Are Economic Elites Anti-Democratic? Why Economic Elites May Support Democratization

Are economic elites always anti-democratic? Not in some contexts. Structural changes in the Bolivian economy cultivated a new set of economic elites in the late 1960s and early 1970s. They typically supported the right-leaning Hugo Banzer, who led a series of coups against the left-leaning junta and established a tyrannical military dictatorship. As Banzer was one of Santa Cruz’s agrarian elites, the economic elites trusted him to further their interests against the left; thus, they strongly supported him.

Once in office, however, Banzer implemented an array of policies benefiting small and medium-sized business owners and emerging commercial agricultural elites in Santa Cruz. Exclusion from Banzer’s major economic policymaking led to growing discomfort among economic elites, and a growing number of them, along with some military players, attempted to overthrow him. Although this alliance relied on rather credible commitments to economic policymaking for the elites, a host of captains and lieutenants alike failed to topple Banzer.

A recurring series of armed coup attempts aggravated political instability and split the military, creating more factions than ever before. These unsettling conditions exacerbated the economic elites’ uncertainty about the prospect of a credible new dictator in the heterogeneous pool of potential autocrats. This catalyzed the elites’ demand for democratic elections, which was the key to Banzer’s eventual removal from power.

Conventionally, economic elites have been viewed as anti-democratic, because they can exercise sociopolitical leverage under nondemocratic regimes. In association with autocrats seeking winning coalitions, economic elites have historically held formal positions in a party or legislature, wielding informal power, for example, through asserting control over the economy in exchange for political support to the authoritarian ruler. However, a recent article by Michael Albertus and Victor Gay relaxes the assumption that economic elites inevitably back authoritarian regimes, and explores the possibility of their shift to democracy.

Noting historical evidence that significant political instability and related uncertainty have preceded unforeseen democratic transitions, the authors posit two salient sources of uncertainty economic elites face on the verge of regime change that may spur elite-driven democratization. The first is ambiguity in the pool of potential successive autocrats. Given rapid cycling of leaders in dictatorships, elites have ample reason to care about who the next dictator might be. If the pool of potential dictators varies widely, economic elites may have no affinity for a new dictator and his future policies; indeed, they may even suffer under an exclusive leader who brings benefits only to his supporters. Such insecurity can lead economic elites to favor democracy even without a threat from below. In response to this motivation, potential autocrats have incentives to signal reliable commitments to economic elites, and the trustworthiness of those signals gives rise to a second type of elite uncertainty.

A potential autocrat who already shares similar interests with economic elites will make credible pledges that are favorable to them. However, a potential autocrat can also expel economic elites from the ruling coalition and instead appeal to a military or personal coalition, if it is likely to expedite his ascent to power. Cognizant of this potential opportunism, economic elites ruminate over whom to support. However, owing to the unstable and ever-changing political environment in which such communication between elites and potential autocrats occur, elites experience the difficulty of extracting precise information about the identity and likely policies of potential autocratic successors. Facing uncertainty over what the next authoritarian regime will bring, economic elites have motivations to reject dictatorship and support democratization whenever the autocrat brings less than the expected benefits from democracy.

In order to make predictions regarding their hypothesis, the authors construct a game-theoretic model of non-democratic politics in which a potential autocrat tries to credibly assure economic elites with benefits in exchange for their political support, whereas elite uncertainty may lead to democratization. The economic elites’ uncertainty over the pool of potential autocrats depends on how closely the potential autocrat is aligned with the interests of the economic elites. The authors also consider that repeated coups and military fragmentation increase economic elites’ uncertainty over the informational environment.

The specifics of the analysis indicate common commitment problems in autocracies. Owing to a lack of credible commitments to deliver ex-ante, an authoritarian leader may renege on promises to his supporters once in power. Therefore, it is vital for the elites to determine the true character of a potential autocrat before backing him out of a heterogeneous pool of potential autocrats. Knowing this, potential autocrats attempt to convince economic elites of their sincere intentions by sending signals. However, potential autocrats’ successful signaling hinges on the informational environment—the noisier the informational environment, the less precise the signals of potential autocrats will be, and thus the less capable they will be of convincing the elites of their reliability. In this way, the authors find that when uncertainty along these two dimensions is high, economic elites will favor democratization in lieu of dictatorship.

Transitions “from above” have been especially well-characterized by these circumstances, where economic elites may have been the key entities setting off democratization. The authors’ data show 61 democratic transitions from 1900 to 2008 where the elite uncertainty mechanism was most likely to have operated; among them, the case of Bolivia provides an excellent illustration. Why did some states suddenly become relatively stable and durable democracies after long, tumultuous decades of cyclical authoritarian leadership? The authors provide some insight: economic elites were perhaps anxious about the payoffs associated with unpredictable and unreliable rulers. These elites thus push for democracy for their own sake, anticipating that a democratic institutional system will ensure greater stability and predictability.

Article source: Albertus, Michael, and Gay, Victor. “Unlikely Democrats: Economic Elite Uncertainty under Dictatorship and Support for Democratization.American Journal of Political Science, Vol. 61, Issue 3 (2016): 624-641.

Featured photo: cc/(Lobro78, photo ID: 531943280, from iStock by Getty Images)

Changwook Ju
Changwook (MPP '18) is a staff writer for Law & Politics. He is interested in political economy, civil-military relations, and electoral politics.

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