Modern dictatorships are more like a protection racket than they are like old-fashioned patronage networks
In the old days dictators handed out money to buy loyalty, but many modern dictatorships steal money upwards in an imitation of the Mafia
For much of the 1800s and 1900s dictators would establish patronage networks, handing out money to buy loyalty. But modern dictatorships work in the opposite direction, people at the bottom are expected to send money to people at that the top, like in the mafia.
But why can’t the rulers of a nation simply impose a tax, and therefore get the money legally? Why do it in a way that is illegal, when they have the power to make it legal?
The answer seems to be the international context. Especially in poor countries, the government could impose a tax on their people, which would bring in very little money, or they can focus on stealing money that comes from the outside. They can steal international aid, or they can find ways to blackmail corporations that want to operate inside the country.
But again, why not pass a law and make this legal? Why not pass a law and say “This corporation must give us 5% of everything.” Why do it illegally when it could be made legal?
Again, the international pressure seems to matter. Money collected by taxes would have to go through a formal process, it would be vetted by nations giving aid, as well as by the IMF. But money gotten illegally is money that the ruler can put straight into their pocket.
The mafia is the model for modern authoritarian governments.
Also relevant is that for the wealthiest people in the world, we’ve built a truly global society. Everyone wants to party in the West. Russian oligarchs, Middle Eastern princes, Latin American criminals, Africa coup leaders — all of them expect to meet each other in the West. There are parties happening in Paris and London and New York and Los Angeles — this is where the rulers and thugs of the world meet. They all need to steal money from their own countries so they can live at this level, this global level. In the old days it might have been odd or confusing to steal money from “your” country and send it overseas. But in the modern era, many dictators view “their” nations simply as a business through which they can make money, which they can then spend in the West (or in a few other centers socializing and networking, such as Dubai).
The economist Paul Krugman has pointed out the uniquely extreme corruption with Russia:
Everyone has heard about giant oligarch-owned yachts, sports franchises and incredibly expensive homes in multiple countries; there’s so much highly visible Russian money in Britain that some people talk about “Londongrad.” Well, these aren’t just isolated stories.
Filip Novokmet, Thomas Piketty and Gabriel Zucman have pointed out that Russia has run huge trade surpluses every year since the early 1990s, which should have led to a large accumulation of overseas assets. Yet official statistics show Russia with only moderately more assets than liabilities abroad. How is that possible? The obvious explanation is that wealthy Russians have been skimming off large sums and parking them abroad.
The sums involved are mind-boggling. Novokmet et al. estimate that in 2015 the hidden foreign wealth of rich Russians amounted to around 85 percent of Russia’s G.D.P. To give you some perspective, this is as if a U.S. president’s cronies had managed to hide $20 trillion in overseas accounts. Another paper co-written by Zucman found that in Russia, “the vast majority of wealth at the top is held offshore.” As far as I can tell, the overseas exposure of Russia’s elite has no precedent in history — and it creates a huge vulnerability that the West can exploit.
But can democratic governments go after these assets? Yes. As I read it, the legal basis is already there, for example in the Countering America’s Enemies Through Sanctions Act, and so is the technical ability. Indeed, Britain froze the assets of three prominent Putin cronies earlier this week, and it could give many others the same treatment.
Sarah Chayes tells a fascinating story of a specific case that she saw in Afghanistan. She eventually reaches this conclusion about the structure of money flows inside the system:
President Karzai was not, as conventional wisdom had it, doling out patronage. He wasn’t distributing money downward to buy off potential political rivals. If anything – with exceptions especially before elections – the reverse was true. Subordinate officials were paying off Karzai or his apparatus. What the top of the system provided in return was, first, unfettered permission to extract resources for personal gain, and second, protection from repercussions.
The main characters in her story:
Sarah Chayes and Foster -- working with the USA military to help track down corrupt officials and arrest them
Sayfullah -- a low-level corrupt Afghanistan official, who Chayes and Foster target for arrest
Interior Minister Atmar -- a high-level Afghanistan official who wanted to protect Sayfullah
Hakim Angar -- a good and decent Afghanistan police officer who wanted to do the right thing, who is briefly told he will replace Sayfullah, before having his promotion sabotaged by high-level corrupt officials
President Karzai -- the extremely corrupt leader of Afghanistan
Kolenda -- an analyst who helped Sarah Chayes see the truth about the structure of corruption in Afghanistan
Chayes has written a fascinating book. I here offer a long excerpt of how she came to see the modern structure of corruption, in Afghanistan and many other countries.
Thieves of State
Why Corruption Threatens Global Security
By Sarah Chayes, 2015
Page 55–56
Flicking my head to scatter the memory, I looked back across the brown wooden table at Steve Foster and studied a response to his project of going after Sayfullah.
“Are you sure?” I ruminated, skeptical. “I know the guy. He actually doesn’t amount to much.” In the complex pattern of Afghan politics, Sayfullah didn’t matter, despite his rank. “He’s kind of a front man. I’m wondering if getting him will send the right message.”
Foster did not disagree with my analysis. Still, his fledgling investigators had the evidence. They had worked so hard, and it was good evidence. It seemed hardly fair to ask them to abandon it now and start afresh on some new quarry. I could see his point.
“Besides,” I offered, “Maybe it’s not such a bad idea to start small. We can stress the system, see how it responds, and be better prepared for the next one.”
Plans for the Sayfullah arrest went ahead.
Interior Minister Atmar’s immediate reflex, upon being informed some days after that meeting in the garden, was to “kick the issue into the long grass,” as Foster put it. He demanded a detailed review of the evidence – though the attorney general had already sworn out an arrest warrant. At our request, ISAF’s intelligence chief, the frenetically energetic General Mike Flynn, visited Atmar one evening and spelled out why it would not be a good idea to stand in the way. Atmar got the message – and began bargaining. Sayfullah’s arrest, he insisted, should be a dignified affair, no handcuffs.
It took place on October 19, 2009. Sayfullah was invited to Kabul to attend an official ceremony, and as it concluded, he was quietly led out a side door. I noted the success with complacent satisfaction. One down – now we could get on to serious business.
A few evenings later I got a call – from quite a different kind of Afghan police official, my friend Hakim Angar, whose career I had followed for years. He was phoning from a plane on a runway; it was hard to make out what he was saying.
Slowly, I pieced it together. Angar was aboard a flight to Kandahar. He had an official paper in his pocket. Beside him on the seat were bouquets of plastic flowers, congratulations gifts from dozens of visitors to his office the previous day. He had been appointed to replace Sayfullah – a stunning departure from the Karzai government’s habit of exchanging one corrupt official for a more corrupt one.
But as the plane began revving its engines, Angar’s phone had rung. It was Atmar’s deputy. “Get off the flight,” he had ordered. Angar’s appointment had been suspended. He should stand by for further instructions.
For the next three months, I worked that aborted appointment. ISAF intelligence chief Flynn told me he raised the issue with Atmar. The three–star operational commander confronted the chief of the Afghan Border Police. In January 2010 Angar’s appointment was on General McChrystal’s list of talking points for a meeting with President Karzai. But nothing moved. Angar remained in limbo.
Nor was this the only interference that plagued the Sayfullah case. A search warrant had been signed out for Sayfullah’s office. Who knew what would be revealed about the doings of the border police? But at the last minute, the interior ministry called the search operation off, Foster, the MCTF, and ISAF reluctantly acquiescing.
Atmar, the story went, had consulted President Karzai about the advisability of this search, Karzai had called Ahmed Wali in Kandahar to get his view. And Ahmed Wali had warned of potential “tribal unrest,” should the warrant be executed. Karzai had told Atmar to call off the search. With the safety of officers potentially at stake, international officials had opted not to fight the cancellation order.
I closed my eyes to quiet the boiling in my ears as I listened to this fairy tale. There was no threat of tribal unrest. Sayfullah had no tribal allies in Kandahar, he wasn’t even from Kandahar. And Karzai, a Kandahar native, didn’t need to make any calls to get the picture. The Afghan officials had shrewdly selected a pretext they knew would strike a chord with their untutored international counterparts.
The Sayfullah case, in other words, had proved to be a more instructive test than I had imagined. It had stressed the system, all right. And the system had responded with a lightning sequence of calibrated blocking maneuvers.
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Page 59–60
“Stop,” Kolenda interrupted in turn. “Let me just finish. Here’s how this Afghan government is operating.”
He started on a new triangle, a new circle at its summit.
“Here’s GIRoA,” he said, the Afghan government. An array of smaller circles formed the triangle’s midsection. They represented subordinate officials – governors or provincial chiefs of police. At the bottom of the triangle was a row of stick figures: the people. Kolenda drew an arrow between the levels of officials again, indicating the flow of money.
But this time, rather than pointing downward to signal a distribution of resources from patron to client, the arrow was pointing upward, from the subordinate official to this superior. Money, Kolenda argued, was moving up the chain of command in today’s Afghanistan, in the form of gifts, kickbacks, levies paid to superiors, and the purchase of positions.
Much of the cash garnered this way didn’t even stay in the country. It was being transferred offshore, to places like Dubai in the United Arab Emirates.
I didn’t snap a picture of that whiteboard sketch. I wish I had. It has structured my understanding of Afghan corruption, and of acute corruption in general, ever since. And incidentally, it pierced the mystery of Interior Minister Atmar and Border Police Chief Sayfullah. I’ve been perfecting that diagram for years, adapting it to fit different countries. I’ve confirmed the behaviors it predicts in hundreds of conversations with Afghans and people living under other kleptocracies. I’ve briefed it dozens of times.
The critical feature is the directionality of the arrows indicating the money flow. Their upward motion contradicts a widely shared preconception about how the Karzai government operated. Karzai was not, as conventional wisdom had it, doling out patronage. He wasn’t distributing money downward to buy off potential political rivals. If anything – with exceptions especially before elections – the reverse was true. Subordinate officials were paying off Karzai or his apparatus. What the top of the system provided in return was, first, unfettered permission to extract resources for personal gain, and second, protection from repercussions.
And that explained the contortions Atmar had put himself through to shield Sayfullah. The whole system depended on faithful discharge, by senior officials, of their duty to protect their subordinates. The implicit contract held, much as it does within the Mafia, no matter how inconsequential the subordinate might be. Every level paid the level above, and the men at the top had to extend their protection right to the bottom. The Sayfullah arrest – like any legal challenge – represented a test case. How well the regime defended even its lowliest officials would broadcast a message throughout the system about the strength of the protection guarantee. If Karzai failed to uphold his end of the bargain, the whole edifice would collapse.
Thinking about the Afghan government this way abruptly solved other puzzles too. I could now decode two subsequent episodes in the Sayfullah saga, which many of my ISAF and rule of law colleagues found baffling.
The first was Interior Minister Atmar’s flat refusal to call a press conference to announce the arrest. “You do it,” he shot back at U.S. officials, who had expected him to leap at the chance to pose as a champion in the battle against corruption. They could not understand why a member of the sovereignty–conscious Afghan cabinet would let foreigners speak in his place.
But Atmar was contemplating the signal that would be transmitted to members of the network. The last thing he wanted them thinking was that he was behind Sayfullah’s arrest. That would violate the protection deal. He needed it known that he had opposed the move – that the foreigners had made him do it. And the best way to get that message across was to have an international official make the announcement.
The press conference never happened.