Sunday, September 17, 2006

Kleptocracy and Mancur Olson's books

Looking for the etymology of 'kleptocracy', excessive rent-seeking by those with political power, one source said that it originated in Spain 1819, during the Napoleonic invasions?

Anyway, the growth of the idea of kleptocracy seems to be attributable to the economist Mancur Olson, especially in his last book Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships:
"A central strand is the nature of political power, and how different kinds of power promote different kinds of economic behaviour...Through history, Olson observes, it has been better to live under political tyranny than to be subject to the depredations of roving bands of warrior-thieves...Assuming that tyrants and thieves are alike, in that they are out for whatever they can extract from their subjects, why should one kind of predation be better than the other? The answer, Olson explains, is that the tyrant has a stake, an "encompassing interest", in the domain he is exploiting: if it prospers, he can extract more for himself in taxes and other ways. A roving bandit merely destroys and moves on. A stationary bandit keeps taxes low in the short term in order to spur growth and gather more revenue later; in fact he goes further, and provides growth-promoting public goods, the better to improve his take...Autocracy, then, is usually much better for the victims than anarchy."
Peaceful, settled rule by political elites, even they extract excessive economic rents, is better than a continual, endemic state of warfare and feuding.

Olson also addreses democracy, which I filed away for my work interest in FDI in emerging economies, but I write papers on early modern political history and warfare, so I found this discussion particularly interesting.

Found a reflective essay on the meaning of the term as well as the interesting, but rather pessimistic "Iron Law of Oligarchy", which "states that all forms of organization, regardless of how democratic or autocratic they may be at the start, will eventually and inevitably develop into oligarchies."