| In a recent paper*, Daron Acemoglu of the Massachusetts Institute of Technology (MIT) and James A Robinson and Thierry Verdier of Berkeley have tried to look at the problem of corrupt political leaders who loot their countries. |
| Their focus is on some African countries. But their conclusions are breathtakingly applicable to some of our own states, notably Uttar Pradesh and Bihar. |
| Thus, they say, political bandits succeed because they are able to divide and rule. The caste divisions in Bihar and UP are a case in point. They then say that the people need to cooperate to rid themselves of the bandits. |
| However, "such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move, and redistributing the benefits to those who need to agree to it." The Mayawati strategy in UP or the Laloo strategy in Bihar are par for the course. |
| Then comes the clincher. "Kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents; when opposition groups are shortsighted; when the average productivity in the economy is low; and when there is greater inequality between producer groups (because more productive groups are more difficult to buy off)." Substitute financial transfers from the Centre to the states for foreign aid and you get an exact match. |
| Another interesting question that the authors discuss refers to the consequences for political banditry when average productivity in the economy is low but there are small groups with very high productivity as well as politically strong producer groups. |
| The authors say that "a highly productive producer group creates a 'balance of power', and this balance between one of the major producer groups and the ruler prevents the most egregious kleptocratic policies." |
| Discerning readers will recognise here the case for creating a middle class. Almost by definition, it tends to be more productive and to exert powerful influence on the rulers. (Madan Lal Khurana lost to Sheila Dikshit because he persisted with the old style politics of placating producer groups when what was needed was to placate the numerically larger middle class of Delhi). |
| This has not happened in Bihar and UP, but it is happening in the southern states. This suggests that the middle class there is big enough to at least restrain banditry. And although some of the leaders there are pretty corrupt, they are no match for the gangsters of Bihar and UP. These two states are in a class by themselves. |
| If weak institutions lead to a collapse of state authority, what takes its place? Since life and business have to go on, contracts and agreements have to be enforced. The standard argument of economists is that if the state fails to do its duty, people and businessmen will turn to private groups. |
| This is called privatisation. But a problem arises when the state will not formally give up its monopoly over the use of force. This turns private enforcers into criminal gangs. |
| A recent book** by Vadim Volkov on Russia throws some light on which way things are headed in UP and Bihar. He says that in Russia the criminal gangs became dominant partners in business enterprises because of their ability and willingness to use violence. What Vladimir Putin is now trying to do is what Colonel Sleeman did in the 1860s: restore its old monopoly to the state. |
| However, neither Volkov nor Acemoglu, Robinson and Verdier, have examined a situation where entire political parties turn into gangsters. This metamorphosis is a peculiarly Indian phenomenon and it would be most helpful if some Indian sociologists and economists got off their hobbyhorses and did some useful research for a change. |
| *Kleptocracy and Divide-and-Rule: A Model of Personal Rule, NBER Working Paper No. 10136, December 2003 **Violent Entrepreneurs: The Use of Force in the Making of Russian Capitalism, Cornell University Press |
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