Source: Ideas and Institutions Issue #24
Analysis
Budget 2023: On cities, a welcome continuity. But reluctance to usher in big reforms is worrying
This year’s Union Budget has been marked by areas of continuity over the past three years. Some areas like the continued boost in capital expenditure have received wide attention. Others like reforms in urban development and planning processes have received less. As India grows, the quality of urbanization will determine the quality of economic growth, and vice-versa. From this perspective, the continued focus on improving urban infrastructure and land-use efficiency is welcome. However, we should not overlook the missed opportunities for more fundamental reforms while celebrating continuity.
This essay was first published in the Indian Express on February 2, 2023.
—By Anirudh Burman
Review
Possibilities at the Margins: Political Liberalization Through International Aid
In the 2003 book The Logic of Political Survival, Bruce Bueno de Mesquita and his co-authors first detailed the “selectorate theory.” The theory gives a description of how political survival strategies shape the decisions of political leaders on economic matters, and how economic realities shape the decisions of political leaders.
The main premise of the theory is that the primary goal of a political leader is to remain in power. The other goals are subordinate to this goal. To remain in power, the leader must get the support of a “winning coalition,” whose support is essential for the leader to continue in power. The membership of the winning coalition can change, as some members may withdraw their support while others from the larger “selectorate” extend their support. The key for the leader is to somehow maintain a winning coalition. The winning coalition is quite large in democracies but can be quite small in autocracies. So, the strategies for political survival also differ from one country to another. In a previous issue of this newsletter, we had applied this theory to analyze the BJP-led Union Government’s strategy of using welfare transfers to secure political support.
The application of this theory to various domains takes some perspective on this logic of political survival as a given and makes predictions or gives explanations about the behavior of political leaders. Unsurprisingly, when applied to international aid, this theory has made very pessimistic predictions. In particular, the predictions for democracy aid (aid to promote democratic reforms) are quite bleak. Since the political leaders are seen to be relentlessly pursuing political power, for the aid-giving country, its own commercial and strategic interests are seen to typically outweigh the promotion of democracy. Similarly, for the aid-receiving country, the political leaders of undemocratic countries have a strong incentive to undermine such aid and not make any serious concessions that may threaten their own power.
A book by Bann Seng Tan of Ashoka University, International Aid and Democracy Promotion: Liberalization at the Margins, published in late 2020 and recently released in paperback, provides some hope against the backdrop of these bleak predictions. Tan argues that given the primacy of political survival as a goal, there is little chance of democracy aid succeeding with countries that can offer commercial or strategic concessions (“primary recipients”) to the aid-giving countries. In such countries, if democracy aid is given, it is not likely to increase the odds of serious reforms. This is simply because the commercial or strategic value of such recipients allows them to neutralize any pressure to implement reforms. However, in “secondary recipients,” countries that are marginal to the commercial or strategic interests of the aid-giving country, aid can be leveraged to get some liberalization, because they “have little of value to exchange for aid.” If such a country needs aid, it should be easier to get some liberalization in the bargain. From the aid-giving country’s perspective, even their second-order preference for reforms can be indulged with such aid-receiving countries. So, Tan writes, “Conditional on being pushed to reform, there should be a significant, positive difference in the likelihood of political reform when comparing Secondary recipients and Primary recipients.” He calls this theory “liberalization at the margins.”
The book does not offer a theory of democratization through aid, but only of liberalization, which may or may not lead to full democratization or democratic consolidation. In this sense, its scope and proposal are modest. However, the message is still quite hopeful compared to the bleak predictions on democracy aid made by most of the other researchers working on the selectorate theory. The book suggests that one has to consider the strategic incentives of the political leaders of both the donor and recipient countries before considering where such aid might actually work. There is little to gain from wrongly assuming that democracy promotion trumps other priorities or that the non-democratic recipients would happily accept reform proposals even if they go against the logic of their own political survival. Seen another way, the theory places domestic politics at the center of the politics of international democracy aid.
Bann Seng Tan presents the theory up front, placing it in the context of the literature it is drawing from, and then deploys mixed methods to test the theory and to explain its nuances. He presents quantitative analysis using data on aid commitments and regime type. These are then analyzed further after being disaggregated into their strategic and commercial subcomponents, to identify which of the attributes of the recipient countries are more valued by donor countries. He also considers regional variation by focusing on Africa and Asia, both regions with democracy scores that are below the global average. He concludes that Africa seems more conducive to democracy promotion than Asia, mainly because most countries in the latter are commercially or strategically attractive to the donor countries.
The author also presents a case study to explain the complexity of donor switching by considering the aid relationship between Myanmar and its two donors, the United States and China. Tan argues that donor switching is not free or easy for the recipient, because donors can also play the same game and extract more concessions from the recipient when they can. Autocratic Myanmar was forced by Western sanctions to rely on Chinese patronage. The increased demands of China proved difficult for the country, which had traditionally preferred neutrality. With a series of reforms, the military regime signaled their willingness to pay a political price in exchange for Western aid. The country later slid back toward autocracy (the book was written before this happened). It remains to be seen how it adapts going forward, because it is likely that its dependence on China has only increased. This case highlights the limits of donor switching. In the broader international context, with the great power competition between the U.S. and China and the regional competitions like the one between India and China in South Asia, this presents an interesting insight into the limits of such a competition allowing countries to play the game through donor switching.
Tan also presents the case studies of two aid recipients, Egypt and Fiji, to draw a contrast between how a primary recipient (Egypt) and a secondary recipient (Fiji) works. These case studies are consistent with the theory that Egypt, under Mubarak, was able to resist the pressure to pursue political liberalization, while Fiji found it harder to do so and ended up holding multiparty elections in 2014.
The book is an important contribution to the growing literature on the selectorate theory and to the vast literatures on democracy promotion and international aid. Perhaps the most important merit of this book is that it can suggest a rational course of action for those interested in promoting liberalization through the instrument of aid.
The work on democracy aid based on the selectorate theory is only one part of the broader literature on the subject that has put cold water on the enthusiasm towards democracy promotion that marked the period after the fall of the Berlin wall. At that time, Francis Fukuyama had famously declared that liberal democracy had won in the realm of ideas. It was only a matter of time before it would also triumph in the world of political practice. It was tempting to then assume that international aid could expedite this process. The experience of democracy promotion has, however, been much more modest than what the initial hopes had suggested. There were too many failures, and the selectorate theory can explain some of them.
Writing in 2008, when the backlash against the idea of democracy promotion was growing rapidly, Thomas Carothers concluded his lecture “Does democracy promotion have a future?” by cautiously suggesting that democracy promotion does have “a vital place in the world for the next several decades. But it is not an automatic or an easy place. It is a place that we have to earn through the seriousness of our purpose and the excellence of our efforts. It is up to all of us concerned with the state of democracy to engage and earn that place in the years ahead.” Works like Bann Seng Tan’s can contribute towards this hopeful but cautious vision by helping identify the margins where progress can happen.
—By Suyash Rai
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