ISS LECTURE on Clapham 2 - cis225 clapham2 February 2005...

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cis225: clapham2 February 2005, p.1 How Do Dictators Manage Their Economies? The Case of Third World Countries -- B How do leaders in a patrimonial system stay in office? 1 Two major control mechanisms are available: 2 Imposition of force 3 But: most third world governments are so weak that force is often difficult or dangerous to impose. 4 He who lives by the sword will die by the sword. 5 Distributing economic benefits to gain and maintain the support of key groups in the country. 6 This is less risky than the use of force. 7 Hence, it usually the preferable option. 8 But: a system in which leaders dispense benefits to followers means that the leaders need resources which can be converted into benefits which can be distributed. 9 Hence, for governmental leaders, control over the economy is exceedingly important. 10 It involves control over the organizations of production and distribution . 11 It involves control over the allocation of employment opportunities in the government itself. 12 This is why third world governments have so often said they were socialists: 13 Socialist ideologies provided justifications for government intervention in the economy. What is the major source of revenue for these leaders? 14 Answer: foreign trade. 15 There are two sources of revenue from foreign trade: 16 Taxes on any transnational firm operating in the country. 17 Import and export taxes 18 Royalties, profits on taxes, profit-sharing agreements. 19 Create government-run international trading monopolies : 20 Buy locally-produced products for mandated low prices. 21 Sell these products abroad for much higher prices .
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cis225: clapham2 November 30, 1998, p.2 22 Government keeps the difference.
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