International influence on regime change and democratization

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International influence on regime change and
democratization

• Roberto Bonfatti
• March 2006

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1a - Motivations

• No formal theory of the economic motivations
  underlying international influence on regime
  change and democratization in developing
  countries.
• Plenty of historical evidence suggesting that
  such influence economic, diplomatic and
  military is strong
• Support to coups against democracy e.g. Iran
  (US, 1953), Guatemala (US, 1954), Chile (US,
  1973).
• Support to counter-insurgence efforts e.g.
  Guatemala (US, 1960s and 1970s), Nicaragua (US,
  1960s and 1970s), East African Mutinies (Britain,
  1964), Cameroon (France, 1960s), Gabon (France,
  1960s), Congo-Brazzaville (France, 1968),Chad
  (France, 1968-1972), Congo (several countries,
  1970s), Rwanda (France, 1990).
• Support to insurgence efforts e.g. Ethiopia
  (Cuba and USSR, 1972-1975), Congo-Brazzaville
  (France, 1997).
• Selective support to democratization e.g. NO
  SUPPORT Latin America (US, 1970s), Nigeria (US
  1990s). SUPPORT Latin America (US, 1980s), Iraq
  and Middle East (US, 1990 - ).
• Selective support to electoral campaigns e.g.
  Chile (US, Christian Democrat 1964), Cameroon
  (France, 1992), Benin (France, 1996).

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1b - Motivations

• Many empirical works in political science and
  economics find that international aid depends on
  strategic considerations
• If international aid affects regime change,
  donors should be included as strategic players in
  models of regime change and democratization.

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2 - Research question

• What are the economic motivations underlying
  international influence on regime change and
  democratization in developing countries?

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3a Related literature

• Democratization
• Work by political scientists
• International Security Liberalism, or
  Wilsonianism (e.g. Smith 1994, 2000)
  democratization as a foreign policy goal.
  Motivation to foster international political
  stability.
• Polyarchy us democracy promotion (Dahl, 1971
  Robinson, 2000)
• Recent work by economists
• Acemoglu and Robinson (2004) analyse the impact
  of free trade and free capital movements on
  democratization through their impact on the
  income distribution. They do not include in their
  model foreign agents behaving strategically.
• International aid
• Boschini and Olofsgard (forth. JDS) find a
  negative differential impact of 1989 on
  international aid for countries that were
  strategically important before 1989.
• Alesina and Dollar (JEG 2000) find that
  strategic considerations (colonial past, UN
  voting behaviour) are a key positive determinants
  of foreign aid allocation. Democracy has also a
  positive marginal effect.
• A voluminous, older literature points in the same
  direction (see for example Schraeder, Hook and
  Taylor, 1998 Maizels and Nissanke, 1984).

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3b Related literature

• Domestic determinants of international relations
• Putnam (1989) two-level game of international
  relations and domestic politics does not
  investigate the possibility that governments
  influence each others domestic politics to
  obtain a higher bargaining power
• International trade relations Grossman and
  Helpman (JPE 1995, AER 1995)
• Hagan (1989, 1993) study the effect of political
  regime change on international alliances (UN
  voting patterns) and foreign policy behaviour
  (CREON).
• Richardson (1976, 1978) study the importance of
  economic dependence for international alliances
  (UN voting patterns).
• Dependency School (Frank, 1967 Dos Santos, AER
  1970s Furtado Marini)
• Nationalization and international relations
• Sigmund (1980) on the politics of
  nationalization in Latin America
• Krasner (1978) on raw materials investments and
  US foreign policy

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4 - Summary of contribution

• Simple extension of Acemoglu and Robinson (2004)
  to start analysing external influence on regime
  change and democratization.
• Point to some possible directions for future
  research

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5 - Model

• Agents, income and domestic policy
• Two domestic agents, R and P, and one foreign
  agent, F. There are two sources of
  redistributable income in the economy a tax
  on foreign direct investments ( ), and
  foreign aid ( ). Domestic policy sets the
  shares of income for R and P

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Foreign policy

• There is a binary alliance decision ( ) ally
  ( ) or ennemy ( ) of F. The
  ruling domestic agent and F can bargain over
  and only if .

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Payoffs

• The payoffs of the three agents are
• where the are exogenous payoffs to the
  agents from their allignment decision, and
  is the geopolitical value of the alliance for F.
• Define

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Assumptions

• there are gains from bargaining over
  and
• , and
  both agents prefer to be allies of F, but Rs
  preference is stronger.
• the joint welfare
  of F and the ruling agent is increasing in ,
  independently on who is the ruler.
• are non re-distributable.

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Negotiations

• Given assumption 1 and 3, it always in the
  interest of the two parties to agree on the
  foreign policy
• (I am also assuming that F has all the bargaining
  power in the negotiations).

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Political game

• At the beginning of the game, R is in power
  (state N). P can size power at a cost .
• The timing of the game is
• The cost of revolution ( ) is revealed
• R and F negotiate foreign policy ( ), aid (
  ) and taxes ( )
• R decides whether to transfer power to P (state
  D) if he doesnt, he promise transfer to
  agent P.
• P decides whether to stage a revolution or not
  (state RR)
• If P has gone to power, P and F negotiate foreign
  policy, aid and taxes, and P sets domestic
  policy otherwise, R can change the domestic
  policy with probability 1 p.
• All the payoffs are realized.

µ
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Time 5

• If R is in power, he can reset domestic policy
  with probability 1 p in this case, he sets
• If P is in power he negotiates and with
  F. This leads to

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Time 4

• If P is in power, he stages a revolution iff
• Define
• that is, the level of cost above which there is
  no revolutionary threat.

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Time 3

• there is no revolutionary threat,
  thus .
• there is a
  revolutionary threat, but agent P staves it off
  by setting
• there is a revolutionary
  threat, and R staves it off by transferring power
  to P (D 1).

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Time 2

• there is no revolutionary threat,
  and F sets .
• there is
  a revolutionary threat, but R is able to stave it
  off even if F does not increase aid. Thus, F sets
  
• there is a revolutionary threat and
  Fs aid offer determines whether R has to hand in
  power to P or not. The maximum that F is willing
  to concede to prevent P from going to power is
  . Define

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Time 1

• Depending on the value of , we have four
  different cases
• 
  
• 
  
• 
  

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6 Remarks

• From Fs point of view
• The agent with the higher stake in the alliance
  should be in power
• But if such a stake is perfectly
  re-distributable, F is indifferent between the
  two parties.
• Provided that R can renegotiate domestic policy
  more more easily than can F renegotiate foreign
  policy
• in case of a revolutionary threat, Fs emergency
  aid is only imperfectly converted into
  redistribution to P
• When the revolutionary threat is strong enough, F
  prefers to allow P to power rather than paying
  emergency aid to R
• For some range of µ, the expected income of P
  (and therefore, expected corruption in the
  allocation of international aid) is decreasing in
  the revolutionary threat.

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P in power
R in power
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x is higher than when
x
x
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7 Future directions?

• Trade model
• Competition between superpowers?

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Polity IV Democracy Index, averages