Mental Pivot

Notes and observations from a lifelong pursuit of learning.


Book Notes: “The Dictator’s Handbook” by Bruce Bueno de Mesquita and Alastair Smith

Summary

The Dictator’s Handbook: Why Bad Behavior Is Almost Always Good Politics by Bruce Bueno de Mesquita and Alastair Smith (2012) is a book about the real-world rules of politics. Pundits often explain politics through storytelling; poor political decision-making and misguided leaders are treated as one-off aberrations. According to the authors, this narrative is flawed. They argue that there is nothing unique about political behavior: all leaders are beholden to a similar set of limits, constraints and incentives. Understanding these rules yields a coherent explanation for a wide spectrum of political practices.

One foundational rule is that no political leader is monolithic, individual cannot act alone or unilaterally. Because of this, leaders have to navigate their relationship amongst a political landscape that consists of three major groups: the nominal selectorate, the real selectorate, and the winning coalition. The nominal selectorate (aka “interchangeables”) is the entire pool of people empowered to elect a leader. In the United States, this group comprises citizens eligible to vote. The real selectorate (aka “influentials”) is the group that engages in the selection process. In the former Soviet Union, this was the voting members of the Communist Party. The winning coalition (aka “essentials”) is the subset of the real selectorate that hands victory to a political leader. The support of this last group is essential to gaining and maintaining political power.

The interaction between interchangeables, influentials, and essentials drives many of the ideas in the book. “Governments do not differ in kind. They differ along the dimensions of their electorates and winning coalitions. These dimensions limit or liberate what leaders can and should do to keep their jobs.” Autocracies trend towards small coalitions which result in a greater concentration of private rewards among coalition members. Democracies, by necessity, have larger coalitions that require more attention to public goods (though private rewards still play an important role). Keeping your coalition happy is the overriding imperative in political systems and is the primary driver behind policy-making decisions.

The tone of the book is grim: political decision-making is self-serving and generally unconcerned with “doing the right thing.” The authors make no apologies; this book is about politics as it is, not how it should be. To their credit, the authors offer constructive ideas for improving politics in the final chapter (primarily by expanding the size of the three political groups as much as possible). Technology, in particular, is seen as one way to improve transparency and participation. Despite a glimmer of cautious optimism, the book feels overwhelmingly cynical. Nevertheless, this is a worthwhile read if you’re looking for a framework for understanding politics--especially if you find yourself increasingly perplexed by the current political climate.

Pros: The core political theory is broadly applicable. Authors provide a dizzying array of current and historical examples to support their ideas.

Cons: The theory is so reductionist that some might view it as overly simplistic. This is a dark book; you'll need a pick-me-up between chapters.

Verdict: 6/10


Notes & Highlights

Introduction

  • “The world of politics is dictated by rules.”
  • Journalists, academics and pundits explain politics through storytelling. The result is that the public largely has a poor understanding of the underlying rules and dynamics of politics.
  • “Each story treats the errant leader and his or her faulty decision making as a one-off, one-of-a-kind situation. But there is nothing unique about political behavior.”
  • Rules and laws limit what people can d.
  • People with political power can design rules to their advantage in order to get what they want.
  • People with political power have a strong incentive to obtain that power and hold onto it.
  • Case study: Bell, California (Los Angeles suburb, population 36,600)
    • Robert Rizzo, city manager from 1993-2010. Starting salary was $72,000/year. End of tenure earned $787,000/year.

    • Bell city council members earned $100,000/year by sitting on city agency boards. This compensation was not considered part of their base salary (which was much lower and more defensible).

    • City leaders manipulated the electorate to hold onto power.

      • They converted Bell from a general city to a “charter city.”
      • Charter cities can make decisions behind closed doors (reduced public transparency).
      • Charter cities are governed by the city’s own charter and can circumvent state and even federal law (for instance: California capped city council salaries in 2005, but only for general cities).
      • City officials sold the “charter city” plan to their constituents as a way to give Bell greater autonomy from “distant” state officials (“local authorities know best!”).
      • Charter city decision was held as a “special election.” Special elections typically have poor voter turnout (only 400 voters participated in the case of Bell).
    • Charter city decision gave a small group of politicians broad discretion over spending and taxation.

    • City was able to maintain a balance budget by not only richly compensating city leaders, but by heavily taxing the community. Bell’s property tax rate was 50% higher than surrounding cities.

    • Rizzo and the council had to remain mutually loyal to each other in order to maintain their compensatory arrangements.

    • Private rewards are a rational behavior for leaders whose political survive depends on a small coalition of allies.

    • Lessons from the Bell, California case:

      • Politics is about getting and keeping political power.

        • Politics is not about the general welfare.
      • Political survival is best obtained and maintained through small coalitions.

      • Kleptocracy is one way to ensure the preservation of power: using power to exploit people, resources and capital for their own benefit.

      • Small coalitions liberate tax decisions. Leaders can benefit their small coalition at the expense of the broader electorate.

  • “Leaders who follow these rules faithfully truly can stay on top without ever having to do ‘the right thing’ for their subjects.”
  • When examining politics, learn to ignore issues of ideology, nationality, and culture: according to the authors these things don’t matter that much.
  • Consider the actions and interests of specific individuals and leaders. Disregard fuzzy concepts like “national interest,” “common good,” and “general welfare.”
  • “Politics…is about individuals, each motivated to do what is good for them, not what is good for others.”

Chapter 1: The Rules of Politics

  • Leaders cannot lead unilaterally: “no leader is monolithic.”

  • For leaders, political landscape consists of three different groups:

    • The nominal selectorate
    • The real selectorate
    • The winning coalition.
  • Nominal selectorate aka “interchangeables”:

    • Consists of everyone legally empowered to select a leader.
    • In the USA this means everyone eligible to vote.
    • This is the pool of potential support for a leader.
  • Real selectorate aka “influentials”:

    • The group that actually chooses a leader.
    • In China and the old Soviet Union this meant voting members of the Communist Party.
    • In Saudi Arabia this group comprises senior members of the royal family.
    • In the United States this group is made of electors of the electoral college or the people who actually vote (for city and state elections).
    • This is the group that has influence over the outcome of selection.
  • The winning coalition aka “essentials”:

    • The subset of the real selectorate that supports the winning leader.
    • In totalitarian regimes this may be a small group.
    • In the USA this group is relatively large.
    • The support of this group is essential to winning office and maintaining power.
  • “Given the federal structure of American elections, it’s possible to control the executive and legislative branches of government with as little as about one fifth of the vote, if the votes are really efficiently placed.”

  • Per the Bell, California example from the Introduction of the book:

    • Nominal selectorate (interchangeable) were 9,395 registered voters.
    • Real selectorate (influentials) were 2,235 who actually voted.
    • Winning coalition (essentials) were the 473 voters who generated a plurality for Robert Rizzo.
  • Other institutions (including publicly traded corporations) have this same structure of interchangeables=>influentials=>essentials. This pattern repeats itself over and over when it comes to any kind of political power (in or outside of government bodies).

  • The book’s framework is applicable to the entire political spectrum from autocratic governments to democratic governments.

  • “Governments do not differ in kind. They differ along the dimensions of their electorates and winning coalitions. These dimensions limit or liberate what leaders can and should do to keep their jobs.”

    • Autocratic governments have small winning coalitions.
    • Democratic governments have relatively larger winning coalitions.
  • Authors assert that variations in policies between different governments are “the product of the incentives leaders face as they content with their particular mix of interchangeable, influential, and essential groups.”

  • People manipulate political apparatus to generate advantages.

    • Example: Laws might enfranchise the population to vote (nominal selectorate) but constraints may be introduced to winnow that group down (real selectorate). For instance, electoral boundaries, runoff elections, etc.
  • Changing the relative size of any of the three groups can alter political outcomes

  • Case study: San Francisco’s board of supervisors.

    • Pre-1977: San Francisco had citywide elections for supervisor posts. Nominal selectorate consisted of all city voters.
    • Post-1977: San Francisco used district-based elections. Nominal selectorate only included voters within a small boundary of the city.
    • Harvey Milk received 53,000 votes in 1975 and finished 7th in the election.
    • Harvey Milk received 6,000 votes in 1977 and finished 1st in the election.
  • “Money can serve as the root of all that is good about governance. It depends on what leaders do with the money they generate.”

  • Consider the ways leaders generate income (taxes) vs. allocate expenditures (via policies).

    • What kinds of policies do leaders spend money on?

      • Public goods that benefit everyone?
      • Private goods that benefit select groups?
    • How is the tax system setup and who does it benefit?

      • Many types of taxation: personal income, corporate income, capital gains taxes, property taxes, import duties, licenses, government fees, etc.
  • “Political transitions are filled with examples of supporters who help a leader to power only to be replaced.”

  • Five basic rules to succeed in any political system:

    1. Keep your winning coalition as small as possible. “Fewer essentials equals more control and contributes to more discretion over expenditures.”
    2. Keep your nominal selectorate as large as possible. This ensures a big supply of “interchangeables” that can be converted to essentials as needed.
    3. Control the flow of revenue. The ideal (from the standpoint of political power) is a system that makes most people poor and redistributes money to keep the leader’s coalition wealthy.
    4. Pay your key supporters sufficiently to keep them loyal.
    5. Don’t take money out of your supporter’s pockets to make other people’s lives better.
  • Consider the rules above in light of two American practices:

    • Congressional gerrymandering: Addresses #1
    • Pro immigration policies: Addresses #2
    • Tax code battles: Addresses #3
    • Welfare, social programs, earmarks: Addresses #4
    • Tax rate cuts and national health care: Addresses #5

Chapter 2: Coming to Power

  • Three ways to remove an incumbent:

    1. The leader dies.
    2. Incumbent’s coalition defects.
    3. External force: military intervention by foreign power or internal revolution/rebellion.
  • “Revolutions occur when those who preserve the current system are sufficiently dissatisfied with their rewards that they are willing to look for someone new to take care of them.”

  • “Paying supporters, not good governance or representing the general will, is the essence of ruling.”

  • “Allaying supporters’ fears of being abandoned is a key element of coming to power.”

  • Health concerns and succession concerns are critical for maintaining power:

    • Dead leaders cannot provide for their coalition.
    • Leaders must manage speculation around health condition (examples: Fidel Castro, Kim Jong Il).
    • Leaders can nominate a successor or heir to allay fears about the future from their coalition.
    • However, too many rival successors is a problem and leaders can take steps to eliminate would-be rivals and unsanctioned heirs.
  • “What constitutes doing he right thing must be understood from the perspective of a potential supporter; it may have nothing to do with what is best for a community or nation.”

  • Expedience is more important, from a political standpoint, than “the right thing.”

  • Remaining solvent is critical. Financial crises create opportunities for the opposition and the formation of new coalitions.

  • In democracies, leaders reward their constituents with beneficial public policies.

  • Democracies, like autocracies, have dynastic characteristics:

    • 31.2% of American female legislators had a close relative preceding them in the same political role.
    • 20% of American presidents have been closely related.
    • Consider various American political dynasties: Tafts, Kennedys, Rockefeller’s, Roosevelts, Bush.
  • Divide and conquer is a standard strategy for politicians.

Chapter 3: Staying in Power

  • The skills needed to stay in power is different than the skills needed to come to power.

  • Rules for staying in power are not the same as the skills needed to rule well.

  • The basic strategy: shore up the coalition of supporters. Bring in loyalists and eliminate troublemakers.

  • “A wise leader does not count too much on those who helped her gain power.”

  • Leaders move swiftly to cull the ranks of supporters that got them to power. They then bring in new people whose interests and abilities will ensure long-term survival and whose loyalty can be bought.

  • Some leaders inherit coalitions and must overcome entrenched agendas and loyalties.

  • Case study: Hewlett-Packard under the leadership of Carly Fiorina.

    • Corporations follow same power structure as nation-states.
    • Corporate boards consist of insiders (employees), grey members (friends/relatives), and outsiders.
    • A CEO’s interest is NOT the same as a shareholder’s interest.
  • “In the end, ruling is the objective, not ruling well.”

  • Loyalty is the most important characteristic in a coalition (from the perspective of the leader).

  • Some leaders guarantee that advisors (even competent ones) cannot become rivals via creative solutions:

    • Eunuchs were used in Byzantine, Mughal, Chinese and others.
    • Using advisers who cannot rise to the top. Example: Saddam Hussein’s #2 was an Arab Christian (Tariq Aziz). In Mario Puzo’s fictional Godfather, Vito’s consigliere was the half-Irish Tom Hagen.
  • Autocratic leaders often resort to execution to eliminate rivals.

  • In democracies, electoral rules and election processes are manipulated to influence the result.

    • Example: Restricting who is eligible to vote and who is not.
    • Example: Bribes to purchase votes.
    • Example: Losing, miscounting or destruction of ballots.
    • Example: Encouraging a crowded field of candidates to siphon votes off and/or confuse voters.
    • Example: Designated seats for underrepresented minorities which reduce the number of people dependent on a leader (reduces their coalition).
    • Example: Bloc voting in which community leaders (church leaders, union boss, etc.) can deliver blocs of votes.

Chapter 4: Steal from the Poor, Give to the Rich

  • A leader must find a reliable source of income. The alternative is that a rival will tap into an income source and steal supporters (with better rewards).

  • Poor bookkeeping/accounting is sometimes a tactic rather than a result of poor governance: “Secrecy not only provides insurance against rivals, it also keeps supporters in the dark about what other supporters are getting…in the corporate setting opacity occurs despite having to satisfy strict regulations…”

  • Democratic nations have more transparent income and financial systems that are durable from one administration to another.

  • Taxation is the primary way to generate revenue.

  • Leaders want to increase taxes: it gives them more resources with which to reward their coalition.

  • Limiting factors of taxation:

    1. Taxes reduce the productivity of workers (high taxes result in low incentives).
    2. Tax burden may impact the leader’s supporters.
    3. Tax collection itself incurs resource costs.
  • “Autocrats aim for the rate that maximizes revenue…good governance dictates that taxes should only be taken to pay for things that the market is poor at providing, such as national defense and large infrastructure projects.”

  • Taxation serves two purposes in ensuring the leader’s survival:

    • The enrichment of the coalition.
    • The undermining of the welfare of the opposition.
  • In the US, Democrats and Republicans use taxation to redistribute wealth from opponents to supporters.

  • “A democrat taxes above the good governance minimum, but he does not raise taxes to the autocrat’s revenue maximization point.”

  • Long-run consequences of political decision are another leader or administration’s problem. This means there is little or no incentive to engage in long-term planning or considerations.

  • Extracting revenue directly from the land via natural resources is an alternative to taxation.

    • This strategy bypasses the general population altogether.
    • Example: oil-rich nations bring in foreign firms/experts, foreign workers and foreign equipment with their own private security forces to collect the resource.
    • This strategy creates massive wealth for autocrats and their coalition.
    • The political incentive to spend on public welfare is low.
  • Borrowing is another way to generate income.

    • Future loan obligations are another leader’s problem.
    • Both autocratic and democratic regimes are enthusiastic borrowers.
  • “Governments of all flavors are more profligate spenders and borrowers than the citizens they rule. And that profligacy is greatly multiplied when we look at small coalition regimes.”

  • “Heavy borrowing is a feature of small coalition settings. It is not the result, as some economists argue, of ignorance of basic economics by third-world leaders.”

  • Debt may be paid by all, but the benefits flow disproportionately to certain groups.

  • Debt forgiveness is poor policy: it effectively wipes the slate clean and sets the debtor up to reinitiate borrowing again.

Chapter 5: Getting and Spending

  • Once money is obtained, it can be spent to keep the coalition happy.

  • Primary domestic public goods to consider:

    • Education
    • Health care
    • Environment
    • Infrastructure
    • Freedom (free press, free speech, assembly)
  • Governments have two paths to ensuring political survival (these can be used individually or in combination):

    • Keep the populace happy prevent rebellion.
    • Keep the populace sick, starving, and ignorant to prevent rebellion.
  • “Who makes revolution? It is the great in-between; those who are neither immigrated nor coddled. The former are too weak and cowered to revolt. The latter are content and have no reason to revolt.”

  • Leaders face trade-offs in domestic policy decisions:

    • Example: Infrastructure projects are corruption opportunities that carry significant private rewards. The flip side, is that road infrastructure, for instance, can facilitate power shifts and the movement of rebels.
    • Example: Education may boost the economy, but highly educated citizens are a threat to leadership.
  • “In small-coalition polities, public goods often serve the narrow interests of the leadership and only indirectly the interests of citizens.”

  • Freedom is a cheap but valuable public good that carries tremendous risks for certain types of governments.

Chapter 6: If Corruption Empowers, Then Absolute Corruption Empowers Absolutely

  • “Successful leaders are not above repression, suppression, oppression, or even killing their rivals, real and imagined.”

  • If you are not willing to take on the dirty work, don’t bother becoming a leader.

  • Corruption is reported as higher in small coalition (autocratic) governments because it comprises a larger portion of the GDP. However, in large coalition (more transparent democracies), corruption may be equal on an absolute basis. The difference is that large coalition economies are larger (and corruption represents a smaller percentage of GDP).

  • “The nature of private rewards in more democratic systems are likely to come in the form of distorted public policy rather than through more overt means such as outright bribery, black marketeering, or extreme favoritism.”

  • Simplified political narrative in the USA:

    • Liberals: Advocates for the poor. Tax the rich, improve welfare for the poor.
    • Conservatives: Advocates of the rich. Decrease welfare for the poor.
    • Middle class voters courted by both parties since it contains a large block of swing voters.
  • More than 40% of Americans pay no income taxes at all. Authors consider this treatment a private reward.

  • “Private benefits, whether in large or small coalition environments, distort economies in exactly the self-serving ways we should expect.”

  • Earmarks are in the eye of the beholder: either supported or reviled contingent on how it impacts individuals.

  • Low salaries for police are a common feature of small coalition regimes. While counterintuitive, the private reward granted to the police is the right to behave corruptly.

  • Private benefits are not the sole domain of governments. Sports organizations are also susceptible. Examples of the International Olympic Committee (IOC) and Federation Internationale de Football Association (FIFA).

  • Corporate “largesse” and large cash and equity bonuses function as private rewards on the business-level.

  • Politicians often attempt to curb corruption through legislation.

    • General public often responds favorably to these policies.
    • Reality is that little changes. Institutions can still bend the rules and exploit loopholes.

Chapter 7: Foreign Aid

  • Most believe that foreign aid is a benevolent act meant to help the impoverished but foreign aid functions within the same political framework as described in the book: a tool for purchasing influence and policy.

  • Donor nations give aid to satisfy the desires of their coalition.

  • Aid recipients (esp. autocratic governments) appropriate and redirect the aid given to them to suit their own ends.

    • Example: Donations from the famous Live Aid concert were allegedly redirected but he Ethiopian government. For instance, trucks meant to deliver food were used to forcibly relocate people into collectives around the country.
    • Example: Foreign aid intended to aid Ethiopia in 1972 was subject to customs fees (to enrich the government).
    • Example: USA gave Pakistan $6.6B in military aid to combat the Taliban between 2001-2008. Only $500M is estimated to have reached the army.
  • “Herein lies the basis for making foreign aid deals. Each side has something to give that the other side holds dear. A democrat wants policies his people like, and the autocrat wants cash to pay off his coalition.”

    • Example: US support for Liberia in the Cold War. The USA supported an autocratic government in exchange for its anti-Soviet stance.
  • Dynamic of democratic vs. autocratic nations and aid:

    • More democratic nations require higher price for aid to buy policy positions.
    • More autocratic nations can be bought cheaply for policy positions.
  • The pattern of US aid follows the nation’s policy needs:

    • Egypt: In the late-70s and early 80s the USA gave large financial incentives in order to secure peace with Israel and keep the flow of oil.
    • Pakistan: US aid to Pakistan rose precipitously in the early 2000s as the necessity of using Pakistan for forays into Afghanistan became important.
  • Tied aid: is another way of using aid agreements to benefit the donor. This type of aid stipulates how money is spent by the recipient.

    • Example: German aid requires the purchase of German tractors.
    • Example: Danish aid to Bangladesh requires that ferries be repaired in Denmark rather than locally (the resulting cost being 4x in Denmark vs. in Bangladesh).
  • In democracies the general population bears some complicity in national policy: “As long as we the people want cheap gasoline…an abundance of markets in which to dump agricultural products, and we want that more than we want to see genuine development in poor countries, then our leaders are going to carry out our wishes.”

Chapter 8: The People in Revolt

  • General populace gets a raw deal under autocracies since there is little motivation for leadership to provide for the common good.

    • Minimal provision for health care, education and food.
    • Natural resources or foreign donors can further erode provision of public goods.
  • Revolutions and mass movements promise reforms and a new system that will look after public welfare. Following through on those promises doesn’t always happen (authors use examples from the Chinese communist revolution and the Kenyan independence movement—both result in autocratic governments).

  • “Many revolutions end up simply replacing one autocracy with another.”

  • Two ways a leader can respond to revolutionary threats:

    1. Increase democracy and public welfare.
    2. Increase dictatorship and misery.
  • The loyalty of the military is a critical factor in determining which of the two responses an incumbent leader will take.
  • Revolution can only gain traction when there is a sufficient number of citizens who believe there is a realistic change of success.
  • Autocrats goal: make rebellion unattractive.
  • Unexpected events often trigger rebellion: natural disasters, disease, stock market crash, financial crises, etc.

Chapter 9: War, Peace, and World Order

  • Carl von Clausewitz (Prussian general): “War is a mere continuation of politics by other means.” (i.e. war is inherently political).

  • Autocrats and democrats must take different strategies when it comes to war.

    • Sun Tzu: Provides a framework for autocratic nations.
    • Weinberger/Powell Doctrine: Provides a framework for democratic nations.
  • Sun Tzu approach:

    • Quick, decisive action and the element of surprise are more important that capabilities.
    • Marshall sufficient resources for a short campaign that doesn’t require reinforcement or additional provisions from the home front.
    • The spoils of war (reward) are essential for motivating the military.
  • Weinberger/Powell approach:

    • Commit forces only if the situation is vital to the national interest.
    • Must be willing to commit all resources and material necessary to win.
    • Political and military objectives must be clearly defined.
    • Relationship between objectives and committed resources must be reassessed continuously.
    • Must have the support of the general populace.
  • “Sun Tzu’s attentiveness to private rewards and Weinberger’s concentration on the public good of protecting the national interest represent the great divide between small-coalition and large-coalition regimes.”

  • In small-coalition regime the military serves two purposes:

    1. To keep incumbent safe from domestic rivals.
    2. To protect incumbent from foreign threats.
  • In large-coalition regimes the military is focused on protecting the system of government from foreign threats.

  • “When it comes to fighting wars, institutions matter at least as much as the balance of power. The willingness of democracies to try harder goes a long way to explaining why seemingly weaker democracies often overcome seemingly stronger autocracies.”

  • “War for democrats is just another way of achieving the goals for which foreign aid would otherwise be used. Foreign aid buys policy concessions; war imposes them.”

  • Ironically, when it comes to regime change, a democracy would rather have an autocrat in power (i.e. a compliant dictator) than deal with a democrat which must answer to constituents (rather than the conquering nation).

  • “Democrats are much more sensitive to war outcomes than autocrats.”

    • Victory doesn’t ensure a democrat’s political survival.
    • Autocrats can lose wars and remain in power.
  • Democrats adopt a “leave no man behind” approach. Autocrats adopt a “leave no equipment behind.” Quote from Ethiopian general: “When you lose an area you better destroy your equipment…if you cannot separate your men from their equipment then you bomb them both together.”

  • Democratic propensity is to pick on weaker opponents that are non-democratic (and not engage against other democratic nations).

Chapter 10: What Is to Be Done?

  • JP Morgan (businessman): “A man always has two reasons for doing anything: a good reason and the real reason.”
  • “Appeals to ideological principles and rights are generally a cover…there is always some principled way to defend any position, especially one’s own interests.”
  • The best strategy for the “masses” is to get the real selectorate and influentials as large as possible.