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The Dictator's Handbook: Why Bad Behavior Is Almost Always Good Politics

December 08, 2011

Introduction

JOANNE MYERS: Good morning. I'm Joanne Myers, and on behalf of the Carnegie Council I'd like to thank you all for joining us.

It is a pleasure to welcome back to our Public Affairs Program Bruce Bueno de Mesquita and also to meet for the first time his co-author, Alastair Smith. Together they have written a fascinating book, entitled The Dictator's Handbook: Why Bad Behavior Is Almost Always Good Politics.

This is rather an unusual book, in that it turns conventional political wisdom on its head by looking at government and governing from the perspective of the leader, rather than from those that would be governed.

With the Arab Spring now well into autumn and with three dictators gone and others teetering on the brink of extinction, it may be a good time to ask: How was it possible for these tyrants to hold on to power and for so long? In The Dictator's Handbook, Bruce Bueno de Mesquita and Alastair Smith address this question, as well as others. What they have discovered may surprise you.

For some time now our speakers have been part of a team revolutionizing the study of politics. In their latest collaboration, they start from a single assertion: Leaders do whatever keeps them in power. They don't care about the national interest, or even their subjects, unless they have to.

Their study shows that where politics are concerned, ideology, nationality, and culture don't matter all that much. After all, they posit, politics is about individuals, each motivated to do what is good for themselves, not what is good for others. Sound cynical? Well, maybe so. But as the authors tell us, it just may be the truth.

Still, it is from this perspective that they deepen our understanding of all political systems. They argue that once we begin to think about what helps leaders come to and stay in power, we will also begin to see how to fix politics.

For professors Bueno de Mesquita and Smith, this is a realistic starting point for anyone seeking to improve human governance, spreading the rule of law, decent government, and democracy, because in the end what their nearly two decades of research into the motivation and constraints of leaders show is that dictatorships are just another form of politics.

As our speakers focus on what is, rather than what ought to be, it is their intent that the lessons learned will teach us how to win the game of politics and perhaps even improve the world a bit as we do.

Please join me in giving a very warm welcome to our guests this morning, Bruce Bueno de Mesquita and Alastair Smith. Thank you.

Remarks

BRUCE BUENO DE MESQUITA: Thank you very much. It's a great pleasure to be back. I want to clarify the nature of the co-authorship. I wrote all the right things, the errors you want to aim at Alastair. See, that's the virtue of going first.

We are indeed going to provide an extremely cynical view of politics and one that we happen to think is also the truth.

We start from the perspective that if you don't focus in on what really is, there is no way that you are going to fix the world. We would like to fix the world. We hope to talk a little bit about how that might be done. But you have to start from a realistic perspective.

 

I want to start off with a little quiz by way of being realistic. I'd just like a show of hands. How many of you would like to have a job that gives you absolute job security for as long as you want to hold the position? How many would like such a position?

[Show of hands]

Keep your hands up. And of those whose hands are up, how many of you would like to make as much money as you want, without limit, just completely whatever you would like to earn?

[Show of hands]

Sounds good. Okay. I'm watching you. You could be dangerous.

And how about you make all that money, and as it turns out, you pretty much are Frank Sinatra. You do things your way; you don't have to worry about a lot of other people that you have to answer to; and, no matter what you do, people tell you that you are doing a fantastic job? Does this sound like a good job? It sounds like a good job.

Well, who has a job like that? Does Barak Obama have that job? No.

People who are dictators have jobs like that. Kim Jong-il, he's got that job. He's running a country, North Korea, with a per capita income of under $1,000, and yet he has managed to make himself worth $4 billion. And he will be in office until he dies in his sleep. He has been in office now for 18 years. He had to wait for Daddy to pass on. He is going to pass it on to his son.

What we want to talk about is how to get and how to keep a job like that.

It's going to turn out that there are just some very simple principles that govern how to govern. I'm going to turn the podium over to Alastair for a few moments now to talk about what those principles are.

ALASTAIR SMITH: One of the big mix-ups, one of the big hang-ups, we have in studying politics is people focus on the right thing as opposed to the politically right thing. So we are going to focus on this politically right thing.

We're going to tell you that all organizations, whether they are democracies, dictatorships, corporations, sports federations—I love talking about sports federations by the way—they all operate on the same principles: that people are trying to get their way and they want to stay in power, the people at the top.

We want to think about a framework where we could bring these ideas to bear. The key thing about staying on top of an organization is forget these nominal titles of dictatorships and democracies and think about what really matters. What really matters is how many people do you have to keep happy to keep your job and where do you get those people from?

We are going to call these things the winning coalition, because we needed some grand word for it. That's the set of people that you need. In the United States, we might think of this is about 35 million votes; that's how many you need to win the presidency of the United States. You're probably thinking that's quite a small number, but we can do the math.

Then you've got to think about where you're going to get those people from, the coalition, the selectoral—where can you choose supporters from?

Then given this simple framework, we're just going to tell you five rules that will get you a long way to securing political power in that great job that you would like to have.

Rule number one, the primary thing you want to do in politics, is be beholden to as small a number of people as possible. Poor old Barack Obama has to keep 35 million people happy if he wants to get reelected. That's a lot of people to keep happy.

Kim Jong-il—we actually did a survey. Some people were arguing whether it was seven or eight people who really mattered in North Korea. They give you the proper nouns. It's not "voters in Wisconsin," it's Mr. Kim and Mr. Kim—which of these Kims really matters? I mean literally it's the smallest number of people you can possibly get. It's easy to keep a small number of people happy.

The second thing you want to do is not just have a small number of people, but you want to pick them from the biggest possible pool you can. So elections are wonderful inventions for corrupt leaders. Lenin was a genius. People keep thinking of elections as legitimacy—"Let's have an election because the government will be legitimate." It's not legitimate if what actually happens is we know what the result is before the election.

But the wonderful thing about it is the people who are in office know they can be replaced. In a democracy, all you have to be is a living human being who can vote and you can be brought into office. There are very few restrictions on who can run for office in the United States, very few restrictions on who can be in the Cabinet. It's not like a theocracy, where you have to be religiously trained, or a general. Those systems are hard to keep supporters because there aren't many replacements.

So we've got a small number of people. Make sure you pick them from a big pool. And then what should you do? You should tax very heavily. Why should you tax heavily? Well, that gives you as much money as you can to reward your supporters.

We like to think of it as the following. It's much better to tax heavily and choose who eats than let the people feed themselves from a much bigger pie. If all rewards and wealth come through you, people are very loyal. It's not just that you're making people worse off. This is the whole purpose: you make people worse off except those people you choose not to make worse off. That makes them very loyal to you.

So what do you do? You've got these people, you've raised all this money. You've actually got to pay your supporters and make sure you pay them well. There are some people who are brilliant at this.

Think of Robert Mugabe. This is a guy who took a productive, flourishing economy and drove it into the ground. But there's one thing he does: The army always gets paid. There are cholera epidemics, there are droughts, there is famine. There is one group of people who get paid; it's the senior people in the army. Unambiguously, they always get paid.

But now we've got to think. There's a classic mistake a lot of people make. So our final simple rule is never be nice to the people at the expense of those who matter.

Let's think of Burma, for example. Than Shwe, who was the general there, never made this mistake. So a big cyclone, Cyclone Nargis just comes in about three years ago, wipes out possibly as many as half-a-million people who got killed in the storm.

Did he bother worrying about looking after the welfare of the people? No. He fleeced the international community, took whatever little aid they would bring in, and actually just resold it on foreign markets, kept it for himself. Actually, when the people started collecting in monasteries and schools to try and find shelter from the hurricane, he said, "No, no, no, no. You guys can organize against me." He got the army to drive these people back into the swamps, back into the flooded areas.

This would be like Bush turning up—some of us may think Bush didn't do a great job with Katrina, but the army did not turn up in Baton Rouge, find the evacuees, put them on buses, and drive them back into the water.

The last rule is don't be nice to the people at the expense of your coalition. People tried this, people like Julius Caesar. What did he do? We all think there was this attempt that he was trying to be king or something. He was already effectively emperor. He made the mistake that he tried to reduce that tax burden on the people. Well, who were the holders of that debt? His friends. What did they do to him? They killed him.

There are five simple rules:

  • Rely on as few people as you can.
  • Pick them from a big pool.
  • Tax them heavily, just heavily enough that they don't stop working, because you do need them to keep working, unless you can find somebody nice, like the U.S., to give you lots of foreign aid, in which case you can get away with it.
  • Pay your supporters.
  • But don't try to be nice to the people at the expense of your coalition.

That will get you a long way.

Actually, that's probably the longest I have ever been able to talk. [Laughter]

BRUCE BUENO DE MESQUITA: It wasn't easy, believe me. [Laughter]

You may be thinking: I could see more or less how these rules would work in a miserable dictatorship.

But our claim is this is how all governance works, it's how corporations work, it's how the Carnegie Council works, it's how the United States government works.

How could that be? My task now is to clarify that a little bit. I'm going to talk about how this works, for example, in the United States. I'm going to do this at two levels, internationally and then domestically.

Again a little quiz. How many of you are in favor of promoting and advancing democracy around the world?

[Show of hands]

Please get those hands up high. I like to see the liars in the room. [Laughter]

Now keep your hands up. I am going to ask you a question, and if the answer is yes, keep your hand up, and if it's no, put your hand down. How many of you think that we should be giving foreign aid to Hamas?

[Show of hands]

But they were democratically elected. Don't you want to help them? We have a few [inaudible]. Okay.

So most of us don't want to help Hamas, although democratically elected, because what we really want is for other governments to adopt policies commensurate with what we want, to be policy compliant.

We say we're in favor of democracy, we say we're in favor of alleviating poverty and other important things, but when push comes to shove and we have to choose between encouraging governments elsewhere to do what we would like versus letting them do what they want when it's abhorrent to us, we choose those who would do what we would like.

And how do we get them to do what we would like? By buying policy concessions. This is what we call foreign aid.

This is one of the ways, for example, in which the leadership of the United States promotes the interests of the coalition it depends on, because if you depend on the small coalition, it's easy to bribe people with private rewards.

But if you depend on millions of people to keep you in power, it's too expensive to bribe them, so you buy their loyalty with public goods, with things that they value as a society. In order to do that, at the margin in the foreign policy arena with regard to aid, you need to persuade other governments whose policies otherwise would be unpleasant from our point of view to adopt the policies we want.

Now, if you go to a democracy and try to get them to do that, it's very hard, it's going to be very, very expensive, because they have to satisfy their coalition of supporters, which is very broad. So when they sell out policy they need something substantial to compensate the people.

Therefore, who do you give foreign aid to? Dictators, because dictators can sell the people out. They just have to satisfy a few people. They use the foreign aid to satisfy those few people. They don't improve the lot of their citizens. And we are happy with that. Our leaders are doing that because we want them to do that. That's what we, the people, want.

The job of any democratically elected leader, as with any leader, is to satisfy the people who keep the person in power. That means doing the policies we want, not making people out in the world better off. Now, how about when we look at this in the even more cynical setting of domestic politics?

There is great polarization in the United States at the moment between the Republicans and the Democrats. There is great debate over how to fix our economic woes.

If you listen to the media, as I am sure you all do, then you know that what the great divide is alleged to be about is some deep philosophical difference about what is the right way to fix the economy.

I don't think it's about a deep philosophical difference. The Dictator's Handbook doesn't think it's about a deep philosophical difference. It's a much more cynical thing.

Whose taxes does President Obama want to raise, the poor or the rich? He wants to raise the taxes of Republicans. Republicans are disproportionately wealthy voters.

Whose benefits do the Republicans want to cut? Democrats'. Democrats are disproportionately poorer voters.

All that we see in this debate is that each party wishes to reach into the pocket of the supporters of the other party, take their money, and transfer it to their own supporters. This is exactly how politics works. There's nothing shocking about it, although in polite company we don't typically say it as bluntly as I have just said it.

The ideology behind this—"we believe in free markets," "we believe in the social good," or what have you—this is window dressing.

The parties have simply worked out that there are three groups of voters: there are voters who are relatively well off and will support parties that pursue their interests in being well off; there are people who are not so well off, they will support a party that supports the interests of those who are not so well off; and there is the great independent voter in the middle not sure which way to go, and that's where all the competition is. That's what the fight is about: How do I attract those few voters?

When we look at policy in the United States, what do we see? We see, for example, that when the Republicans are in office they want to reduce the taxes on people who are already pretty wealthy.

They can even offer a nice Chicago-like incentive-compatible argument for that: "We would like everybody in the country to be prosperous and rich. We could give people an incentive to become rich by penalizing them for being poor, taxing them heavily." This seems to be the Republican perspective. Where is Milton Friedman when we need him?

And the Democratic perspective is: "No, no. We have to take care of the poor and needy." There happen to be many, many more of them than rich. So Democrats get typically many more votes or have many more party identifiers. Luckily for the Republicans, the Democratic identifiers don't come out to vote as much.

It's all about relative interests. It has nothing to do with national interests. It has nothing to do with philosophy of what is the right thing to do. It has everything to do with "How do we get people to support us and keep us in power?" This is how it works whether you are looking at the United Kingdom, you are looking at France, you are looking at Chad, you are looking at China, you are looking at India. They all operate the same way.

We can see this in corporations. We are now coming into the season of corporate bonuses. Already, just a few days ago, The New York Times, knowing now that bonuses are going to be relatively low this year, relative to previous years—not relative to what most people earn, but relative to previous years—already The New York Times ran a story a few days ago pointing out that what the big banks are going to do is smaller bonuses but stock options, which—my god!—could be worth—this is a quote—"zillions (technical term in The New York Times) of dollars in a few years."

Many of us wonder: How could the banks be so politically tone deaf as to be willing to spend all of these resources on these few people working for them when they had to be bailed out by the American taxpayer, when they are extremely unpopular at the moment? How could they do that?

We have a very simple answer: Who are the people who can depose the leadership of a big Wall Street bank? Is it the American voters? Does the American voter have a say about who is the CEO of Chase JP Morgan? No. It is senior management, board of directors, just a small group of people. Those are the folks who are getting the big bonuses, the big salaries. They are being kept loyal to the incumbent leadership.

It's not that they're tone deaf. It's that what we, the people, think would be good is irrelevant to their political survival.

So if we wanted to change that, we would have to change how the choice process works. I use that as the segue to Alastair telling us how to make the world a better place.

ALASTAIR SMITH: This is so funny. Bruce just loves to talk through all the things I was going to talk about.

BRUCE BUENO DE MESQUITA: What is the answer?

ALASTAIR SMITH: We really want to hit home here that policies that leaders have are things that are in their interests, and that means the interests of their supporters are not making the world a better place.

I want to give just one example that struck me. I just came back from a trip to France. I was walking around the pope's palace in Avignon. You think, "A religious organization, so there must be—"

BRUCE BUENO DE MESQUITA: I'm sorry, I have to interrupt. And Alastair has studied French. He speaks it so well that neighbors who hear him speak French think he is speaking German. [Laughter]

ALASTAIR SMITH: My French is not good.

I won't to go into the long stories of the Anglo-American plan to bankrupt the French crown through asking you guys to rebel, sucking the French into the war, and bankrupting them, because that would take a little long. But we'll do that another time.

Yes, the pope.

You go to the Palace of the Pope. What would you think you would talk about when you go around? You pick up the little audio guide and you walk around. I was with a friend.

I said, "I've got a little quiz for you. I want you to write down or count the number of times in the commentary you are going to hear the following words: 'God,' 'religion,' 'faith,' 'charity,' 'helping the poor,' 'religious education.'"

Zero, nada, not one. There are lots of references to the word "Jesus" because there were lots of rooms named after Jesus.

Then you turn up and you can see the budget for popes. What was their budget? Well, they had a pie chart of the entire budget. Now, my French isn't brilliant, but I'm pretty damn certain that in the discretionary budget there was like 70 percent for fighting wars; entertainment was typically about half of the budget for the palace. This is half of the wealth of the Christian church is being spent on entertaining. That's the kind of party I want to get invited to.

Charity, religious education, zero on the budget line, budget line zero. Nothing was spent on those.

If you want to think about how organizations work, we've got to think about the structures they have. So let's think about an organization that I care an awful lot about but some of you may have never heard of, and that's FIFA [International Federation of Association Football]. This is soccer's world governing body.

Now, those in the know—that would be me—because people come in and say, "What's going on in Egypt?" and I go "Have you heard the latest scandal about Sepp Blatter, the bribery and corruption scandals at FIFA?"

The truth here is FIFA, when they run the World Cup—this is soccer; this is football for those in the know—the budget is about $4 billion. There's a lot of money at stake here.

You need 12 votes to capture the games. For the executive committee that decides who's going to be the president and where the location of the games is, you need 12 votes to win this. So, surprisingly enough you've got a budget of $4 billion and you need 12 votes—do you think people are working on improving the stadiums, or are they passing around votes? It turns out, if we were to believe the BBC Panorama program, it's about $800,000 seems to be the going bribe for a vote for FIFA.

For example, I believe the recent vote was they are going to have the games in the Gulf [2022 World Cup in Qatar]. Now, there was a slight problem with this. Alcohol is banned, which is going to make it tough for some football fans to go. But, perhaps even more important, it's about 120 degrees and humid, which is not conducive with the top-quality play. So they are planning on air-conditioning the stadium, or maybe moving the games to the winter. You would think they would have thought this through.

So the choice is made based on public good.

How do we fix FIFA? This is the question. The immediate response from people like Sepp Blatter is, "We're going to have an inquiry and we're going to have some more rules."

Well, what's the problem with the more rules? He actually used the rules. People challenged his leadership. What did he do? He turned around and used these anti-corruption allegations to de-throne or de-thorn all of the people who were trying to take his job.

This is the wonderful thing. In a system that's built on private goods, on corruption and graft, everybody's hands are slightly dirty. So if we just had more and harsher rules, it's just a way that leaders can impose more power.

What's the simple way to do it? Let's suppose that three or four people per country, so say 600 people, got to vote on where the games would be? Bribing 300 people to get the location of the games is so much harder.

Let me give you the evidence. In the IOC, the International Olympic Committee, you need about 55 votes to win an Olympic vote, and the bribes are $200,000. That's about a quarter. Surprisingly enough, four times as many people to bribe, the bribes go down to a quarter.

Well, follow this though. If we made it 2,000 people—suppose all medalist winners at the previous Olympics got to vote on where the future games would be—suddenly you've got several thousand people. Send them a beautiful glossy brochure about the beautiful facilities that are going to make the games better. Then people will end up picking better games and less corruption.

But rules are not the way to reform institutions. You've got to change the rules. You've got to change the underlying incentives.

Let me talk about a more democratic society. I know I'm in the United States and I'm supposed to say the United States is the best country in the world. That doesn't mean it couldn't be better. There are some fundamental problems with the United States.

I gave you the number earlier that you need 35 million people to win the presidency. The country is about 300 million. That's a little over 10 percent. So how do we get there?

Well, there's only about 260 million voters. Only about 160 million of those actually bother to register. Then there's turnout problems. And you only need to win half the Electoral College votes. Forget the idea that you need to win the approval of the American people. You need to win half the Electoral College votes.

The states are disproportionate in size. Thirty-five million votes comfortably gets you the presidency. You get more votes but you don't need them. That's the key.

What's the problem with the Congress? Well, in the Congress the problem is with gerrymandering. We all know this is a problem. How many people get kicked out of office? You're far more likely to get kicked out of office as a congressman because of scandal and corruption than you are because you got defeated in a competitive election.

The problem is the gerrymandering system allows, through the state legislatures, that the representatives get to pick their voters. So you've got this phenomenal—things going in completely different directions. Everybody hates the Congress and loves their own congressman. Why? Because their congressman got to pick them.

So what is Congress? Control of the government is actually dependent upon relatively few electoral districts. There are very few competitive electoral districts. That means control of Congress comes down to relatively few people.

What do you do when you want to buy the support of a few people? You hand out private favors to them.

We're not trying to keep half the American population happy. We might think we want to try to keep them all happy. But democratic [inaudible] will be half. We're trying to buy support in a few key electoral districts because that's all of control of Congress matters about.

How do we fix this? Well, this is what we'd like to think about. Fixing things is much harder, because if it were easy people would have done it before.

The problem goes to the congressmen. They don't want to change these rules. They would not want to have competitive districts picked, for example, by a computer program where you feed in the stats, the districts get redrawn along geographical features, balancing contiguous groups. They would like to pick their voters so they keep their jobs. So they are not going to do this.

We have to be a little creative about how we are going to do this. What we want to do, for example, is things like have these things grandfathered in. So in 15 years, in two censuses down the line, this will be the rule that will come, because half of the congressmen that are in office today won't be there. They'd be glad to help the people at somebody else's expense in the future, but they're not willing to help people at their expense.

The sad, cynical lesson we want to think about when fixing things is we've got to think of the incentives people have and we've got to find ways to make it in people's interest to do what's the right thing when we want to fix stuff.

BRUCE BUENO DE MESQUITA: I am going to say a few words about the Arab Spring and then we can open it up to questions.

We were introduced with the thought about how do these guys stay in office so long. Really, the question is: Why don't they stay in office longer? We'd like to suggest a way to think about that.

Let me start with Hosni Mubarak. I'm going to talk about two people, Mubarak and Gaddafi. That will pretty much clarify the problems.

General rule: There are three circumstances that put a dictator at risk of being overthrown, for starters:

  • First, they are very new in office, just a year or so. That is, they don't yet know where the money is, so they can't be counted on to successfully continue the flow of money to their cronies, so the cronies are constantly shopping around for somebody new.
  • Two, they have been in office for quite a while but they are now believed by their cronies to have a terminal illness. This is why a lot of people like to keep serious illnesses secret. Ben Ali was rumored to be suffering from terminal cancer, and we now know that that's true.
  • Three, they have the ultimate terminal illness: They are very old. It turns out very few very old people become very, very, very old people. So when they are very old—Hosni Mubarak was in his 80s—again they can't be counted on down the road to continue the flow of money.

So the first problem is you have a vulnerable leader. Any one of those three things will make a leader vulnerable.

 

ALASTAIR SMITH: Or being broke.

BRUCE BUENO DE MESQUITA: We're getting there.

 

Next, you don't have enough money to continue to buy the loyalty of the people who keep you in power. So you have an economy that has gone sour, as is true in, for example, Syria.

The Egyptian economy was growing well, but only certain sectors. So there was high unemployment among relatively well-educated people, who of course were disgruntled.

You then look for ways to compensate. You're already taxing at the optimal level. So you look for other sources of money. Maybe you're lucky and you have oil or diamonds or natural gas or what have you.

Or you have foreign aid.

So let's look at what happened in Egypt: Hosni Mubarak in his 80s, high unemployment among relatively well-educated people, and—tucked away in the back pages of The New York Times, but I guarantee you that General Tantawi and every important leader in Egypt was aware of this—in February of 2010, President Obama announced that he was cutting foreign aid to Egypt in half.

So you're in the military and you're sitting there and you're saying, "Hosni has been very good to me. He's a very fine fellow, a great leader. He's getting a little old and he doesn't seem anymore to be able to command the respect of the United States. He's no longer delivering the money. Where is my money going to come from? Maybe it's time to shop around. Maybe it's time to see if there is a replacement available. Maybe, if all those unhappy, unemployed people are getting agitated, I should sit on my hands, hedge my bets, and see what will happen. If they can push him out, then I can take control." Which is what is happening.

You think: Well, easy to say now. I will point out that we used the theory in The Dictator's Handbook in a talk on May 10, 2010, to predict that Mubarak would be gone within a year. I didn't remember this, but when I was here a couple of years ago I spoke about the forecasting model, and I wrote a book on that in 2009 [The Predictioneer's Game: Using the Logic of Brazen Self-Interest to See and Shape the Future].

But I wrote a book in 2001 on it, called Predicting Politics, in which I said that the Egyptian regime would be changing and would tend to liberalize somewhat in 2010. It says "in 2010." I was kind of pleased with that. So Mubarak.

How about somebody like Gaddafi, who had all this oil wealth? What happened to him?

The sort of standard account is he's this terrible guy, this horrible monster, and so of course eventually people are going to get unhappy and rebel. We, I am afraid, have a different account.

ALASTAIR SMITH: Violating rule five.

BRUCE BUENO DE MESQUITA: Yes. Muammar Gaddafi violated rule five. He was too good to the people, too good. Let me offer a little evidence.

In 2005 the Libyan press was the least free press in the neighborhood. By 2010, it was the second freest press in the neighborhood. The freest press? Egypt—and look what happened there. Don't give the people freedom. Terrible mistake. So he liberalized the press.

Then Mr. Gaddafi educated his population. He didn't need an educated population. A lot of dictators do, a lot of dictators need people who have basic educations so that they can work and produce revenue. But Libya had all that oil and foreign labor. They didn't need Libyans to be decently educated. But the average level of education in Libya was two years greater than in any of the neighboring countries. Don't teach people how to think. They might think that you're not doing a good job for them.

Then, finally, Mr. Gaddafi wanted to curry favor with the United States and our allies. He wanted to be thought of as a better person than the Lockerbie Gaddafi. So he had a mechanism for showing that he was now a better person: He began to significantly reduce the level of torture, oppression, abuse of his citizens—all signaling people that the expected cost of rebelling has gone down.

He would be there today if he had just picked up the phone: "Alastair, what should I do? I've got this—" But no, he didn't call Alastair. Instead he liberalized, and now we see where it got him.

So if we want to understand what brings on rebellion or what leads governments to get better or to get worse, we need to think about how the leadership imposes these rules and what the circumstances are that they face.

On an optimistic note, we believe, for example, that Morocco will become a considerably more liberalized country over the next few years.

We believe China will liberalize politically. We're not talking about its becoming a liberal democracy, but over the next few years there will be real loosening in China with the transition to a new leader. New leaders are at very high risk of being overthrown. They reduce that risk if they pretend to be more democratic, if they liberalize. So that's what we can expect. Then they may tighten up again later.

We even think there will be some liberalization in Saudi Arabia.

We think the United States and NATO would have been much better off using its military might to put pressure on the Assad government in Syria than in Libya, because we don't believe that Libya is going to be any better. It's just going to oppress a different group of people because there will be a different crowd in control; they are not going to democratize.

And we are not optimistic about Egypt. I was just talking with a student about this yesterday. We are reminded that during the uprising in Egypt all the talking heads on the nightly news told us that we didn't have to worry about an Islamist government in Egypt because it's a secular society.

Meanwhile, we were saying it's going to be either a military dictatorship or a military-Islamic dictatorship, one or the other, because the only people who were organized politically were the military and the Muslim Brotherhood. How could people think this secular society stuff? That was a good selling point when you were trying to survive politically in a hostile environment. Now it's a friendlier environment.

I will stop with that. Those are some of our thoughts on how this reasoning applies to what is going on currently in the world. Thank you.

Questions and Answers

QUESTION: Susan Gitelson.

Thank you for your eye-opening and amusing, in a cynical way, presentation. But there are a few areas that we often discuss in changing regimes and so forth that I'd like to have your comments on.

For example, in the Arab Spring there's the whole Shiite-Sunni split. In Bahrain and many places for change—in Lebanon and so forth.

Secondly, how about dealing with Russia? Putin seemed to have gathered all the power and made all the arrangements, and all of a sudden there are elections and he doesn't get the overwhelming majority that he expected. What's going to happen next?

BRUCE BUENO DE MESQUITA: The Sunni-Shia distinction is clearly an important one, in our view, in much the same way that Republican/Democrat is an important distinction. These are organizing principles. They're conveniences for people who want to organize support.

It is easy, through surnames and so forth, to know whether somebody is Sunni or somebody is Shia. They tend to live in their own neighborhoods. So it is easy to discern what the support is in this neighborhood, in that neighborhood. So these are just convenient organizing principles that cynical politicians use to motivate the quest for power.

We just had this horrible set of bombings in Afghanistan, a country that has no history of Sunni/Shia conflict. But for a set of people who are interested in destabilizing the Karzai regime, it was a convenient way to organize people because it will get a lot of attention. It's very hard if you just—this is terrible to say—if you go out and you murder 60 random people, it will not have the same impact in terms of political gains and political leverage, fund-raising and so forth, as if you kill—the 60 individuals are random but targeted with regard to characteristics.

So that's the sense in which we think these are not cultural battles. Culture is a convenient organizing principle for using for political advantage.

Mr. Putin?

ALASTAIR SMITH: Mr. Putin, right. Mr. Putin is likely—well, the point you made was he did a lot poorer in the current elections than he got in the past ones. The key for us is he is still in power. His party got 50 percent of the vote. They are going to remain in power, and everyone still thinks he is going to win the presidential election. That's the key here.

One of the great things about having elections is it's a way that you can signal to your supporters that they can be replaced very easily. It keeps him in power. It's a very corrupt system. Corruption is growing, becoming more rampant. The society does not appear to be delivering the public goods and the welfare that the citizens might want. And yet they didn't do as well as they expected. That was a shock to everyone, right?

We would expect that media restrictions are going to get tougher, there is going to be a lot more cracking down. It would not surprise me if we start seeing funding of other parties to start splitting up the vote. That's a great thing. What we need in democracies is we always need another party, because we can always flip the opposition off. That's a great way of owning the power.

If you want to think about what are the long-term predictors of democratization in Russia, I would go with a very simple single thing: probably the oil price. So long as the oil price is high and Russia is pumping oil, then Putin can run a regime that is based upon corruption and graft.

If all of a sudden the oil price was to collapse—if we wanted to democratize around the world, the best thing the West could do is have sensible energy policy. If we could drive the price of oil down, then Russia would be in a lot of problems. Then how do you pay your supporters? You have to get the people to work. How do you get the people to work? You have to lower taxes, improve public policy, remove corruption and red tape, things that are making your supporters well off. But that puts you in political jeopardy.

If you want a very simple prediction about what is going to happen, it's the source of revenue that Putin can extract.

QUESTION: John McAuliff of the Fund for Reconciliation and Development, an NGO.

I think your model is fascinating and I think says a lot about how things work. But I want to poke a few holes, or at least anomalies.

One is that I think your model of the United States having 35 million people to appeal to underestimates the extent to which concentration of wealth and the use of money affects where those 35 million markers actually show up, and particularly given the Supreme Court rulings.

One of Obama's problems, I think, was that he actually got a lot of Wall Street money, and therefore couldn't have dealt with the underlying problems in the society. So that's a question on the U.S. side.

ALASTAIR SMITH: Silence. I want to take that right now. I want to give you a piece of evidence. I want to go back 200 years and I want to think about the 13 colonies, as I might prefer to refer to them—you might call them the states—immediately after independence.

They all had nominally democratic rule. But democracies are not all the same. We like to throw this word "democracy" around as if it's some great thing—"It's a democracy, we had elections; therefore, the leaders are beholden to the people." That's just simply not the case. You can be beholden to vastly different numbers of people. That was the case for the 13 colonies. So they differed a lot.

First of all, slavery is a big issue. So we're counting fractions of people in terms of weighting how many votes people get, but they don't actually have anything.

But let's look at the state legislatures. They differ vastly by redistricting. They differ by property rules, whether you were educated. Obviously, women didn't get to vote, and that didn't happen for at least 100-plus years after that.

We had a student about two years ago, Jeff Jensen, who is now teaching at NYU Abu Dhabi, who did a study. He actually went through and in detail collected precisely what the rules were, and he looked at the districting and where the people lived. He worked out how many people you would need to actually win the state legislature in each of these 13 states. They differed vastly. The numbers are low, so you go from like a high of 10 percent down to like 1 percent, depending upon numbers of slaves and the redistricting and the property allocations.

The remarkable thing is this difference in how many people you needed predicted with astonishing accuracy the economic development of these states.

So where did the people choose to locate? When people got off the boat, obviously they tended to go to the seaboard states because that's where the boat came. But even controlling for that, they migrated to those states where the leaders were beholden to a lot of people. Why? Because there were better policies there. These are the places that had better education, more health care; they opened up canals; they built railroads first.

A very, very simple distinction in the number of people you need drives the policies that are going to keep leaders in office, and this drives the economic development of the states.

BRUCE BUENO DE MESQUITA: Let me add a word to that with regard to the current situation.

Your statement was correct except for one word, which when corrected will clearly support the theory, not poke a hole. You said that we were underestimating. But we are overestimating if you are right.

That is, the 35 million, if you are right, is a much smaller number based on wealth distribution, making the coalition that much smaller, and therefore the political leadership even that much more beholden to doing what that subset of people want rather than what we, the people, want.

That's exactly rule number one: Try to be beholden to as few as possible. So if you focus on wealth instead of votes, then you are beholden to fewer people. That's exactly the argument.

QUESTION: John Richardson.

On the odd summers, my wife and I drive out to our daughter and grandchildren out in Wyoming, where a high school in Jackson is predominantly Hispanic now. But in our experience, as we have gone through these little hamlets and places on Route 80, we think life's pretty miserable, so we jokingly say that really outside New York and Chicago and some other places, the American people have a choice between the Mormons and the Mexican drug cartels.

So my question is—Mexico is right on our border, over 100 million people. It seems to us they've got terrible problems. What's your take on Mexico?

ALASTAIR SMITH: Bruce's children live in Mexico, so he'll rant and rave.

BRUCE BUENO DE MESQUITA: We're actually quite optimistic about Mexico. The current battle of the government with the drug cartels is a signal, a sign, of the reality that the Mexican government is dependent on a much larger coalition today than it was in the past. When the PRI [Institutional Revolutionary Party] had everything sewn up, you just had to take care of a few people, you didn't have to worry about these things.

Now the pressure, for example, to reduce corruption, which is a feature of depending on a larger coalition, is very strong. Hence, the struggle against the drug cartels.

Mexican growth since becoming a more democratic country, a larger coalition country, has been quite substantial as compared to what it was before. Of course it has suffered the last few years because of the recession and its dependence on the American economy. That drives Mexicans at the margin to come to the United States.

In the last part of the book, we talk about immigration and immigration policy. We have a particular view, which may be unpopular—but that's okay. It's grounded in game theory and statistical evidence.

In the United States it's very easy to become a citizen. In Japan it's very hard. In Japan, to become a citizen—it's now possible; it wasn't 20 years ago; but now you can become a citizen—it takes a vote of the Japanese Parliament for each individual. In the United States, of course, millions of people become citizens.

When citizenship is easy, what this means is that this pool of people, the selectorate, from which the key coalition is drawn, is expanding. As that group expands relative to the coalition—if it expanded faster, that would be bad for policy.

But, because of voting rules, as the selectorate expands, the size of the winning coalition that you need also expands, conditional on people being located in particular ways, geographically concentrated and so forth, the result of which is that it leads to more public goods production, better public policy, to have immigrants who can become citizens than not to. Even allowing him in the country probably marginally improved things a little bit. [Laughter]

The interaction between the United States and Mexico is—the resistance to immigration is largely in relatively small-coalition states where it's not a benefit to the politicians in power because it raises the prospects that they would lose down the road.

So that's kind of how we see it. Quite optimistic about where Mexico is headed.

ALASTAIR SMITH: But there is an interesting side feature here. You talked about driving through Wyoming and there were big concentrations of Hispanic villages. But this is a feature. These people are poorly off. The current system is politicians like to draw the boundaries such that they can draw minority-majority districts, and they like to isolate.

So we're bringing people in. But politicians would like to sort these people into electoral districts to minimize the number of people that they are actually beholden to. They would like to create districts where they put people where they have relatively little political influence instead of drawing from the body as a whole.

BRUCE BUENO DE MESQUITA: Indeed, very quickly, the reason Wyoming exists as a state, or Montana and so forth, is right after the Civil War, because Mr. Lincoln was very unpopular in the South, the Republican Party realized it was losing its coalition of control. So they created these huge states with almost nobody in them to regain control of the Senate. That was what it was about. It was not about these people are entitled to citizenship. It was just about controlling the Senate.

QUESTION: Renee McCormick.

Thank you for your presentation. Very refreshing the way you cut to the chase.

My question is about where you would put U.S. foreign aid, because my feeling is that Ron Paul's non-interventionist position would be helpful in rebooting our economy and our country in general. So I'd like to know where you would put the money.

ALASTAIR SMITH: Let me take this.

Bruce made the point here that we would like to pretend that we are giving foreign aid because we want to help people overseas. The reality is we are buying policy.

We were giving $7 billion to Egypt in the late 1970s. Why were we doing that? So they would recognize the state of Israel. We can dress it up. As soon as that money got cut—Bruce gave you this number that Obama cut aid—what happened? The Egyptian foreign minister said, "Israel is the enemy," and Obama immediately reversed the policy. We're buying policy.

We're not going to get rid of foreign aid. I actually think it would be great for the rest of the world. But that's not the policy because the U.S. vultures want cheap oil, they want anticommunist policies, they want penetration for U.S. firms in foreign markets. Those are things that lots of U.S. voters want and they are things that the U.S. congressmen and the president are going to deliver.

But I do think we could reform aid in terms of if we're going to pay this we might as well pay it effectively.

Let me give you an example in Pakistan. The United States has been paying the Pakistani government to help with its assistance with the war on terror and fighting in Afghanistan. One of the big policies was we wanted to capture bin Laden. What was the problem with this policy?

We asked the Pakistani government to hand us over bin Laden. "We're going to pay you billions of dollars, several billions, $2-3 billion a year, to look for bin Laden."

They weren't stupid. They knew that the moment they handed over bin Laden we'd say, "Thank you very much. We don't need to pay you to look anymore." So what did they do? They pretended to look and we kept paying them.

So every time they didn't do enough, we threatened to cut aid, and they said, "Well, you have to pay us more if you want us to look a little harder." So we gave them some more. But then they didn't really want to find him.

We didn't say, "By the way, we know where he is. Could you arrest him for us?" They went and killed him. Obama sent the troops in to kill him himself.

So what's one of the problems? How can we get around this system? A very simple thing. We developed this in the context of disaster aid, which is something I am very interested in, how do we get people to build effective dams and flood protections and stuff. But we can do this in any kind of form.

Instead of just giving people money to do something like, "Go capture bin Laden for us; here's some money; we'll keep paying you for as long as you're looking," we should say: "Look, there's a nice Swiss bank over there that has been working for the dictators for a long time. Let's use them for our advantage. We'll escrow some money."

I don't know what the amount should be. Maybe it was $8 billion to hand over bin Laden. Put the money in there and say: "When you hand over bin Laden, these nice Swiss bankers will start releasing the money to you."

Maybe we could even cut out the middle man and get it cheap and actually just pay Zardari straight off the bat, rather than just go through the whole pretense that we're going to pay the Pakistani government to do good things.

What's the incentive there that's created with this sort of escrow fund is the government or the leader in Pakistan, or any other country, doesn't get the money until they deliver the policy that the United States wants and the United States is going to get the policy delivered because the leader wants it.

So we just think that simple changes—we're not going to get rid of foreign aid—personally, I like that policy—that's not going to happen; but we could be smarter about how we do it.

QUESTION: Susan Rudin. Thank you very much.

What is your opinion of the Tea Party and its influence in our government today?

ALASTAIR SMITH: Fire away.

BRUCE BUENO DE MESQUITA: Coward. [Laughter]

ALASTAIR SMITH: I never know quite what crowd I'm standing in front of.

BRUCE BUENO DE MESQUITA: The Tea Party has worked out that you can assemble a proportionately, relatively speaking, small coalition of interests that are intense and you can, because they could be the margin of victory, you can substantially swing policy to benefit their interests. So it is just a small coalition looking to be rewarded with a tax program, for example, that is beneficial to their members, may or may not be beneficial for the country; the evidence on that is much less clear-cut.

In that sense it is really no different from, for example, the 99/1 percent distinction of the Occupy movement, which is simply saying, "Here's a set of things that would be good for us."

What the Tea Party, from my perspective at least, represents is key swing—not swing—key pivotal votes in shaping what would be a winning coalition. They have understood that by organizing they can greatly enhance their prospects of victory, even though they may represent in terms of the total nation a relatively small percentage.

Their belief is totally different, but one could think about this in the way that I spoke a little while ago about the Muslim Brotherhood, which is a very small contingent of real supporters in Egypt, but they're organized. If the Tea Party actually would organize, you can have a big impact on policy.

QUESTION: John Brademas. 

Applying some of your rules, right now we have an aging and ill dictator in Cuba, and also a sick dictator in Venezuela and Iran, which senses a wonderful opportunity to move in and do some damage here.

BRUCE BUENO DE MESQUITA: We're very optimistic about Cuba. The key is that Raúl not live to be in his mid-90s, because right now there is exploration for oil and natural gas offshore of Cuba. The Chinese are doing it.

If they were to bring that on board, begin to actually generate revenue from it—it's going to take about ten years—then it will continue as a dictatorship. If they don't, they are very likely to become a real democracy.

Venezuela, exactly—Huge Chavez is probably terminally ill. He's working pretty hard behind the scenes to consolidate the power of the military and his cronies. There is a reasonably good prospect that that will fail. But there is a lot of oil wealth, which makes it easier to achieve.

You had a third country?

QUESTIONER: Iran.

BRUCE BUENO DE MESQUITA: Iran.

ALASTAIR SMITH: The health thing is precisely why the Shah fell. All of a sudden, every time people would go out in the streets, the army showed up and shot them. All of a sudden, in 1979, the army knows he's terminally ill. The people show up on the street and they go, "Sorry."

BRUCE BUENO DE MESQUITA: Iran has already in my view undergone a political transition. Khamenei is increasingly the less prominent figure and Jafari, the head of the Revolutionary Guard, is increasingly the guy who is actually in control. Khamenei is aging. He has made some poor political decisions.

I'm pretty optimistic, because Jafari depends heavily on a small group, called the bunyads, who control about 20-25 percent of Iran's gross domestic product. They are exempt from taxation and exempt from charges of corruption—a good job to have. They are very concerned that the economy do well, because that's how they get their money. Therefore, Jafari is likely by them to be pushed to be increasingly pragmatic.

So I am reasonably optimistic that if we're looking five, six, seven years down the road Iran is going to look like a much more civil government than now.

JOANNE MYERS: I thank you so much for this informative discussion.

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