Sunday, July 27, 2014

The re-emergence of the roving bandit

Mancur Olson introduced the concept of roving and stationary bandits to explain why dictators - stationary bandits - have a self-interest to the society they rule productive to maximize the rent they can collect from the population. This in contrast to roving bandits who have no obligation to provide protection to the population, or keep the land productive. Roving bandits just plunder and steal. A stationary bandit uses taxation.
With the development of nation states during the last few centuries we seem to have entered a period where we don't have roving bandits. Some countries experience democratic systems, others autocratic. But in recent years we seem to observe the re-emergence of roving bandits, as a nasty side-effect in panacea thinking of the benefits of market solutions and democratic systems. Note that democracy is typically portrait as voting, not the involvement of people in decision making, which is the key to democracy according to Vincent Ostrom.
We have multinational companies who move around to avoid taxation and exploit natural resources. When resources are depleted they can move on to other countries. Whether this is shrimp farming in rice field in south east Asia, gold mines in Africa, or soy bean production in Latin America, the multi-national companies lack the incentives to care about the long term for the people, and often local governments are too weak to implement and enforce regulations to reduce the negative impact.
Former stationary bandits
At a different scale, we see roving bandits emerging in Northern Africa and the Middle East. The so-called Arab Spring led to the removal of some dictators who suppressed a large part of their population. Unfortunately we now learn that those dictators were able to provide some security compared to the anarchy currently ruling in 'countries' like Libya, Syria and Iraq. Those dictator were able to suppress the violence between different ethnic and religious groups within their countries. These suppressive regimes favored their own ethnic and religious groups, but compared to the current anarchy, we may wonder whether everyone did benefit.
Douglas North and his colleagues public a book in 2009 on the difficulty of societies to transition of controlling social order via violence, to the control social order via votes and democratic institutions. Those transitions have been rare, had a long duration and are embedded in a long history of social norm development that supports democratic institutions. As we have seen in recent years, removing dictators is not a solution to establish a less violent and prosperous society. I don't have a solution to this problem, but we should at least learn from history and avoid creating more anarchy as has happened in recent years.