Fifty shades of gray dictators

 What motivates authoritarian rulers in Central Asia?

Paul R. Gregory.  The political economy of Stalinism: Evidence from the Soviet secret archives.  Cambridge University Press.  2004.  308 pages.

More than two decades after the massive heart attack of the Soviet Union, scholars debate the reasons for the collapse.  To Austrian economists like Friedrich Hayek, a planned economy cannot induce the information from individuals that generates trade.  Had Steven Jobs not known the prices and quantities bought of personal computers, he might not have been able to gauge the potential profits in a pocket-sized device (assuming that he could have kept them).  Socialist economists blame the men rather than the blueprint.  Planning might have worked had the politically powerful not been intent on pocketing gains.  To use Joseph Berliner’s analogy, did the Soviet economy implode because of the jockey or the horse?  “What we know for certain,” writes Paul Gregory, who has studied Soviet economies and their progeny for four decades, “is that the administrative-command system survived longer than Hayek and [Ludwig von] Mises would have expected and, at its peak in the 1960s and 1970s, it constituted a credible military threat as a world superpower.”

The Austrians failed to anticipate this qualified success because their model was too simple, Gregory argues.  Bureaucrats had incentives to gather information informally, but not necessarily to share it with ostensible superiors.  Brezhnev faced the same problem that torments main shareholders today in the United States – the agent may not do the bidding of the principal.

The two-arm bandit

To explain Stalin, Gregory puts forth four models of a dictator – models that may apply in Central Asia today.  The first and least likely is the “scientific planner”, who merely defines benevolent rules for divvying up resources among the population and leaves the decisions to the technocrats.  In contrast, the “stationary bandit” manages the economy in order to ensure its long-run growth and subsequently the nation’s political stability.  (Gregory attributes this model to the late, great American economist Mancur Olson.)  

Both types of dictators may engender economic growth; but clearly other types proliferate, somewhat in the manner of stinkweeds.  The “selfish dictator” cements his political support by bribing or bullying the powerful.  Finally, the “referee-dictator” presides over the internecine struggles of interest groups in order to make himself indispensable to them.  (Yet another Olsonian concept.) 

With respect to Stalin, we can dispose of the scientific-planner model rather quickly.  Also, his iron grip on the Soviet economy and politics would rule out the referee-dictator model.  Choosing between the two remaining models is complicated by the lack of reliable statistics, Gregory argues.

From specialized studies of output, investment, rubles and other topics, Gregory concludes that the Kremlin horse had thousands of jockeys, some of whom were superiors to others and all of whom were elbowing for position..  “Each superior faces an uncooperative and untruthful subordinate who can only be moved to positive action by force.  One dictator alone could bring little force to bear.  Each dictator requires minidictators under him to coerce action at the next level.”  This inelasticity in the economy reduced output.  “Virtually all economic instructions were based on the principle that this year’s activity would be last year’s plus a minor adjustment.  The massive imbalances were resolved by arbitrary interventions by the thousands of ‘dictators’ empowered to intervene.  There could be no general rules because they would have interfered with the authority of officials to intervene….In effect, the economy was frozen in place as the other world economies progressed.”  Regardless of its motivation, the dictator’s urge to command inhibited economic growth.  Perhaps this principle is not entirely alien to Central Asia.   -- Leon Taylor, tayloralmaty@gmail.com

        

Good reading 

Hayek, F. A.  The use of knowledge in society.  American Economic Review 35.  1945.  Argues that only free markets can collect essential economic information from individuals, through millions of their exchanges.

Olson, Mancur. The logic of collective action: Public goods and the theory of groups.  Harvard University Press.  1971.  Small interest groups may dominate large ones because their benefits per member are larger and their organizational costs smaller.   

Olson, Mancur.  The rise and decline of nations: Economic growth, stagflation, and social rigidities.  Yale University Press.  1982.