Leave it to losers

The need to defer to the presently powerful is a troubling thread throughout Daron Acemoglu and company’s work.

For instance, Acemoglu and company describe US elites as being willing to let the country democratize and develop because they were assured that they wouldn’t be subject to income tax (until 1913). In Britain, agricultural elites were assured that the Industrial Revolution wouldn’t upset their interests, because they were given the House of Lords and Parliament only expanded the franchise gradually. In present day Germany after the 1850s, the landed Junker class stopped blocking industrialization when they were assured future influence within a ruling coalition with the rising bourgeoisie (sometimes called “Iron & Rye”).

It is difficult to not see this as taking sides. Why should it be inherently desirable to keep reactionary losers in power?

I think Daron and colleagues would argue that this is not a normative but a positive stance. In the countries that they study, coddling political losers seemed to pre-date positive economic transformations.

In fact, their economic model simply models the utility function of a ruler, and a utility function of the citizenry, and adds a variety of modifications to see how each reacts in a game theory environment to factors like technological innovation or military invasion. Whether or not the elite need coddling depends on a number of factors, like the cost of replacing elected leadership, or the likelihood that a new technology would erode political power. When the cost of replacing a leader is low, leaders will allow the adoption of new technology because society has them in a vice grip. When the cost is high, they still allow innovation, because they’ll get to tax the proceeds. When political replacement costs are middling, the leader is unsure of whether they will be able to capture the returns to innovation. When innovation will destroy their power, they will oppose it. If leaders aren’t just trying to maximize taxation receipts, but also get rents from governing, they will in general hold on to power with a sticky vengeance. While innovation (especially in human capital) leads to returns that grow with the economy, rents (essentially modeled here as feudal rents) are always the same little basket, so are relatively less attractive as development takes off.

Because all of these factors are tough to economically model, Acemoglu and company simplify by reducing them all to rents (either taxation induced or super rents), or factors that influence rents. As such, the Acemoglu account doesn’t engage with more nuanced views of the state, like…

• Karl Polanyi’s work saw the state as contributing usefully to influencing the rate of economic change. This was not because elites wanted rents, but because creative destruction gets a little too hopped on its own smoke to be sustainable.
• Michael Mann has proposed a framework of looking at how networks arise because of ideological, economic, military or political shifts – often externally induced. If these networks are capable of high degrees of organization (which will often pull “promiscuously” on ideological, economic, military or political sources of power), then they will be relatively successful. This “organizations” approach doesn’t give primacy solely to money or technology.
• Finally, Charles Tilly argued that variance in the types of states that emerged in Europe can be explained by variations in concentration and accumulation of capital and coercive power. Preparations for war – in given political-economic settlements – determined the options available to rulers and the shape of future concessions. So it’s not rents relative to some idealized efficient market that are considered, but ABSOLUTE levels of accumulation and power. More efficiency doesn’t win wars against overall richer states.

Indeed, part of the problem with the false parsimony of Acemoglu’s models is that they appear to point in every direction at once. While accommodating political losers is given explanatory power in some of their accounts, revolution carries the day in others – as we’ll see in a future post.