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USA Real Estate Blog

The false equivalence between dictatorship and democracy

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Earlier this week, following a CIA briefing of US senators regarding the killing of Washington Post writer Jamal Khashoggi, Lindsay Graham commented that “there’s not a smoking gun, there’s a smoking saw.” As a former South Carolinian, I appreciate his Southern candor. However, word acrobatics aside, the revelation speaks to a truth that many Americans — especially millennials — have come to question: that democracies and autocracies are fundamentally different.

Democratic government entails dysfunction and discord, but is fundamentally different from autocracies under the volatile rule of murderous Crown Princes, paranoid Politburo Chairmen, or thieving, former-KGB thugs. REUTERS/Marcos Brindicci

It is easy to be cynical about democracy. Winston Churchill’s famous quote that “democracy is the worst form of [g]overnment except for all those other forms that have been tried from time to time” frequently rings true in the manic swings of Western media, academic, and policy debates. But the underlying point is eternal. Democratic government, for all of its dysfunction and discord, is still a far better option when compared to the volatile rule of murderous Crown Princes, paranoid Politburo Chairmen, or thieving, former-KGB thugs.

In “Dictatorship, Democracy, and Development,” the late Mancur Olson articulated an alternative to social contract theory — the Enlightenment idea that governments emerge from explicit or tacit agreements between people and their rulers. From the perspective of an unconventional economist like Olson, it is more likely that all governments rise from and rest upon “the rationalization of theft through taxation.”

According to Olson’s theory, over time, roving bandits realized that if they settled down in one area, put on a crown, and protected villagers from other bandits (instead of ruthlessly pillaging them and moving on), the villagers would produce more goods and services under the relative safety of the king. Roving bandits that became stationary could then hold a monopoly on taxation and extract ever-larger, more stable gains through taxes. Over time, this process, all around the world, created the oldest form of dictatorship known to man: the “divine right of kings.”

Olson concludes that “democracy” is a relatively new addition to the world and develops not through nation-building efforts but largely through accidents of history (usually wars) that leave rival stationary bandits in a given area, at a given time, in a stalemate of competition. Olson specifically cites the American Revolution, which ended with 13 independent nations and not a single former colony capable of controlling and taxing all the rest. Thus, the founders were forced to compromise on a constitutional, federal republic.

Out of such compromises, democracy arises. Fundamental to the compromise of shared power are the individual rights to property, privacy, and free expression that are out of reach of any bandits: roving, stationary, or even elected.

And this is why democracy is chaotic: It arises out of historical contexts in which no single group is capable of ruling single-handedly. But it is also why democracy is better than regimes ruled by a singular, stationary bandit. You see, when bandits compromise and give rights to the individual instead of a privileged group, one of the key outcomes is that the thief tends to actually lower taxes for strategic purposes. Assuming there will be regular rotations of power, the bandits in power will not want to give any advantage to their successors.

Though this is a highly stylized theory, it explains one of the fundamental dynamics that separates democracies from autocracies. In a dictatorship, there is a monopoly on power, giving the stationary bandit a relatively long time horizon. Thus, the dictator makes plans to stay in power for life, leading him to extract as much as possible, wherever possible, and whenever possible. Historically, dictators have done so through ever-higher taxes, but some modern authoritarians also seek natural resource rents through cartels like OPEC, shakedowns at elite hotels-turned-prisons, massive “anticorruption” campaigns, and offshore money laundries. But just like the kings of yesterday, modern autocrats will not shy away from sending hit squads to hack their perceived enemies to pieces.

Any way one cuts it, democracy is often dreadful — but it is far superior and preferable to all of the alternatives. We should commit to making it better.

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