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842 international conflict
3.3 Institutional Incentives
Bueno de Mesquita et al. (1999, 2003) suggest an institutional theory in which all states
can be seen as governed by a tenure-maximizing leader who relies on a coalition of
core supporters to remain in power. The core supporters—the winning coalition—
are drawn from a larger pool that they call the selectorate. They examine how insti-
tutions alter the incentives of leaders in domestic affairs and international politics.
Their so-called selectorate theory posits that leaders want to maximize their survival
time in office (and secondarily their income from office). Leaders are responsible for
raising revenues and spending those revenues in the name of the state, with their
taxing and spending decisions driven by their interest in staying in power. This theory
focuses on how different political arrangements—like democracy (i.e. a system in
which leaders depend on a large winning coalition) or autocracy (in which leaders
depend on a small coalition, possibly drawn from a large or a small selectorate)—
shape how incumbents tax, allocate revenues, and choose courses of foreign policy
action.
All leaders raise and allocate revenues to three basic spending categories according
to the selectorate theory:
1. Public goods that benefit all members of society (e.g. national defense, rule of
law, protection of civil liberties);
2. Private goods that benefit those whose support is essential to keep the leader
in office (e.g. the use of nepotism, privileged access to contracts, rent-seeking
opportunities, discriminatory tax policies to benefit the so-called winning coali-
tion); and
3. Discretionary funds that are at the disposal of the incumbent leader (e.g. secret
bank accounts, lavish lifestyles, political rainy-day funds).
When leaders rely on only a few people to keep them in office then it proves most
efficient for the incumbent to buy their support by providing the coalition’s members
with lots of private benefits in exchange for loyalty. When domestic political institu-
tions compel a leader to have a broad base of support—as is true in democracies—
then purchasing loyalty through private rewards is an inefficient way to stay in power
(Lake 1992; Robinson 1998; Robinson and Verdier 2002; Bueno de Mesquita et al.
2003). Democratic leaders would have to spread the private rewards across so many
people that each would receive too little to be influenced to remain loyal to the
incumbent. In such a situation, it is more efficient for leaders to rely on public goods
as their best means to retain office. But when a leader needs many supporters, each
supporter knows that he or she also has excellent prospects of being essential to the
political success of a politician who challenges the incumbent for office. Conversely,
when a leader only needs backing from a few people to stay in power, those few
people are loyal both because they are getting well rewarded for their support and
because they face a high risk of losing their privileges if another politician succeeds
in toppling the incumbent regime. Thus, autocrats spend more resources on private
goods than on public goods as compared to democrats; they enjoy strong loyalty
bruce bueno de mesquita 843
from their coalition; and this loyalty allows them to spend less than the total pool
of revenue on their backers even when facing a credible political rival. What small
coalition leaders do not spend to maintain the loyalty of their supporters remains
as discretionary funds for their own use, in essence, a rainy-day fund to get out of
political trouble if it arises.
Democratic leaders, in contrast, emphasize public goods over private goods. Con-
sequently, membership in a democratic winning coalition confers only a small private
goods edge over the public goods rewards that go to everyone. Furthermore, because
the winning coalition is a large portion of the selectorate, the risk of exclusion
following political defection is small. Thus, in democracies, leaders must spend more
tomaintaincoalitionloyaltythaninautocracies;theycanreservelesstocompensate
for an exogenous shock; and so they are more susceptible to be turned out of office
than are their small coalition counterparts. Autocrats, then, can rule by theft and yet
stay in office for a long time while democrats rule based on good public policy and
are easily defeated by political rivals.
Consider now what the selectorate argument implies about the inclination to fight
wars. State-centric theories, like realism or liberalism, lack a clear way to explain
the generally accepted observation that democracies tend not to fight wars with one
another even though they are not especially reluctant to fight with autocratic regimes.
According to the selectorate logic, democratic leaders cannot afford to pursue overly
risky foreign policies because democratic leaders are judged primarily in terms of
how good a job they do in providing public benefits. Democrats, therefore, become
involved in wars only when they believe at the outset that their chances of victory are
very high or when all efforts at negotiation fail.
Autocrats, in contrast, are not retained or deposed by their domestic supporters
primarily because of the job they do in providing successful public policies. They are
judged by their ability to deliver private benefits to their cronies. As a result, autocrats
are not as selective as democrats about the disputes they participate in or the wars
they fight and they do not make as great a marginal effort as democrats do to win
wars that prove to be tougher than initially expected or to find negotiated settlements
to their disputes.
Except for two special circumstances, to survive in office, autocrats need to be sure
that they can pay their essential supporters enough that they do not defect while
democrats, if faced with war, need victory or a negotiated settlement before fighting
breaks out. For autocrats, extra money that goes into trying to win a war is money that
could have been better spent by using it to buy the loyalty of cronies. For democrats,
saving money to bribe backers is not nearly as politically beneficial as is spending
money to assure policy success, including victory in war.
This idea is readily shown with a simple, stylized example based on the limiting
case in which all available resources are devoted either to the war effort or to private
goods for members of the winning coalition. Suppose a leader must choose between
putting all the available revenue (R) into fighting a war or retaining all of the revenue
to distribute as private rewards to W members of his or her winning coalition.
Further, assume that victory (V) is assured if all revenue is put into the war effort
844 international conflict
and defeat in the war is assured if all revenue is retained for use as private rewards
to coalition members. Suppose V = v + r where v is the public goods component of
victory enjoyed by everyone in the society and r represents the additional resources
(i.e. the spoils of war) that can be extracted from the vanquished state and allocated
to the leader’s coalition members following victory. Defeat has a value of 0.Letthe
per capita cost of waging war be k whether the war is won or lost. If a leader makes
an all-out effort to ensure victory, then the public and private benefits of winning
are worth v + r/W −k for each member of her coalition. Alternatively, if the leader
chooses to retain resources for use as private benefits to her coalition at the expense
of losing the war for sure, then the payoff to her coalition is R/W − k.Theleader
prefers additional effort when v>(R −r)/W, the latter term of which is decreasing
in W provided that R > r ; that is, national resources (R) exceed the value of post-
war spoils (r). We see, then, that small W systems—like autocracies and juntas—are
more likely to induce leaders to choose to make relatively little extra effort to win a
war, and large coalition systems, like democracies, are relatively more likely to induce
leaders to give up paying their coalition private rewards in exchange for relatively
more extra, marginal effort put into achieving victory in war (Bueno de Mesquita
et al. 1999, 2004).
Empirical evidence reveals that democrats need victory relatively more than au-
tocrats to survive in office and so make the extra effort described above (Bueno de
Mesquita and Siverson 1995; Bueno de Mesquita et al. 2004). This implies that leaders
of large coalition systems are more selective than autocrats about the circumstances
under which they are prepared to fight, and, further, helps explain why they almost
always win the wars they initiate. In fact, democracies win 93 per cent of the wars they
initiate while autocrats win only about 60 percentofthetime(ReiterandStam2002).
The cases of observed war outcomes, of course, represent a biased sample as many
disputes are resolved through negotiation. The above summary statistics presumably
reflect the situations in which autocrats thought (a) they had an acceptable chance
of victory; the dispute was over (b) a policy concession, such as deposition of the
rival, that the autocrat could not agree to; or over (c) a proposed concession—like
the autocrat going into exile—that the democrat could not credibly commit to honor
ex post. This commitment problem, of course, is the issue faced by Chile’s deposed
dictator Augusto Pinochet; and it may have been an issue in Saddam Hussein’s
decision to fight rather that negotiate a deal with the United States in 2003.
Allowing for the small advantage gained by striking first, autocrats basically have
even odds of winning when they start a war while for democrats victory is practically
certain. But if two democrats are at loggerheads, then war is unlikely. The reason is
that each democratic leader has similar incentives, including an incentive to try hard
if war ensues. Each must provide policy success in order to be retained by his or her
constituents. The likelihood is practically naught that leaders of two rival democracies
each believes at the same time about the same dispute that their prospects of victory
are nearly certain. When democrats do not think they are nearly certain of victory
they opt for negotiations over fighting. Thus leaders of two democracies are unlikely
to find that the circumstances are right for them to gamble on war over negotiations.
bruce bueno de mesquita 845
Autocrats do not face the same circumstances. Autocrats generally do not need to
try especially hard to win most of their wars; they are prepared to fight even when
the chances of victory are not exceptionally good; and they are more likely to be
overthrown if they do not retain adequate resources for their cronies than if they
lose the war, unless the defeat is horrendous (Goemans 2000). Thus it is that we
observe democracies fighting with autocracies; autocracies fighting with one another;
democracies not fighting with each other; democracies winning most of the wars in
which they get involved; and democracies showing greater eagerness than autocracies
to resolve disputes through negotiations (Bueno de Mesquita et al. 2003).
There are two exceptional circumstances when domestic institutionally induced
incentives do not make democrats try harder than autocrats. One arises when the
opponent is so weak that victory is assured without extra effort. The other occurs
when the conflict is about the deposition of the defeated foreign rival. In that case,
all leaders try hard. The first exception characterizes wars of imperial or colonial
expansion. The latter characterizes the effort in the last stages of the Second World
War, when it was evident that an allied victory meant the removal of the axis’s leaders.
In the selectorate theory’s account of the so-called “democratic peace,” democratic
leaders are not more civic minded, nor are they inherently better at fighting wars
than other types of political leaders. Instead, their desire to stay in office shapes their
choices and makes them highly selective about escalating disputes to violence. Like-
wise, autocrats were not assumed to have different motivations from democrats; just
different institutionally induced incentives. State-centric approaches to international
relations simply have no basis for explaining the pattern of behavior just described
and yet historical, case study, and statistical analyses support the implications of the
coalition-selectorate explanation or some of the other domestic accounts.
4 Nation-building,Foreign Aid,
and Domestic Politics
.............................................................................
Models of domestic politics provide a way to explain broad patterns and detailed
nuances of foreign policy and international politics. What is more, they offer a
microfoundation for arguments about what happens at the system or structural
level (Kadera, Crescenzi, and Shannon 2003). In this section I consider insights
into nation-building and foreign aid policy provided by domestic models. It will be
evident that even when theoretical conclusions are reached that seem consistent with
a realist viewpoint, the microfoundations and logic of action are completely different.
When it comes to nation-building following military intervention or to foreign aid
as a policy instrument, domestic perspectives offer accounts that do not at first appear
very different from the view of realists. In each case, there is little reason to be san-
guine about nation-building or foreign aid as exercises oriented toward developing
846 international conflict
new democracies or improving individual welfare except under special circumstances.
The logic leading to policy implications, however, is radically different. To illustrate
how the logic of the domestic perspective works when it comes to nation-building,
consider the incentives American political leaders have to shape governments in other
countries following a military intervention such as occurred in Iraq in the spring
of 2003.
A president of the United States acts as a self-interested (or political party
interested) leader. As such, the president always has a strong policy motive driven
by re-election incentives. This colors not only his decision of where and when to
intervene but also of how to intervene. From the domestic perspective, a factor
determining whether to intervene is whether the president believes that the policies
pursued by the other state’s government are good or bad from the perspective of the
president’s core constituents; that is, the American voter or at least those who might
be persuaded to support (or oppose) the president’s (or his party’s) re-election. In
cases where the policies are viewed as poor from the point of view of his supporters,
the president is pulled by his need to produce effective public policy toward changing
the other state’s leadership and possibly its governing institutions so as to improve
his own re-election prospects. When American voters view the policies in the target
state favorably, US intervention is generally motivated by a desire to prop up the target
government and ward off domestic forces opposing it. The domestic perspective helps
us recognize that democracies, including the United States, even when partially moti-
vated to spread democracy, are also motivated by other goals in the world. Sometimes
furthering those other goals through intervention or other foreign policy choices
necessarily implies working against democracy in some states (Bueno de Mesquita
and Downs 2006).
The problem with erecting a true democracy following military intervention arises
when the policies desired by the citizens of the defeated state are incommensurate
with the policies desired by the core constituents of the democratic intervener,
whether it is the United States or some other democracy. The key is that a quasi-
autocratic puppet government can credibly commit to deliver the policies desired by
the intervener in exchange for sufficient funds to remain in power (e.g. by providing
adequate financial returns to their small group of coalition members). Thus there is a
critical trade-off decision to be made by the democratic victor: obtain a preferable
policy outcome by maintaining or imposing a friendly autocrat in power or risk
a future stream of hostile policies by promoting democracy in the defeated state,
leaving policy choices to its citizens rather than imposing the policies desired by the
victor’s constituents. Since autocratic leaders need not satisfy the policy ambitions
of a broad constituency, the policy interests of the general populus becomes a com-
modity autocrats can sell in exchange for the resources they need to satisfy the private
goods demands of their small coalition. If a democratic government were installed,
its leaders could not make such a commitment because those leaders would need to
satisfy the policy wishes of their own constituents to stay in office. As an empirical
matter, most countries that have experienced military intervention are no more—
and often less—democratic ten to twenty years after the intervention than they were
bruce bueno de mesquita 847
before. This is true whether the intervener is a democracy, an autocracy, a multilateral
effort, or the United Nations.
Foreign aid follows a similar pattern. Aid-giving, like military intervention, can be
a useful approach to achieving policy gains for domestic constituents. Democracies
are more likely to give aid than are autocracies. Aid is more likely to be received by
autocrats than by needy democrats according to the domestic perspective because
democratic donors and autocratic recipients have something to trade; namely, policy
concessions from the recipient in exchange for money from the donor.
An autocratic prospective aid recipient can more readily afford to make policy
concessions to the democratic donor than can democratic prospective recipients of
aid. Autocrats are maintained in power based on their distribution of private goods
to their small group of supporters rather than on their emphasis on providing public
goods in the forms of generally desired policies. Autocrats can get money needed to
maintain their coalition of backers by entering into an aid for policy deal.
Democratic leaders seeking aid bear a higher political cost for making policy
concessions in exchange for money than do autocratic recipients. The core backers of
a democrat depend on public policy benefits more than private benefits in choosing
whether to continue to support the democratic incumbent or switch to another
candidate. Consequently, a democrat seeking aid in exchange for policy concessions
must receive more aid than an autocrat because the political costs associated with
making a policy concession are greater in democracies than in autocracies.
Democratic donors survive in office by satisfying their constituents through policy
choices. At the margin, gaining policy concessions on salient issues (e.g. help with
the war on terrorism) from other states can improve a democrat’s political survival
prospects. If it happens that the people in a democracy particularly desire a policy
that alleviates poverty in recipient countries, then there is not much constraint on
granting aid to a democracy, but if the donor’s domestic constituents seek policy con-
cessions, as often seems to be the case, then they face a trade-off between promoting
economic well-being and policy gains through aid.
Substantial evidence supports the dismal conclusion that aid has had only a small
impact on improving economic growth, health care, education, social welfare, free-
dom, or governmental accountability (Easterly 2001). Perhaps this is because aid
agencies like USAID, the World Bank, or the IMF do not understand how to promote
economic growth. That interpretation, however, is inconsistent with another body of
evidence that shows that aid is most likely to go to small coalition, poor autocratic
regimes but that the largest amount of per capita aid goes to the larger/coalition
and/or to relatively well-off countries (e.g. Egypt, Israel, Marshall Plan) rather
than to the poorest countries. As Bueno de Mesquita and Smith (2004)showtheo-
retically and empirically, foreign aid is most likely to be given by wealthy polities
whose government depends on the support of a large coalition. Aid is most likely
to be given to poor governments dependent on a small coalition so that the leaders
can commit to follow policies the donor (democratic or otherwise) wants even if
the recipient’s citizens do not like the policy. From this domestic perspective, foreign
aid is a deal between those who value a policy concession on the one hand—public
848 international conflict
goods-oriented regimes—and those who value money for use as rewards for
cronies—the private goods-oriented regimes. A consequence of such aid for policy
deals is that citizens in recipient countries often have their own welfare diminished as
a result of aid even as their failed leaders are helped by democratic donors to sustain
themselves in office. No wonder such aid for policy arrangements are popular with
recipient leaders but unpopular with the exploited citizenry in recipient countries.
5 Conclusions
.............................................................................
Structural theories cannot predict how regime type influences the following: either
who gets or who gives aid; how nation-building unfolds; differences in war fight-
ing or war outcomes; or a host of other empirically observed regularities in the
domain of international relations. Domestic politics-oriented theories provide clear
formal deductions about such questions. The evidence seems more consistent with
deductions from domestic models than from implications drawn from structural
theoretical approaches. Indeed, the domestic perspective and its attendant theories
and models contradict the idea that there is a sharp distinction to be drawn between
foreign policy and international politics, yet this is one of the core ideas behind neo-
realist theorizing.
With the advent of political economy models of the domestic perspective the study
of international conflict is now firmly embedded in the broader context of political
theory, with the microfoundations of action being laid out and the ties between
individual choices and aggregate consequences becoming clearer. Increasingly, inter-
national politics and conflict research fall within the domain of comparative political
economy rather than being seen as outside the mainstream of political theorizing. As
one recent title suggests, we have entered the period of Dissolving Boundaries (Werner,
Davis, and Bueno de Mesquita 2005) when all aspects of international politics can be
studied as problems in comparative politics.
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