The Dictator’s Handbook, Notes

Book by Alastair Smith and Bruce Bueno de Mesquita. Notes by Harsh Mudgil.

3 Objectives of Politics:

1. Come in power.
2. Stay in power
3. Control most money.

No ruler is an absolute ruler.

Ruler rules by managing three dimensions of any organization or society.

1. Nominal Selectorate (interchangeables)
2. Real selectorates (Influentials)
3. Winning coalition(essentials.)(inner circle.)

For Example: In a company.
Small shareholders = interchangeables
Large shareholders = influencials.
People who form boards = essentials

Governments such as Autocratic, Monarchic, and Democratic don’t differ in kind. They simply differ in the dimensions of these selectorates and the winning coalition.

These dimensions determine, how liberated or limited the powers of a leader are and up to what extent a leader can go without losing her job.

• A dictatorship is a form of government that has a small number of essentials, drawn out from a large number of interchangeables and a small number of influencers.
• A democracy is a form of government that has a large number of essentials, an even larger group of influencials, and a group of interchangeables as big as influencials.
• In an absolute monarchy, all three dimensions are small.

Policies of a country are a result of consequences leaders face from the 3-Ds of their country.

Rules of Success in any Political System

1. KEEP THE WINNING COALITION SMALL. A small group of loyalists is easier to maintain and rely upon.

2. KEEP THE NOMINAL SELECTORATE AS LARGE AS POSSIBLE. A large nominal selectorate, keeps essentials and influencials alert, that they would be replaced if unloyal or if they misbehave. Expand interchangeables

3. TAKE CONTROL OF SOURCES OF REVENUE. The most effective cash flow for a leader is the one that makes most people poor and a select few rich.

4. PAY ESSENTIALS JUST ENOUGH TO BUY THEIR LOYALTY. NOT MORE. Essentials would rather be you, than supporting you. Your only advantage over them is you know where the money is and they don’t. Pay them just enough to buy their loyalty and ensure they don’t sell themselves to your competitors.

5. DON’T TAKE MONEY OUT OF YOUR ESSENTIALS POCKET TO UTILISE IN PUBLIC WELFARE. Poor, Hungary people can’t overthrow you. But unhappy loyalists can. Don’t rob your supporters.

In a democracy, it’s more difficult for the leader to loot his country and continue his reign. That’s why a lesser number of leaders succeed in democracies. Here leaders need to be just a little more creative than their autocratic counterparts.

Leaders make the rules for their own convenience.

1. Choose whom to give the right to vote, creating new lots of interchangeables.
2. Create electoral boundaries. Not allowing certain people to vote. (stack the deck to create a class of influencials. )

This is for staying in power.

The amount of money a leader can spend on either public welfare policies or on policies for welfare depends on the number of essentials, a leader must keep loyal to him.

In a democracy, since the number of essentials is large, the amount of money that a leader can spread as a private reward is thin. Thus, essentials don’t sell their loyalty to private rewards (Money). Instead, it’s sold to public welfare policies, which further strengthen the power of essentials. Thus in a democracy, essentials can force the leader to take welfare policy decisions for their own electorates to offer their loyalty to the leader.

In a dictatorship, it’s more efficient to buy the loyalty of the essentials using money as a reward, as the number of essentials is small, and thus the spread of the money goes in fewer hands, thus making it a significant incentive.

Taxes are higher when we have a small number of essentials and vice versa.

Notes on Survival

• A small winning coalition is more stable and less democratic than a larger one this is because the leader has to offer more to his winning coalition than his competitors. In this case, the incumbent has advantages.
• Essentials also have to keep in mind that, new competition might be offering more, but those benefits would only mean something if the new competition keeps them in his winning coalition after coming to power.
• New competition might promise more benefits, but he can replace the old essentials, with new ones who he deems more loyal after coming to power. If a new leader brings new members to his winning coalition from outside, then there’s a good chance that he will terminate rewards for the old guard who helped him bring down the reign of the old leader out of loyalty.
• The old guard is purged because they have demonstrated that they are capable of disloyalty and betrayal. Thus they are purged by the new leader to neutralize threats to his power.
• In the case of a monarchy where the size of both selectorates and the winning coalition is small, the leader’s ability to replace members of his coalition is small. So the essentials can drive up the price of their loyalty and the leader has limited discretion over revenue since large chunks need to go to the coalition for their loyalty. Thus sustainability of power is lower.
• In the case of a dictatorship where there’s a small pool of essentials to choose from a large pool of interchangeables, it's cheaper to buy loyalty.

Three things to come to power.

1. Remove the incumbent.
2. Seize the apparatus of government
3. Form a coalition of essentials

• The incumbent can be removed by offering essentials of his a better offer.
• Incumbent can also be removed by rebellions, but only when he has already lost the loyalty of his essentials. Essentials no longer remain loyal, when they are dissatisfied with the rewards they are getting from the current leader and they need someone else to take care of them.
• Suppression of revolts is an unpleasant task. Essentials need to be fed well, to contribute to it otherwise they turn their backs.
• At a time many coalitions are trying to come to power. So it becomes essential to speed up and gain control of the instruments of the state first. Speed is essential.
• The impending death of a leader can cause him to lose support from essentials as they view it as an impending end of their rewards. So they try to search for someone else to take care of them
• Inheritance makes it difficult for outsiders to offer essentials something more than they expect from the current and new upcoming leader because they expect their rewards to continue.
• Doing the right thing to come to power must be seen from the perspective of the potential supporters so that they can be won. Coming to power isn’t about doing the right thing. It’s about doing what’s convenient and practical.
• Even when a country goes bankrupt, the job of the leader remains rewarding his essentials. When a leader isn’t able to deliver to them, his power becomes vulnerable.
• Silence is very important. If you want to change the group of your essentials, don’t tell before doing so. A group of essentials should never collectively feel that they are gonna be replaced.

COMING TO POWER IN A DEMOCRACY.

Just like in autocracies, a leader needs to depose the incumbent, take control of the state machinery and reward his essentials. In democracies since a leader needs a large group of backers, the group of essentials is large. Thus the spread of private reward is thin. Thus larger the size of the winning coalition, the lesser the loyalty. Thus the leader has to offer public policies which not only benefit themselves personally but also their backers electorally. A challenger can seize power by offering better public policies.

Dynasties exist in democracy for the same reasons as in autocracies. That’s because the group of essentials feels safe in the hands of a family, as it ensures their continued private reward.

While in an autocratic system, the struggle for power is physical, in a democracy it is mental. A rival with a better policy idea can overtake.

In a democracy, since there’s a need for a large winning coalition, the leader is always vulnerable. If a rival finds an idea over which the winning coalition can split then he can take over the control. Divide and rule work well in a democratic system.

A rival can try to win the essentials of the incumbent by offering them more than they are currently receiving. But unfortunately for the rival, the incumbent has an advantage. The essentials feel a sense of security with incumbent because they know their rewards would continue with the current leader and may stop with a new one. But if the incumbent is known to be suffering from a terminal disease or if he takes too much for himself or if he makes policies that are harming his essentials then the rival gets a shot at power.

To come to power means recognizing the opportunity, moving fast, and moving decisively to seize the day and terminate any opponents, if any.

Corporate Politics

Like any other small coalition regimes, companies run on the ethos of private rewards. It’s the most efficient way to win loyalty in a small coalition regime. Companies just like other small coalition regimes should pick a small number of essentials from a small number of influencials, who are picked from a very large number of interchangeables.

Only after the sacking, shuffling, and shrinking of a particular set of essentials can a leader ensure his future tenure.

A corporate winning coalition consists of:

1. Insiders (few members of upper management)

2. Outsiders (board of directors (highest shareholders))

3. Grey members (family and friends.)

The benefits of a corporate coalition consist of:

1. Salaries, perks, stock options.

2. Dividends.

• Those board members who bring coupe to the old regime must be deposed because otherwise, they will bring it again to the new one.
• Those company heads who make personal relationships with the board last longer.
• The job of a CEO is to ensure continuous increases in stock price. The stock price is a reward for the biggest stockholders (essentials.) If the stock price is low, essentials are unhappy and they will depose.

To suppress rebellion, a leader can do two things.

1. Expell misbehaving elements of the essentials. Raise the private rewards for other essentials.

2. Expand essentials and reward interchangeables.

Leadership is about the good of the leader and not about doing good for people. A competent group of essentials is a danger to the leader. After all competent members are seen as alternatives to the leader.

The only required trait from a potential member of a winning coalition is loyalty.

It is very important to sink all the members of the winning coalition who helped a leader to bring the previous leader down because loyalty is everything. People who aren’t loyal to one leader will lose loyalty to the new one sooner or later. So it’s better to sink them and potential challengers to power as soon as possible and get those positions filled by the most trustworthy comrades. It's much much better to have loyals who are incompetent, than having competent ones who are disloyal.

The group of essentials should be such that it has no capacity to rise to the top.

Keeping the group of essentials off-balanced is important to stay in power. Making them remember that they are expandable by for example having regular elections is a way to remind them of their replaceable nature. On the other hand, rewarding loyalty is important.

Keeping the winning coalition off balance means making them stuck into the loop of being rewarded for their loyalty and between a threat of being purged.

In a democracy to consolidate power, leaders can cheat or be innovative about it by fixing feats for minorities.

In a democracy, parties fund other parties to cut off the vote percentage of the opposition.

Bloc voting is another instrument in a democracy through which leaders control power. It is basically meant to make a large chunk of voters act in togetherness based on cultural/religious/regional/professional ties. It makes democracy function like an autocracy.

Bribing people for votes is ineffective. Bribing works best at the bloc level. To win the support of the leaders of a bloc.

Blocs which turn out less for the leader, are punished by cutting off amenities.

Things to do for staying in power in a democracy.

• REDRAW BOUNDARIES OF CONSTITUENCIES, TO REDETERMINE WHO CAN VOTE AND WHO CAN’T.

TAXATION.

• Taxes can not be too high, as then they would discourage people from working hard. Neither they can be too thin, as then they would contribute nothing to the government’s treasury.
• The optimum taxation which lies somewhere between the above also depends on a number of essential backers of the government. That’s why it’s also important to have a small group of essential backers.
• Taxation also helps in winning loyalty. High tax rates can be used to increase the comfort of the coalition members while non-members only face its blunt.
• Making bureaucracy for tax collection adds to the list of people the leader needs to depend on to run the government. So to reduce that, leaders use indirect taxes.
• Msp of farm and other such products is another form of indirect tax. Leaders buy cheap and sell high to earn profit.
• Private tax collectors or for that matter the sales staff of a company are an asset and a liability for the leader. On one hand, they bring in cash, but on the other, it’s their very same dealing with cash that gives them power.
• By distributing licenses to collect taxes, leaders kill 2 birds with a single stone. They tackle the problem of rewarding essentials, by making them tax collectors and they also tackle the problem of establishing and managing the infrastructure for tax collection.
• A country is less likely to democratize if it continues to rely on natural resources for revenue. To democratize the only way is for the leader to rely on the revenue from taxes which are to be collected from people. Eg. the US curbing oil exports from Iran and Venezuela and sanctions to allow their leaders to take more democratic decisions.\
• Borrowing money is the favorite of all leaders. It gives them more money to buy loyalty in private rewards and since most leaders aren’t lucky enough to survive in politics for a long time, the worry of debt lies on the next incumbent. Since this is a liability to any new challenger, it becomes a wall of defense for the current incumbent.
• A leader should default on debt if the cost of servicing the repayment becomes equal to or more than future credits. To increase the credits, the leader should increase the revenue. Natural resources provide 1 way of increasing the debt. But, to increase the revenue, the taxes must be logged at a higher rate, which produces inequality and poverty.
• Debt relief work in a democracy and not in an autocracy.
• Even dictatorships function on taxes. So leaders need to provide for people so that they remain productive and work to pay taxes. But leaders should give just enough to keep people productive and not to turn them into the capable competition. For example in North Korea elementary education is excellent. But higher education sucks. This is so that people get just enough to stay productive to pay taxes and not become challengers to power.
• Leaders also need to provide roads as well. Roads let people come to market and sell their products. But roads can also allow people to gather and to make protests or new power centers. So roads to markets yes. Roads to leaving the country yes. Other roads, which people need to reach the center of power? -No. Roads are generally curvier in democracies because the cost of acquiring private land is high and unfair means of acquiring private land are out of options. Roads in autocracies are straight because autocracies can always use unfair means to their advantage to acquire private land.

American System, Corruption, and Financial Aids

Usually, there’s a difference between what politicians say or do and what they actually believe in.

Low-income group citizens tend to vote for Liberals as they form policies that benefit them personally.

High-income group people vote for Republicans as they form policies that benefit them.

Liberals and Republican target different sets of electoral niches and they distribute private rewards respectively.

Police salaries are purposefully kept lower in small coalition regimes. It is so that corruption becomes institutionalized. Police in this manner become more loyal to the power, because their wealth depends on their ability to exercise corruption, which depends upon the power’s discretion to not penalize them for doing so. If the police decide to turn disloyal, the power then to can crack the whip of prosecution on them

Corruption provides a means to ensure loyalty to the regime without having to pay good salaries and it guarantees the prosecutorial means to take out any beneficiary who fails to remain loyal to the regime.

Only those corrupt officers are outed, who fail to remain loyal. Those who work on anti-corruption drives don’t end up well.

Anti-graft laws don’t curb corruption. But they are rather an instrument of the power to make the essentials fall in line. The entire system of politics is based on the corrupt management of money. The only way to root out corruption is to increase the size of the winning coalition and make the power more accountable to more people

Foreign aid is a tool for buying policy decisions in foreign countries. Doing so leaders build up support for themselves in their home country. It is easier and less costly to buy a policy in an autocratic country than it is to buy in a democracy. US invasion of Iraq was launched from small coalition countries such as Kuwait and Saudi Arabia, rather than from Turkey. The coalition size of Turkey is large and thus US offer for foreign aid wasn’t large enough to make the members of the coalition of the Turkish government sell out their loyalties towards Iraq a fellow Muslim nation, to a Christian-majority country.

Poor countries get less aid than rich ones as they can be bought cheaply. Aid is simply a reward for serving the interests of the donor

Aid fails to work for humanitarian issues, because:

1. It absolves the leader from depending upon the citizens to work, in order to pay him taxes.

2. Unpopular policy concessions are controlled in an autocratic fashion.

Governments seek their cuts out of aid from private organizations as well in many forms such as import duties.

Aid works best when we stop pretending that aid is for the betterment of people and start treating it as a reward for the accomplishment of objectives. It works best if given out on reward bases.

Notes on War

• Democratic leaders only wage war, when winning is certain. Autocratic leaders wage war even if the victory is uncertain.
• Democratic leaders double down on their efforts if going gets tough to win win the war. Autocratic leaders make good initial efforts but abandon war as soon as they feel they are losing.
• Soldiers in a democracy are motivated by National interest. In an autocracy, they are motivated by private rewards.
• In a democracy, leaders need to keep people happy. Foot soldiers or bottom-ranking soldiers are also people. Thus democracies invest heavily in upgrading their forces and providing them with as much protective gear as possible. In an autocracy, low-level soldiers are disposable pawns, who do not matter. Thus, autocrats spend less on upgrading them and for providing them with protective gear.
• In autocracies, losing a war is a much more delightful option for a leader than going full out with it. Autocrates, need to fund their cronies. Thus, they can not cut their pay and invest in the war. The reason for that is autocracies have small winning coalitions.
• Democratic leaders war to impose favorable policies in foreign countries. For them, aid and war have the same objective and that is, to buy or impose favorable policies in foreign countries, which could enhance their personal popularity domestically. Autocrats, go to war to loot and steal whatever resources they can so that they can reward their cronies and make their positions much stronger.
• As a result, war is an instrument for solidifying political power for leaders in all possible systems of governance. The democratic leader most likely loses the power if the loses wars. Autocratic leaders are vastly unaffected by the decisions of war if they can manage to accumulate enough resources after it.

Winning coalition expands when the country is facing money constraints. This is because, the leader has to cut down the number of his winning coalition members in order to feed the remaining lucky ones the same exact rewards, as he was feeding them before. But, getting purged goes against the interests of the winning coalition. Thus, they resort to expanding the coalition, which reduces the private rewards for everyone, but also lets them remain a member of the winning coalition.