The ability to survive politically depends upon the capacity of others to produce economically.
Robert H. Bates
The formation of societies is a tricky business. On one hand, the power granted allows the ruling class the ability to impart policies that support economic growth and prosperity.
On the other, political directives ensure stability and security necessary for continued investment in the economic landscape.
Robert Bates’ thesis stems from a historical perspective of the economic and political development of societies. Since the beginning of human history, basic societies have formed rules and structure around the idea that in order to grow, groups must invest in new ventures and delay gratification of gains. However to justify such investments, the community must be willing to protect such investments by whatever means necessary.
It’s the application of practical portfolio theory. In order to invest, the investor(s) must be compensated for their risk of capital. In olden times, communities sought to mitigate their risk through the threat of force, in the same way that today’s governments enforce retribution through renumeration and incarceration.
The development of societies, both economically and politically, is fascinating. When hearing Bates’ description of William of Orange’s clever assumption of the English throne, one cannot help but be impressed with his ability (and sacrifice of power/ego) to restructure the government into a parliamentary system that could both finance and check his war campaigns, thereby provided assurances to merchants and the capital holders (Bates, Prosperity and Violence, p. 80).
Considering the imbalance of developed and developing economies today, it is even more interesting to consider the incendiary nature of political change. Bates specifically focuses on the post-Cold War era as a gauge of how unfavorable economic conditions provide an unstable foundation for political leadership. As one example, Bates turns to Kathryn Firmin-Sellers’ story of Nana Offori Atta, a cheiftan of the Akyem Abuakwa tribe, who implemented a system of checks on his power to assure capital investors of his limitations and ability to usurp their resources, leading to development and prosperity from the cocoa farms of his tribe.
However, Bates points to Ghana’s first President after independence who in his own efforts to grow the development of Ghana’s industries, instituted a state-run monopoly on the cocoa business and heavily taxed farmers to finance growth in other industries. President Nkrumah’s detrimental economic policies spawned violent opposition from many tribes including the Akyem Abuakwa and led to the “withdrawal of capital from farming, to a decline in the production of cash crops, and to the impoverishment of Ghana.”
Bates’ deep examples of economic and political development stress the importance of policy incentives for the international and domestic community to put capital to work. His primary focus on the political insurrections that followed the end of the Cold War point to the need for capital as the incendiary event that started the predisposition of emerging countries towards democracy and the political orientation of the western nations. Bates argues that these countries needed international capital that the U.S. and other democracies could supply, so by reorienting their governments to mirror those industries they were able to institute policies that supported economic liberty for those in the country who could create wealth, protect the assets of those who had accumulated wealth, and even in some cases promote the power of the military as a driver to promote and protect new industries.
Prosperity and Violence points to examples of violence and political insurrection as a necessary tool to promote fair and encouraging economic policies. Coersion, as Bates states, is the mechanism by which societies are able to defend and secure capital investments. What economic preconditions lead to political revolt? As Bates and many economists point to – protectionist policies that do not promote putting capital in to the hands of the most productive entities and violent dictators that threaten the likelihood of future gains are at risk to be overthrown or met with an equal or greater force.
