steal the national wealth. Other kleptocrats controlled poor countries lacking access to rich natural resources. The recently deposed Mubarak (whose personal wealth is listed at the maximum estimate) is in the middle range of notable kleptocrats. Of the eleven countries represented, four (Philippines, Indonesia, Nicaragua, and Peru) have subsequently democratized, although Nicaragua’s democracy may be shaky. Democracy strikes at the root causes of kleptocracy by making the rulers accountable to an electorate and investigative journalists.
Heads of state who steal from less populous countries (Serbia, Haiti, and Nicaragua) accumulate less wealth ceteris paribus than those in populous economies (Russia, Indonesia and Nigeria). The grazing ground for kleptocrats is less spacious in poor countries than in rich countries. The percentage of the kleptocrat’s wealth to GDP is a measure of the kleptocrat-head-of-state’s s burden on society. This table shows that Mobutu, at the end of his reign in Congo, had accumulated wealth equal to more than forty percent of the nation’s meager output. Duvalier had accumulated an estimated ten percent – a figure comparable to the Central Asian oil magnates of Kazakhstan and Azerbaijan. Marcos and Suharto are in the three to four percent range, whereas Putin and Milosevic are in the one to two percent range.
It should be noted that these figures show the economic burden imposed only by the head of state. Heads of state have their courts, which share in the plunder of resources. The court’s assets are not calculable, but we imagine that, if they could be included as well, the kleptocratic burden would be multiplied many times over.
The next table shows the cumulated wealth of the ten wealthiest persons in industrialized democracies (the United States, the European Union, and South Korea), in two former Soviet states (Russia and Ukraine), Mexico and in China. These figures omit the wealth of the head of state.
The table shows that the top ten have more wealth in the large and wealthy United States and European Union (between 170 and 270 billion). Relatively poor Mexico and Russia both have nearly one hundred billion. (There are as many billionaires listed for “poor” Russia as for the “rich” United States – a remarkable testimony to rent seeking in Putin’s Russia.) The top ten in South Korea and Ukraine have the same amount of wealth even though South Korea is five times richer. China lies between Mexico and Ukraine although it has the world’s second largest economy.
The US top 10 list is comprised largely of entrepreneurs whose ideas and business methods changed whole industries (Gates, Buffet, Walton, and Brin). The Russian top 10 list is made up of Kremlin-favored oligarchs who were awarded extremely valuable assets that had previously belonged to the state. The South Korean list is populated by industrialists who formed conglomerate businesses that compete in world markets, while the Ukrainian list is made up of those who received valuable state assets during privatization. China’s list is of industrialist owners of successful Chinese companies (most partially owned with the state), who could not have been successful without the support of the Chinese state.
The next table shows the wealth of the top ten as a percent of GDP. In those countries (US, EU, South Korea) where the top wealth holders play primarily entrepreneurial roles, their share is between one and two percent. Viewed in the light of their contribution to the economy, their wealth reward seems rather modest. In Ukraine and Russia, the share of GDP of the top ten is between four and six percent – a rather substantial return to those making a negative or questionable contributions to output and welfare. The high Mexican share is due to the “Carlos Slim Effect.” He alone accounts for most of the high Mexican figure.
China is an outlier. The wealth of its richest persons is small relative to the size of the Chinese economy. What this suggests is that there are forces at play, other than the usual constraints imposed by democracy and a free press, that have limited rapacious rent seeking on the part of connected Chinese businessmen . At this juncture, we do not know enough about the internal workings of large Chinese businesses to define the entrepreneurial roles played by their chief executives. These constraints on rent seeking in China may be one of the many (still unexplored) reasons for China’s rapid growth.
The basic message of this analysis is that, in countries with good institutions, generous wealth accumulation is a reward for positive contributions to the economy. These are rewards for innovation, radically new ideas, persistence, and risk taking. In societies with good institutions, the rewards are relatively modest as a percent of total economic activity. These rewards are constrained by competition, social morays, and the rule of law. In countries with poor institution, wealth is accumulated either by the head of state or by oligarch cronies by transferring assets from others or from society itself. Such transfers not only do not increase national wealth; they reduce it insofar as real entrepreneurs cannot prosper in such an environment.
We are often reminded of the greed of those at the top. Little attention is devoted to the contributions of those entrepreneurs whose ideas and methods have contributed to economic growth. Walmart, Microsoft and Google currently employ 2.1 million, 93,000, and 22,000 respectively. The indirect employment they create through suppliers, vendors and other stakeholders is a multiple of these figures. Their annual payrolls equal a large fraction of the accumulated wealth of their founders.
Warnings about the growing concentration of wealth at the very top must be considered in proportion to the size of economic activity, whose increase is in fact positively affected by those at the top. Today, the top ten account for less than two percent of GDP in the United States. At the turn of the twentieth century, the top ten accounted for more than five percent! In a ranking of the 100 top wealth holders from the founding of the United States to the present (as a percent of GDP), only five living persons are listed, and Gates and Buffet are ranked only numbers 31 and 39 respectively.
Data sources: This data is drawn from Forbes rankings of the world’s richest people, from estimates of Transparency International, and independent estimates of the wealth of Vladimir Putin and informal estimates of the wealth of Nazarbaev of Kazakhstan and the Aliev family of Azerbaijan. The wealth of other kleptocrats is given as of the date of their removal from power converted into 2010 US dollars. The top five Ukrainian oligarchs are taken from http://ukrainianguide.com/5-wealthiest-ukrainian-oligarchs/2/ Only five Ukrainian oligarchs made the billionaire list; so I assume there are five more slightly below one billion. Mubarak’s wealth is taken from an ABC News report of February 11, 2011 citing U.S. intelligence sources. These sources dismiss the high figures cited in the press and place Mubarak’s wealth between $1 and $5 billion. I take the upper figure to avoid underestimation. The wealthiest 100 Americans throughout history is taken from http://www.getrichslowly.org/blog/2006/07/29/the-wealthy-100-a-ranking-of-the-richest-americans-past-and-present/
Personal wealth is created in one of two ways. On the positive side, it arises as a result of innovation, hard work, brilliant insights, or even luck. Entrepreneurs create enormous wealth when they have a better idea (Henry Ford’s assembly line), discover and develop new products (Microsoft Windows or Google’s search engine), see a new business model (Sam Walton), or are simply at the right place at the right time. Often, it is a combination of innovation and timing, something economists call network externalities.
A second and negative route to personal wealth is through political connections, lobbying to obtain benefits from the state, violence to remove competitors, or outright theft of public resources. Those who earn their fortunes the first way create jobs, raise productivity, and contribute to economic welfare. Those who use the second route are “rent seekers” who subtract from growth and welfare for their own benefit.
Bill Gates, Sam Walton, and Sergei Brin represent wealth earned through entrepreneurship. Their Microsoft, Walmart, and Google made them not only among the richest persons in the world. They have created new technologies, hundreds of thousands of jobs, new business models, and have revolutionized they way we gather and process information. Carlos Slim, the world’s wealthiest man, made his fortune by monopolizing Mexico’s telecommunications market (presumably with help from government regulators). Poor Mexicans have been denied the wide range of choice of telephone services that others have and pay for his wealth in the form of the highest telephone rates on the continent.
The most egregious rent seeking occurs in autocratic and dictatorial regimes in which wealth accumulation is not constrained by an electorate, corporate transparency, or a free press. Such authoritarian regimes breed kleptocrats –those who accumulate wealth for themselves through their official positions. Oligarchs are those who use their access to those in power to accumulate wealth. Both kleptocrats and oligarchs transfer assets from society or from others to themselves; they do not create new products or additional jobs. They reduce economic welfare by crowding out real entrepreneurs, who refrain from economic activity knowing the fruits of their labor will be stolen. Kleptocracy and oligarchy are determined by the quality of society’s institutions and rule of law. The better the institutions, the more limited kleptocracy and oligarchy.
I present here some data on the world’s kleptocrats, oligarchs, and top entrepreneurs. The wealth of kleptocrats cannot be measured with any degree of precision because, as heads of state or government officials, they wish to conceal it. However, the figures capture rough orders of magnitude. Oligarchs, not being government heads or officials, are less prone to conceal their wealth. They may even feel a sense of pride when they see their names listed in Forbes.
I begin with a ranking of kleptocrat heads of state by absolute wealth. (I convert the wealth of past kleptocrats into current dollars). Four of the top six rule (or ruled) countries with rich natural resources (Putin, Nazarbaev, Aliev, Mobutu), such as energy or diamonds. The real “oil curse” is therefore the tendency of the rulers of mineral-rich countries to steal the national wealth. Other kleptocrats controlled poor countries lacking access to rich natural resources. The recently deposed Mubarak (whose personal wealth is listed at the maximum estimate) is in the middle range of notable kleptocrats. Of the eleven countries represented, four (Philippines, Indonesia, Nicaragua, and Peru) have subsequently democratized, although Nicaragua’s democracy may be shaky. Democracy strikes at the root causes of kleptocracy by making the rulers accountable to an electorate and investigative journalists.
| Ruler(ranked top to bottom) | Year | Wealth (bl. 2010 $) | ||
| Putin (Russia) | 2011 | 40 | ||
| Suharto (Indonesia) | 1998 | 25 | ||
| Nazarbaev Kazakhstan) | 2011 | 20 | ||
| Marcos (Philippines) | 1986 | 7.5 | ||
| Aliev (Azerbaijan) | 2011 | 10 | ||
| Mobutu (Congo, Zaire) | 1997 | 5 | ||
| Mubarak (Egypt) | 2011 | 5 | ||
| Abacha (Nigeria) | 1998 | 3.5 | ||
| Milosevich (Serbia) | 2000 | 1 | ||
| Duvalier (Haiti) | 1986 | 0.55 | ||
| Fujimori (Peru) | 2000 | 0.6 | ||
| Alemain (Nicaragua) | 2002 | 0.1 | ||
| Estrada (Philippines) | 2001 | 0.08 |
Heads of state who steal from less populous countries (Serbia, Haiti, and Nicaragua) accumulate less wealth ceteris paribus than those in populous economies (Russia, Indonesia and Nigeria). The grazing ground for kleptocrats is less spacious in poor countries than in rich countries. The percentage of the kleptocrat’s wealth to GDP is a measure of the kleptocrat-head-of-state’s s burden on society. This table shows that Mobutu, at the end of his reign in Congo, had accumulated wealth equal to more than forty percent of the nation’s meager output. Duvalier had accumulated an estimated ten percent – a figure comparable to the Central Asian oil magnates of Kazakhstan and Azerbaijan. Marcos and Suharto are in the three to four percent range, whereas Putin and Milosevic are in the one to two percent range.
| Ranked top to bottom | Year | Percent of GDP | ||
| Mobutu (Congo, Zaire) | 1997 | 0.4202 | ||
| Aliev (Azerbaijan) | 2011 | 0.1111 | ||
| Nazarbaev (Kazakhstan) | 2011 | 0.1036 | ||
| Duvalier (Haiti) | 1986 | 0.1000 | ||
| Marcos (Philippines) | 1986 | 0.0429 | ||
| Suharto (Indonesia) | 1998 | 0.0331 | ||
| Putin (Russia) | 2011 | 0.0180 | ||
| Milosevich (Serbia) | 2000 | 0.0165 | ||
| Abacha (Nigeria) | 1998 | 0.0127 | ||
| Mubarak (Egypt) | 2011 | 0.0100 | ||
| Alemain (Nicaragua) | 2002 | 0.0073 | ||
| Fujimori (Peru) | 2000 | 0.0029 | ||
| Estrada (Philippines) | 2001 | 0.0003 |
It should be noted that these figures show the economic burden imposed only by the head of state. Heads of state have their courts, which share in the plunder of resources. The court’s assets are not calculable, but we imagine that, if they could be included as well, the kleptocratic burden would be multiplied many times over.
The next table shows the cumulated wealth of the ten wealthiest persons in industrialized democracies (the United States, the European Union, and South Korea), in two former Soviet states (Russia and Ukraine), Mexico and in China. These figures omit the wealth of the head of state.
The table shows that the top ten have more wealth in the large and wealthy United States and European Union (between 170 and 270 billion). Relatively poor Mexico and Russia both have nearly one hundred billion. (There are as many billionaires listed for “poor” Russia as for the “rich” United States – a remarkable testimony to rent seeking in Putin’s Russia.) The top ten in South Korea and Ukraine have the same amount of wealth even though South Korea is five times richer. China lies between Mexico and Ukraine although it has the world’s second largest economy.
| Ranked top to bottom | Wealth of Top 10 (bln $) | ||
| US | 264.8 | ||
| EU (without UK) | 171.5 | ||
| Russia | 97.0 | ||
| Mexico | 90.3 | ||
| China | 42.3 | ||
| South Korea | 21.4 | ||
| Ukraine | 17.7 |
The US top 10 list is comprised largely of entrepreneurs whose ideas and business methods changed whole industries (Gates, Buffet, Walton, and Brin). The Russian top 10 list is made up of Kremlin-favored oligarchs who were awarded extremely valuable assets that had previously belonged to the state. The South Korean list is populated by industrialists who formed conglomerate businesses that compete in world markets, while the Ukrainian list is made up of those who received valuable state assets during privatization. China’s list is of industrialist owners of successful Chinese companies (most partially owned with the state), who could not have been successful without the support of the Chinese state.
The next table shows the wealth of the top ten as a percent of GDP. In those countries (US, EU, South Korea) where the top wealth holders play primarily entrepreneurial roles, their share is between one and two percent. Viewed in the light of their contribution to the economy, their wealth reward seems rather modest. In Ukraine and Russia, the share of GDP of the top ten is between four and six percent – a rather substantial return to those making a negative or questionable contributions to output and welfare. The high Mexican share is due to the “Carlos Slim Effect.” He alone accounts for most of the high Mexican figure.
| Top 10 Persons | Wealth of top 10 as percent of GDP | ||
| Ukraine | 0.0586 | ||
| Mexico | 0.0583 | ||
| Russia | 0.0437 | ||
| US | 0.0184 | ||
| South Korea | 0.0147 | ||
| EU (without UK) | 0.0113 | ||
| China | 0.0042 |
China is an outlier. The wealth of its richest persons is small relative to the size of the Chinese economy. What this suggests is that there are forces at play, other than the usual constraints imposed by democracy and a free press, that have limited rapacious rent seeking on the part of connected Chinese businessmen . At this juncture, we do not know enough about the internal workings of large Chinese businesses to define the entrepreneurial roles played by their chief executives. These constraints on rent seeking in China may be one of the many (still unexplored) reasons for China’s rapid growth.
The basic message of this analysis is that, in countries with good institutions, generous wealth accumulation is a reward for positive contributions to the economy. These are rewards for innovation, radically new ideas, persistence, and risk taking. In societies with good institutions, the rewards are relatively modest as a percent of total economic activity. These rewards are constrained by competition, social morays, and the rule of law. In countries with poor institution, wealth is accumulated either by the head of state or by oligarch cronies by transferring assets from others or from society itself. Such transfers not only do not increase national wealth; they reduce it insofar as real entrepreneurs cannot prosper in such an environment.
We are often reminded of the greed of those at the top. Little attention is devoted to the contributions of those entrepreneurs whose ideas and methods have contributed to economic growth. Walmart, Microsoft and Google currently employ 2.1 million, 93,000, and 22,000 respectively. The indirect employment they create through suppliers, vendors and other stakeholders is a multiple of these figures. Their annual payrolls equal a large fraction of the accumulated wealth of their founders.
Warnings about the growing concentration of wealth at the very top must be considered in proportion to the size of economic activity, whose increase is in fact positively affected by those at the top. Today, the top ten account for less than two percent of GDP in the United States. At the turn of the twentieth century, the top ten accounted for more than five percent! In a ranking of the 100 top wealth holders from the founding of the United States to the present (as a percent of GDP), only five living persons are listed, and Gates and Buffet are ranked only numbers 31 and 39 respectively.
Data sources: This data is drawn from Forbes rankings of the world’s richest people, from estimates of Transparency International, and independent estimates of the wealth of Vladimir Putin and informal estimates of the wealth of Nazarbaev of Kazakhstan and the Aliev family of Azerbaijan. The wealth of other kleptocrats is given as of the date of their removal from power converted into 2010 US dollars. The top five Ukrainian oligarchs are taken from http://ukrainianguide.com/5-wealthiest-ukrainian-oligarchs/2/ Only five Ukrainian oligarchs made the billionaire list; so I assume there are five more slightly below one billion. Mubarak’s wealth is taken from an ABC News report of February 11, 2011 citing U.S. intelligence sources. These sources dismiss the high figures cited in the press and place Mubarak’s wealth between $1 and $5 billion. I take the upper figure to avoid underestimation. The wealthiest 100 Americans throughout history is taken from http://www.getrichslowly.org/blog/2006/07/29/the-wealthy-100-a-ranking-of-the-richest-americans-past-and-present/
Monday, January 31, 2011
An Egyptian Power Struggle: Why the Worst Will Win (Lesson’s from Lenin’s Playbook)
The media has again begun its celebration. Another repressive dictator has been overthrown (or is about to be). The people are massed in the streets demanding freedom. Talk turns to a successor who will restore order and create a new and better order. We hear these familiar words as the thirty-year-old Mubarak regime totters on the brink.
The hard reality is that this optimistic scenario rarely works out. A worse (or equally bad) dictator rises to the top, not a democracy or even a more benevolent dictator. Throughout history, it is the Lenins, Stalins, Ayatolla Khomeneis, Saddams, and Aristides who replace the Czars, the Shahs, the al-Bakrs, and the Papa Docs. Successful transitions from dictatorship to democracy of the Philippines and South Korea are the exception and require special circumstances.
Machiavelli advised that “a man, who wishes to profess goodness at all times, must fall to ruin among so many who are not good.” Even a well-intentioned “Prince” must learn “how not to be good.” F. A. Hayek expressed the same sentiment when he explained why “the worst will rise to the top” in a power struggle played without rules. In Russia, the “good” Kerensky fell to Lenin. In Iran, the good “Bakhtiar” could not contend against Khomenei. In Egypt a “good” El Baradei will fall to a yet unidentified leader of the Muslim Brotherhood.
The Lenin-Stalin-Khomenei-Saddam has substantial advantages in a power struggle, and there is little the outside world can do. He is unconstrained by a moral compass; he is willing to do whatever is necessary to gain power. These advantages are multiplied when the dictator-to-be does abhorrent things in the name of a powerful ideology. Lenin and Stalin had socialism and its intellectual admirers in the West. Saddam had Arab nationalism, and Khomenei had his vision of a fundamental Islamic revival.
Dictators are loathe to designate a successor (unless it is their son or daughter, but even then they hesitate). Hence, the power struggle will take place in a vacuum without established rules. In such a free-for-all, the most brutal contender is advantaged, particularly if he has organizational skills. Nor does it particularly matter what the people want. In the absence of established democratic institutions, their voices can be scarcely heard.
Lenin’s playbook of 1917 is still the classic. His Bolshevik party was organized as a tiny party of professional revolutionaries. The Bolsheviks were part of the February-revolution coalition that dispensed with the Czar. The victors agreed to elect a constituent assembly to create a new multi-party parliament. Lenin had carefully wooed supporters within army and navy units, and he had enough of them to drive Kerensky’s timid provisional government from the Winter Palace in November 1917 without a shot.
After the Bolsheviks received only twenty percent of the popular vote for the constituent assembly, Lenin sent in armed sailors to its first meeting and bolted the doors forever. Lenin then ordered his bloody Red Terror against rival parties and independent thinkers. Notably, he suppressed those parties most brutally that were the closest to the Bolsheviks in ideology. He could not afford to have any rival in the wings. The Czar and his young son and teen age daughters were slaughtered in Siberia.
It was left to Lenin’s successor, Stalin, to move against his own party. By 1938, he had executed any and all party leaders, whom he regarded as a threat.
Lenin’s formula for power fits the Egyptian situation to a T: A popular revolution overthrows a despised dictator. There is no planned succession. Any figure associated with the old regime is tainted. There will be some popular figures among the “revolutionaries,” but they are disorganized and have no ideology to sell. The dictator-to-be’s party may be small, and it may not be particularly popular, but it is well organized and can bring force to bear when necessary. It employs its organizational superiority, brutality, and raw power to outmaneuver or liquidate rivals. Once the dictator-to-be’s party is in power, he can turn his attention within to eliminate his rivals.
The Egyptian army is the one wild card, just as the Czarist army was Lenin’s wild card. Indeed, remnants of the white army fought Trotsky’s Red Army to a standstill, until they were split apart by internal disputes. The advantage to Lenin and the next Egyptian dictator is that both armies were conscripted rather than professional. Conscripted armies are less likely to fill a power vacuum than professional armies.
The hard reality is that this optimistic scenario rarely works out. A worse (or equally bad) dictator rises to the top, not a democracy or even a more benevolent dictator. Throughout history, it is the Lenins, Stalins, Ayatolla Khomeneis, Saddams, and Aristides who replace the Czars, the Shahs, the al-Bakrs, and the Papa Docs. Successful transitions from dictatorship to democracy of the Philippines and South Korea are the exception and require special circumstances.
Machiavelli advised that “a man, who wishes to profess goodness at all times, must fall to ruin among so many who are not good.” Even a well-intentioned “Prince” must learn “how not to be good.” F. A. Hayek expressed the same sentiment when he explained why “the worst will rise to the top” in a power struggle played without rules. In Russia, the “good” Kerensky fell to Lenin. In Iran, the good “Bakhtiar” could not contend against Khomenei. In Egypt a “good” El Baradei will fall to a yet unidentified leader of the Muslim Brotherhood.
The Lenin-Stalin-Khomenei-Saddam has substantial advantages in a power struggle, and there is little the outside world can do. He is unconstrained by a moral compass; he is willing to do whatever is necessary to gain power. These advantages are multiplied when the dictator-to-be does abhorrent things in the name of a powerful ideology. Lenin and Stalin had socialism and its intellectual admirers in the West. Saddam had Arab nationalism, and Khomenei had his vision of a fundamental Islamic revival.
Dictators are loathe to designate a successor (unless it is their son or daughter, but even then they hesitate). Hence, the power struggle will take place in a vacuum without established rules. In such a free-for-all, the most brutal contender is advantaged, particularly if he has organizational skills. Nor does it particularly matter what the people want. In the absence of established democratic institutions, their voices can be scarcely heard.
Lenin’s playbook of 1917 is still the classic. His Bolshevik party was organized as a tiny party of professional revolutionaries. The Bolsheviks were part of the February-revolution coalition that dispensed with the Czar. The victors agreed to elect a constituent assembly to create a new multi-party parliament. Lenin had carefully wooed supporters within army and navy units, and he had enough of them to drive Kerensky’s timid provisional government from the Winter Palace in November 1917 without a shot.
After the Bolsheviks received only twenty percent of the popular vote for the constituent assembly, Lenin sent in armed sailors to its first meeting and bolted the doors forever. Lenin then ordered his bloody Red Terror against rival parties and independent thinkers. Notably, he suppressed those parties most brutally that were the closest to the Bolsheviks in ideology. He could not afford to have any rival in the wings. The Czar and his young son and teen age daughters were slaughtered in Siberia.
It was left to Lenin’s successor, Stalin, to move against his own party. By 1938, he had executed any and all party leaders, whom he regarded as a threat.
Lenin’s formula for power fits the Egyptian situation to a T: A popular revolution overthrows a despised dictator. There is no planned succession. Any figure associated with the old regime is tainted. There will be some popular figures among the “revolutionaries,” but they are disorganized and have no ideology to sell. The dictator-to-be’s party may be small, and it may not be particularly popular, but it is well organized and can bring force to bear when necessary. It employs its organizational superiority, brutality, and raw power to outmaneuver or liquidate rivals. Once the dictator-to-be’s party is in power, he can turn his attention within to eliminate his rivals.
The Egyptian army is the one wild card, just as the Czarist army was Lenin’s wild card. Indeed, remnants of the white army fought Trotsky’s Red Army to a standstill, until they were split apart by internal disputes. The advantage to Lenin and the next Egyptian dictator is that both armies were conscripted rather than professional. Conscripted armies are less likely to fill a power vacuum than professional armies.
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