Feb 16, 2009

Dynamics of political-economic decision making

In a modern world where the lofty ideals of human freedom and democracy are so profoundly endeared, professed and emphasised only 22 per cent of the world population lived in free “societies”.
Another 39 per cent were classified as “partly free” and a vast majority still lives under the shackles of authoritarian rule or under dictatorship of one form or the other. In fact, for most part of the human history, mankind lived under dictatorship: and democracy has been more of an aberration than a norm, and dictatorships, authoritarian or autocratic forms of government have been the rule rather than the exception. Therefore, there has been a compelling need for a detailed analytical study of the rationale for continuation of dictatorial rules, the working of the economies under such rules and their impact on production processes, consumption patterns, utility functions savings capital formation, investment decision-making, income distribution, allocation of available social and economic surplus to competing demands, payments of rents, equilibrium of economic forces, trade, growth and development, welfare, etc.
It was after the First World War, that the interest of the economists started growing in analyzing the dynamics of political overtones of economic decision making and vice versa. In fact, the Versailles Treaty that brought the conflagration to an end after the economic prowess of the United States established through the Bretton Woods agreement that introduced a new international monetary system dominated by the greenback.
While there could be a large variety of dictatorships, including at time elected democracies, dictatorships, of elite groups or oligarchies there are four major forms essentially based on two major variables, viz degree of repression and loyalty. And those forms are:
(i) Totalitarianism,
(ii) Tinpots,
(iii) Tyrranies and
(iv)Tymocracy. Tymocracy is the rule of a mild form of dictatorship, which neither affords to exercise adequate repression nor does it enjoy the desired level of loyalty.
In totalitarianism the degree of both repression and loyalty is very high as has been witnessed in the former Soviet Union, Nazi Germany, China etc.
A tinpot is primarily interested in accumulation of wealth, and therefore cannot afford to resort to high degree of repression, nor does it enjoy high level of loyalty because of the negative perception of the people about. It Marcos of Philippines and Noreiga of Panama are examples of tinpots. In tyrranies like that of Saddam Hussain and some other medieval rulers, a high degree of repression is coupled with a very low level of loyalty.
As such dictators believe that a high degree of repression is enough to hold on to power and there is not much need for resorting to payments of rents to a large cross section of the society. Tymocrats are benign types of dictators who do not unleash repression but still command a high degree of loyalty through rational redistribution and lavish payment of rents.
The modern day military rulers fall in this category. Since the government’s control over economy was much greater in the Soviet Union than in the Nazi Germany, it was the Soviet experience which stimulated much research and debate within the economic profession.
The dictators’ capacity of action far exceeds that of the democrats who are often marred in inaction and this inaction is a very high political and economic cost as inactions ultimately lead to the downfall of democracies and rise of dictatorships. History is replete with examples where hyperactive democracies ended in failure and led to the rise of military dictatorships. Apart from inaction it is also the polarization of the political system that leads to breakdown of democracy.
This is further corroborated by the fall of democracies’(of Zulfikar Ali Bhutto) in Pakistan. Similarly, democrats turned kleptocrats also bring about painful demise of elected democracies.
The rationale of the dictators’ staying in power and the people’s exending loyalty essentially lies in the rational choice theory. The main weakness of dictatorship compared to democracy is that the psychological dilemma of dictators in characterized by the element of paranoia, this paranoia has its origin in the absence of a credible mechanism to gauge the degree of loyalty or support to the dictator. By Behram Tariq

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