Political stability is the most important attribute of a modern state, save for liberal democracy.

In order to
analyse and explain the phenomenon of political stability, this paper draws its statistical data from the
Norris cross-national subset. However, it needs to be said that a complete analysis of all the factors
affecting political stability can neither be collected nor analysed. The following hypothesis includes the
variables which as this paper will show have the strongest effect on the dependent variable, ‘political
stability’ (Kaufmann political stability 2002).
Upfront, it needs to be said that there are a wide variety of variables that influence political stability, this
paper, however, will choose the ones which are more common than for example the amount of police per
1000 citizens or similar variables.
The hypothesis is that political stability mainly depends on the rule of law (kaufmann rule of law 2002), a
high degree of autocracy or democracy (Democ²) and the amount of trade (% of GDP; mean 1990-99)
that the country engages in.
This suggests three separate hypotheses which support the main hypothesis stated above.
Firstly, this work suggests that political stability is getting stronger when the rule of law increases. Pinherio
agrees that a lack in of the rule of law leads to a lack of legitimacy, and therefore also consequently
political stability (Pinherio 1996: 18). If the rule of law decreases, the political stability is weakened. The
rule of law has an influence on the political stability because it is an indicator for how well the executive
does its job. Even in an authoritarian regime is it important that the army follows the rules set up by the
dictator. Moreover, the variable rule of law 2002’ is an ordinal variable which goes from -2.05 to 2.03.
Secondly, the degree of political stability high if there is a high degree of democracy or
autocracy. Beetham argues that the biggest changes in the relationship between society and legitimacy
are a shift in the political or social order (Beetham 1991: 75). Strong democracies or strong autocracies
are best equipped to withstand this shift, and hence provide political stability. Therefore, states with a
small degree of democracy or autocracy are less politically stable. In audition this computed ordinal
variable goes from 0 to 100.
Finally, political stability is also dependent on economic aspects. The reason is obvious: people are
encouraged to invest and trade when they are confident in the future, and few things seem more likely to
undermine business and consumer confidence than the prospect of political unrest and sudden changes
in the economic “rules of the game” (Goldsmith 1989: 471). Therefore, trade is also an indicator for
political stability, but also a part of economic stability. A lack of trade does not only mean that there is a
lack of production, but would also suggest that there is a lack of political stability, because political
stability is only possible with economic stability. Furthermore, trade is an indicator for how developed the
society is, if there are certain goods produced which other countries cannot produce because of their lack
of technical advantage. Trade can also be seen as an indicator of how well the regime is embedded with
its neighbours. If that is not the case, than the degrees of political stability and volume of trade are low.
This is an interval variable which goes from 3.8 to 360.
This work will start the analysis by drawing a causal diagram in order to illustrate the dependency of the
dependent variable on the independent variables. Afterwards, there will be an examination of the
frequency table, in order to assure that there are sufficient cases which this paper can draw from. In
addition, there will be a correlation computed in order to illustrate that the independent variables do not
produce multicolinearity. Finally, there will be an ordinary least square regression (OLS) used between all
the variables in order to examine the strength, form and significance of this model. This is necessary to
conclude that the hypothesis stated above is true.

The variables and their justification

The causal diagram in table 1 shows the relationship between the dependent and the independent
variables. The plus indicates that there is a positive correlation. However, not all the variables of the
dataset were used and one variable needed to be computed in order to analyse if the hypothesis is true.
The variable ‘Polity Combined 20-pt score 2000’ was squared for this research in order to compute the
variable Democ². In doing so this paper calculated a variable which indicates the degree of stability the
regime enjoys. If the number is high then the regime has the ability to sustain itself. This variable does not
account for democracy, however. It just assures that it is either a very stable democracy or a stable
autocracy. In order to carry out the test of the hypothesis it was necessary to compute the variable
because no variable with these specific features existed before.

The aim of the causal diagram is to suggest the positive correlation between the independent variable
and the dependent variable. Moreover, this causal diagram serves to illustrate what the paper aims to
explain and which variables will be used to do so.
The second obligation of this research is to assure that there are in fact sufficient cases to work with. A
dataset in which specific variables for a variety of cases are missing would undermine the research. To
assure that this is not the case, a Frequency table will be presented (table 2). This table shows that there
are sufficient valid cases in the dataset. There is just a small amount of cases in the dataset, in which the
dependent or independent variable is missing. There is just a maximum of 40 cases missing. It appears to
be reasonable to reject one or more independent variables when there are more than 60 cases are
missing. The dataset all together has 190 cases. As a result, this work concludes that it is able to use the
chosen independent variables.

Frequency table
Trade (% of GDP)
kaufmann political kaufmann rule of mean(1990-99) -
stability 2002 law 2002 WDI/STF3 Democ²
Number of valid
177 186 156 151
cases
Number of missing
14 5 35 40
cases
Table 2

The variable Polity Combined 20-pt score 2000 was squared for this research in order to compute the
variable democ2. In doing so this paper calculated a variable which indicates the degree of stability the
regime enjoys. If the number is high, then the regime has the ability to sustain itself. This variable does
not account for democracy. It just assures that it is either a very stable democracy or a stable autocracy.
In order to carry out the test of the hypothesis it was necessary to compute the variable because no
variable with these specific features existed before.
The third important operation is a correlation. This correlation (table 3) assures that there is no
multicolinearity between the independent variables. It can be said that two independent variables are
multicolinear when the correlation between them is 0.7 or above.

Correlations

Trade (% of
GDP)
kaufmann mean(1990-
rule of law 99) -
2002 WDI/STF3 democ2
kaufmann rule Pearson Correlation
1 ,274(**) ,669(**)
of law 2002
Sig. (2-tailed) ,001 ,000
N 186 156 151
Trade (% of Pearson Correlation
GDP)
,274(**) 1 ,020
mean(1990-99)
- WDI/STF3
Sig. (2-tailed) ,001 ,814
N 156 156 137
democ2 Pearson Correlation ,669(**) ,020 1
Sig. (2-tailed) ,000 ,814
N 151 137 151
** Correlation is significant at the 0.01 level (2-
tailed). Table 3

As table 3 shows, the biggest correlations between the independent variables are less than 0.7. Therefore
it can be rejected that there is multicolinearity between the variables. The three operations in this part of
the paper reassured that the independent variables in use have explanatory power, sufficient cases inside
the dataset and do not depend on each other
The hypothesis and the statistic
In order to illustrate the dependency between the dependent and the independent variable an OLS
regression was computed in Table 4.
Coefficients(a)
Unstandardized Standardized
Coefficients Coefficients
Model R²= .817 B Std. Error Beta t Sig.
1 (Constant) -.521 .157 -3.324 .001
kaufmann rule
.624 .072 .636 8.706 .000
of law 2002
Trade (% of
GDP)
.003 .001 .142 2.711 .008
mean(1990-99)
- WDI/STF3
democ2 .005 .002 .188 2.635 .009
a Dependent Variable: kaufmann political stability
2002 Table 4

The regression equation of this model is Y= a + b1x1 + b2x2 + b3x3 + e. The Y is the independent
variable, eand in this case political stability. The a-value describes the y intercept and is in our case -.521.
Moreover, b1, b2 and b3 are the ratio of the relative predictive power of the independent variables and
X1, X2 and X3 are the ratio of the relative predictive power of the independent variables. This means that
the regression equation for this model is as follows: political stability = -.521 + .624 rule of law + 0.003
Trade (% of GDP) mean (1990-99) + 0.05 democ2 + e.

This table contains three indicators which will show that the rule of law, trade, and the level of democracy
or autocracy are in a correlation with political stability.

Firstly, the strength of this model shows that the independent variables chosen do explain the dependent
variable. The R² is 0.8e17. This indicates that 81.7% of the variation in political stability in the dataset is
explained by the independent variables. Therefore, the independent variables chosen have quite a
substantial explanatory power. However, the constant just has a small difference within; therefore other
variables would score a high R² as well.

Secondly, the form of the model indicates that the there is a positive correlation. The constant in relation
to the coefficient show that that there is a slight positive relationship between the independent and the
dependent variable. The slope of this model is just very slight because the constant is quite small. Due to
the circumstances that the maximum and minimum of the dependent variable is quite small, the
coefficient is small as well. This, however, does not suggest that the slope is so slight that the fact that
there is a positive correlation might be rejected. This is just a mathematical phenomenon and should not
be regarded as an argument against the hypothesis.
Finally, the models’ significance is strong enough to support the hypothesis. In order to reject the null-
hypothesis two indicators need to be examined: the t-ratio and the p-value. The t-ratio in all cases is
above 1.96 or below -1.96 which indicates that the null hypothesis should be rejected. The t-ratio is
calculated by dividing the B- coefficient through the standard error. The t-ratio for the rule of law is 8.706,
the t-ratio from the trade variable is 2.711 and the t-ratio of the democ2 variable is 2.635. This concludes
that the relationship between political stability and trade, rule of law and a high degree of autocracy or
democracy is significant. However, the p-value might suggest otherwise on the first glance. The
significance level of the b-coefficient (p-value) should be below 0.005 in order to reject the null hypothesis
with 99.9% certainty. This is just the case in the rule of law. The significance of the trade and democ2
variable on the other hand is 0.008 and 0.009. This is above the widely acknowledged limit if 0.005.
However, as mentioned before, the constant has values which are small and lie close together. This is the
explanation why the p-value is above 0.005. I would not be surprising to see higher values. The values of
the trade and democ2 variable however is still quite small and the t-ratio is well above 1.96 therefore the
null-hypothesis might be rejected.

This model states that if the rule of law would rise by 1 then political stability would rise by 0.624. If the
amount of trade would rise by 1% then political stability would rise by 0.003. Moreover, if democ2 would
rise by one political stability would rise by 0.005. This does not sound as it would make a big difference
but as mentioned before the variable of political stability goes from -2.42 to 1.63. Therefore, just slide
increases or decreases would have a big affect on the political stability of a country.
Conclusion
To conclude, this model was computed in order to show that political stability is mainly caused by the rule
of law, the amount of trade and the degree of democracy or autocracy in a country.
In the first part, this paper shows that there are a sufficient number of cases in the dataset. This leads to
the acknowledgement that the independent variables chosen have enough cases to continue in the
argumentation.
The second part of this work showed that there is no multicolinearity between the independent variables.
This states that no independent variable is caused by or is in a close relationship with the other
independent variable. This measure was computed in order to reject any arguments which could criticize
the dependency between the independent variables.
The final part of the paper examined a regression computed in order to prove that there is in fact a
positive correlation between political stability and the independent variables. The strength of the model
showed that the explanatory power of the independent variables is in fact sufficient to explain a
substantial amount of political stability in the dataset. The model form indicated a slope with a slight
positive correlation. The model significance indicates that we can reject the null hypothesis and that the
independent variables are significant in explaining the dependent variable. Some data got corrupted due
to the circumstance that the constant is quite weak.
All these examinations sustain the hypothesis stated in the beginning. It is not just true that political
stability grows when there is a growing rule of law, an increased amount of trade but also when there is a
growing degree of democracy or autocracy in the country. The numbers showed that the independent
variables chosen in this paper do in fact explain what political stability in a country is all about. However,
this is true using the dataset provided. It can be argued that political stability is in fact so difficult to assess
that statistical proof can always be disputed.
 Bibliography

Pinheiro, P. S. (1996) ‘Democracies without citizenship’, in NACLA report on crime and

impunity vol. XXX. N. 2: 17-23.
Beetham, David (1991) The legitimation of power (US: Humanities Press International).

Goldsmith, A. A. (1987) ‘Does Political Stability Hinder Economic Development? Mancur Olson's
Theoryand the Third World’, in Comparative Politics, Vol. 19, No. 4: 471-480.

POLITICAL STABILITY AND ECONOMIC GROWTH.

A TWO WAY RELATION.
EDGARDO E. ZABLOTSKY
FEBRUARY 1996
1 Senior Researcher and Chairman of the Master in Finance, CEMA, Córdoba Ave. 637,
Buenos Aires, Argentina.
POLITICAL STABILITY AND ECONOMIC GROWTH.
A TWO WAY RELATION.
EDGARDO E. ZABLOTSKY1
FEBRUARY 1996
I. INTRODUCTION.
It is usually asserted that political instability significantly lowers private investment, as well as
economic growth, since it has adverse influence on property rights, and by that on investment
and growth
(i.e, Robert Barro, 1991; Ross Levine & David Renelt, 1992; Paolo Mauro, 1994; Edgardo
Zablotsky,
1994). Political instability may lead entrepreneurs to wait until the uncertainty is resolved, before
undertaking irreversible investment projects, it also may lead to capital flight; by the same token,
multinational companies may be less likely to locate their subsidiaries in countries that face the
possibility
of coups, revolutions, terrorism, or expropriation.
For example, Robert Barro (1991) reports, for a sample 98 countries in the period 1960-1985,
that growth rates are negatively related to measures of political instability. He makes use of
variables like
figures on revolutions, coups, and political assassinations, since these relations could involve the
adverse
effects of political instability on property rights, and therefore on private investment.
Similarly, Ross Levine and David Renelt (1992) conclude that the figure on revolutions and
coups
per year is robustly negative correlated with the investment share of gross domestic
3
product. Thus, not surprisingly, countries that experience a high number of revolutions and coups
tend to
be countries that invest less of their resources domestically than countries with stable political
environments.
By the same token, Paolo Mauro (1994), accounts that any one the different proxies of political
stability that he analyzes is significantly positively correlated with private investment and
economic growth.
In this paper we will face the problem from a different perspective; we will propose that there
also
exists a relation from economic growth to political stability. In direction to this goal we will
center our
attention on military coups d'etat.
The study of military coups d'etat has not received enough attention in the public choice
literature;
actually, since the pioneering works of Downs (1957), Buchanan and Tullock (1962), and Riker
(1962)
most of the public choice literature have been developed under a democratic framework. The
first paper
in the public choice literature developed under a non-democratic framework was presented by
Ireland in
1967. This work, as well as the Tullock's (1971) paper, opened a new framework to the study of
nondemocratic
changes of government. Until Ireland's and Tullock's works, the study of revolutions was an
exclusive field of political scientists, who focus their interest on the public good aspect of the
revolutions.
Since the appearance of Ireland's and Tullock's works a group of scholars (Leites and Wolf,
1970;
Tullock, 1974; Silver, 1974; Cao Garcia, 1983; Cartwright, Delorme and Wood, 1985; etc.) have
challenged this romantic notion of revolution using the assumptions and methodology provided
by the
economic theory. The by-product designation of this self interest theory is credited to Tullock
(1971), who
used the term following Olson (1965), whose analysis of the motivations of an agent as an active
participant
in a collective action can be extended to the revolutionary activity.
While most of the public choice literature in non-democratic changes of government center their
4
interest in the so called "mass revolutions" (Ireland, 1967; Leites and Wolf, 1970; Tullock, 1971;
Cartwright, Delorme and Wood, 1985; Kuran, 1989; Grossman, 1991; etc.), most of the actual
irregular
executive transfers are military coups d'etat.
To the best of my knowledge, only Tullock (1974), Silver (1974), Cao Garcia (1983), Mbaku
and
Paul (1989), Zablotsky (1992) and Morón (1994) analyze coups d'etat. Of these scholars only
Tullock
and Zablotsky explicitly study military coups d'etat by means of a microeconomic analysis of
benefits and
costs. This paper provides further insights on the issue; it is divided in three sections.
Section 2 proposes an alternative definition of a military coup d'etat that characterizes military
coups
d'etat that overthrow democratic regimes better than the usual definitions. We will show that in
order to
understand the behavior of the army officers who face the decision to participate in a coup it is
insufficient
to analyze the private interest motivations that they may have, as it is stated by the by-product
theory of
revolutions; it is also necessary to analyze the public good rewards that the high rank officers
may consider.
Section 3 is devoted to develop our proposed hypothesis, and to provide preliminary evidence in
order to
illustrate its feasibility.
II. AN ALTERNATIVE DEFINITION OF A MILITARY COUP D' ETAT.
This section is devoted to propose an alternative definition of a military coup d'etat; this
definition
allows us to understand better the behavior of the army officers who face the decision to
participate in a
5
2 For example, Cao Garcia (1983), p. 77, states,
"In contrast to revolutions, which are activities organized by persons outside the
government, a coup d'etat is an attempt of a subset of this ruling coalition to overthrow from
office
the head of a government, together with a subset of his supporting coalition, by means of
political
violence... The basic difference between a revolution and a coup d'etat, therefore, is that, while
revolutionary activities are made, ex definitio, by individuals outside government, coups d'etat
are
carried out by government officials."
coup that overthrows a democratic regime.
It is usually argued that the main difference between a revolution and a coup d'etat is that in the
former case a significant proportion of the revolutionaries are not members of the government or
of the
ruling coalition, while in the latter the members of the plot are part of the government.2
In actuality, this definition fully applies to most, but not every type of coup d'etat; the military
coups
d'etat that overthrow democratic regimes should be considered an exception, given that they are
headed
by high ranking officers who only supposedly are part of the government. The army officers are
professionals, they are neither elected officers nor are they part of the governmental coalition;
therefore,
the usual definition: in a coup d'etat the members of the plot are part of the government or of the
ruling coalition, is inadequate to characterize this type of irregular executive transfer. In order to
characterize adequately this class of non-democratic change of government I will introduce the
following
alternative definition: "A
military coup d'etat that overthrows a democratic regime is characterized by the fact that its
actors
6
are supposedly, but not in fact, members of the government."
This subtle difference is of great relevance in the understanding of the role played by public good
considerations on the behavior of the army officers. For example, Tullock (1974) sustains that
public good
considerations are apt to play as small a part in the decision to participate in a coup as in the
participation
in any outside revolution (Tullock, 1974, p. 62); indeed, it is clear from his arguments that he
bases this
conclusion in the traditional definition of a coup. However, it can be shown that under my
alternative
definition it is not possible to reach such a conclusion; in order to demonstrate this point, we will
explicate
Tullock's line of argumentation.
Tullock studies military coups d'etat by means of a microeconomic analysis of benefits and costs,
analyzing structural factors that affects the participation of the army officers in the coup. He
proposes a
framework where, in order to choose his position, every army officer compares the total expected
payoff
that he would receive if he joins the coup (Pr), if he stays loyal to the government by joining the
repression
(Pd), and if he remains neutral (Pin).
The army officer will join the coup if:
Pr > Pd and Pr > Pin
similarly, he will join the repression if:
Pd > Pr and Pd > Pin
otherwise, he will choose to remain neutral. Where:
Pin = Pg Lv - Np
Pr = Pg (Lv + Li) + Ri (Lv + Li) - Pi [1 - (Lv + Li)] - Lw Ir + E
Pd = Pg (Lv - Li) + Di [1 - (Lv - Li)] - Pp (Lv - Li) - Lw Ir + E
7
3 Pr - Pin = Pg L + R (Lv + L ) - P [1 - (Lv + L )] - Lw Ir + E + Np
iiiii
and,
Pg = Public good generated by a successful coup.
Lv = Likelihood of a revolutionary victory if the subject is neutral.
Np = Punishment for remaining neutral.
Li = Change in the probability of revolutionary success resulting from the subject participation.
Ri = Private reward to the subject for his participation in the military coup d'etat if the coup
succeeds.
Pi = Private penalty imposed on the individuals for his participation in the coup if it fails.
Lw = Likelihood of injury through the participation in support of, or against, the coup.
Ir = Injury suffered in action.
E = Entertainment value of participation. Silver (1974) defines this term as the "psychic
income from participation," given that it may include a wide variety of factors, like the
individual's sense of duty to the law, race, humanity, the rulers, the revolutionary brotherhood,
his taste for conspiracy, etc.
Di = Private reward to the individual for his participation in putting down the coup if the
government wins.
Pp = Private cost imposed on the defenders of the government if the coup succeeds.
The public good reward (Pg) will have a relevant role in the decisions of the agents if, and only
if,
the change in the probability of revolutionary success resulting from the participation of the
agent (Li) is
significantly different from zero.3 As in a mass revolution the participation of the subject will
have an
8
Pd - Pin = Pg Li + Di [1 - (Lv - Li)] - Pp (Lv - Li) - Lw Ir + E + Np
then, Pg will play a role only if Li . 0.
4 "Note that L , the effect that the individual may have on the coup, is not necessarily
i
infinitesimally small for a government official. Under these circumstances, the expression Pg Li
may
be more significant for the government official than it is for the private citizen. This is dubious,
however. Most of the junior government officials will still have very small Li's; therefore this
expression should be close to zero. On the other hand, the senior government officials, although
they will indeed have somewhat larger Li's are also likely to receive very large rewards or very
large
punishments in the private sphere from the success or failure of the coup. Under the
circumstances,
it is likely that for them, too, the public good aspect of the coup is relatively minor. Another
feature
that must be emphasized is that the participants in the coup or in defense against the coup are
infinitesimally small effect over the probability of success of the action (Li . 0), then we can
conclude that
public good considerations do not play a role in the behavior of the agents; therefore, the subject
will be
motivated to participate by the expectation of a private return and the public good reward
generated by
a successful revolution must be interpreted only as a by-product.
Gordon Tullock also argues that public good considerations are not an important factor in
explaining coups d'etat; in order to support this statement he analyzes the following facts:
A. For most of the junior government officials Li will be close to zero.
B. For the high rank government officials while Li will be significantly different from zero, the
important
governmental positions that they hold imply that they are basically satisfied with the
government, such that
if public good considerations (Pg) have any role at all, it will be against their participation in the
coup.4
9
officials of the government. They are that group of people who are least likely to be unhappy
about
the policy of the government. Further, the higher rank they have, the higher the Li; but at the
same
time, the more likely it is that they are basically rather satisfied with the existing government,
except insofar as they would like to have a higher rank. Under the circumstances, public good
considerations - if they are of any importance at all among government officials considering a
coup -
are more likely to weigh in on the side of retaining the present government than on the side of
attempting to overthrow it. Thus, public good considerations are apt to play as small a part in
the
decision to participate in a coup as in participation in any outside revolution."
Tullock, 1974, p. 62.
5 As Tullock, 1974, p. 63, argues,
"The infantry private who is suddenly informed by all of his officers that they have joined
the revolution probably finds it extremely dangerous to do anything except to agree with them."
6 It is possible to find examples where the privates, organized into battalions, resist orders (i.e.,
the
1991 Moscow coup), but they are clearly the exceptions; exceptions that, for example, do not
characterize
the traditional Latin American military coup d'etat.
The first argument, while fully correct, is generally not important for explaining military coups
d'etat;
usually, given the verticality of the army,52 the only relevant behavior that explains a military
coup d'etat is
the behavior of the senior officers; officers whose Li's will be significantly different from zero.
6
The second Tullock's argument is based upon the fact that the senior officers are members of the
government; so, while the argument is entirely correct for any coup d'etat that satisfies the
traditional
definition of a coup, it is no longer satisfactory for military coups d'etat that overthrow civilian
regimes, given
10
that this type of non-democratic change of government satisfies our alternative definition instead
of the
traditional one.
Therefore, in order to understand the behavior of the army officers who face the decision to
participate in a coup it is insufficient to analyze the private interest motivations that they may
have, as it is
stated by the by-product theory of revolutions; it is also necessary to analyze the public good
rewards that
the high rank officers may consider. There is no reason to assume that public good
considerations are not
a relevant factor in explaining a military coup d'etat that overthrows a democratic regime; thus, it
seems
appropriate to view private returns and public good considerations as complementary factors in
the
decisions of the army officers. It is surprising that the romantic public good considerations that
are
prevalent in most of the political science literature on non-democratic changes of government
cannot be
rejected only in the less romantic type of irregular executive transfer: the military coup d'etat that
overthrows a civilian regime.
Zablotsky (1992) makes use of the assumption that private returns and public good
considerations
are complementary factors in the decision process of the army officers who face the possibility to
take part
in a military coup d'etat; in the following section we will make use of the same assumption in
order to obtain
further insights on non-military factors that may affect the probability of the coup.
III. ECONOMIC GROWTH. A REQUIREMENT FOR POLITICAL STABILITY.
This essay is devoted to present further results on non-military factors that may increase the
probability of a military coup d'etat. In direction to this goal I will make use of the framework
proposed
by Zablotsky (1992). It will closely follow the Tullock's approach to the subject but it also will
take into
11
account the civilian side of the coup; the inclusion of civilian considerations constitutes the basic
difference
between this framework and that of Tullock, and radically departs from the by-product theory of
revolutions since it provides public good considerations, instead of private interest rewards, as
the engine
for the motivations of the civilian actors. These considerations are a side product of the pressure
groups
approach to the economic policy developed since the seminal work of Arthur Bentley (see
Zablotsky,
1995).
Our first step will consist to describe the military building block of the model. An army officer
may
support a coup heavily, leading it, or he may want to participate only as a follower in the event
that most
of his colleagues participate. In the first case his level of support of the coup (Xi) will be high,
while in the
second it will be small but positive. Similarly, he may want to lead the repression, which will
imply a large,
in absolute value, but negative (Xi), or he may want to participate in the repression as a follower
which will
imply a smaller, in absolute value, and negative (Xi). Obviously, neutrality implies Xi = 0.
In order to choose his optimal level of participation in support of the coup, or of the repression,
(Xi), the army officer will take into account the different payoffs that he expects to receive if the
coup
succeeds (Ri, Pi), or fails (Di), and his own assessment of the probability of success of the action
(Li).
The army officer expects to receive a private interest payoff (Ri) if the coup succeeds; it will be
positive for the army officers who support the coup and negative for the officers who join the
repression,
Ri = Ri(Xi) Ri(0) = 0 dRi/dXi > 0
Each army officer also expects to receive a public good payoff (Pi) if the coup succeeds (see
Section 2).
By the same token, every officer expects to receive a private interest payoff (Di) if the coup fails;
12
it will be positive for the army officers who join the repression and negative for the officers who
support
the coup,
Di = D(Xi) Di(0) = 0 dDi/dXi < 0
Then, in order to choose his optimal level of participation in support of the coup, or of the
repression, each army officer will face the following maximization problem,
Ti Ti
Max E(U ) = L * U (R + P ) e dt + (1 - L ) * i i i it it i Ui (Dit) e dt
-*t -*t
{Xi} 0 0
In order to maintain the framework as simple as possible I will assume as in Zablotsky (1992):
1. Rit = Ri, Pit = Pi, and Dit = Di. This assumption is also employed by Mirani (1984), and Usher
and
Engineer (1987), in frameworks where an agent face the possibility to participate in the
production of
violent political pressure (i.e., riots, rebellions, etc.).
2. Li = Li(L) and dLi/dL > 0, where (L) represents the probability of success of the coup; a similar
assumption is implicitly employed by Silver (1974) and O'Kane (1981),
L = L(X1,...,Xn; V) ML/MXi > 0 ML/MV > 0
where (V) summarizes the exogenous factors that affect the probability of success of a military
coup d'etat
for given levels of participation of the army officers. An example of this variable may be the
participation
of civilian groups in support of the coup.
Under these assumptions the maximization problem faced by each army officer becomes,
Max E(Ui) = B {Li(X1,..., Xn; V) Ui (Ri + Pi) + [1 - Li(X1,...,Xn; V)] Ui(Di)}
{X } i
Ti
where, B = * e-*t dt
13
0
The next step will consist to formalize the problem faced by the civilian actors. The exact
specification of this problem lacks of relevance as far as it contemplates the existence of a
positive marginal
cost of participation; this cost will rule out the participation of any pressure group who does not
affect the
probability of success of the coup to a perceptible degree. Consider, for example, that each
pressure
group faces the following maximization problem,
Tj Tj
Max E(U ) = L * U (W + M - C ) e dt + (1 - L ) * j j j jt jt jt j Uj(Wjt + Djt - Fjt) e dt
-*t -*t
{Yj} 0 0
which under similar assumptions to the ones imposed to the military building block,
1. Wjt = Wj, Mjt = Mj, Djt = Dj, Cjt = Cj, and Fjt = Fj
2. Lj = Lj(L), and dLj/dL > 0
becomes,
Max E(Uj) = , [Lj Uj(Wj + Mj - Cj) + (1 - Lj) Uj(Wj + Dj - Fj)]
{Yj}
Tj
where, , = * e-*t dt
0
and,
Yj = Level of participation of each identical member of the group j in support of the coup (Yj >
0), or
of the repression (Yj < 0).
Wj = Income of the agent independent of government redistribution.
Mj = Government redistribution to each member of the group j under the rules of the
redistributive game
14
embodied in a military regime.
Cj = Cost of participation in support of the coup.
Cj = C(Yj) and dCj/dYj > 0 if Yj > 0
C(Yj) = 0 if Yj # 0
Dj = Government redistribution to each member of the group j under the rules of the
redistributive game
embodied in a democratic regime.
Fj = Cost of participation in defense of the democratic regime.
Fj = F(Yj) and dFj/dYj < 0 if Yj < 0
F(Yj) = 0 if Yj $ 0
The interaction between the actors is modeled as a Cournot-Nash non-cooperative game in their
level of participation; then, the equilibrium is determined by the utility maximizing condition for
each actor
(military or civilian) with respect to his level of participation in support of the coup or of the
repression,
taking as given the level of participation of any other actor,
ME(U)/MX = ML/MX [U(R + P) - U(D)] + L U'(R + P) R'+ (1 - L) U'(D) D'= 0
ME(U)/MY = ML/MY [U(W+M-C)-U(W+D-F)] - L U'(W+M-C) C'- (1-L) U'(W+D-F)F'= 0
where we are omitting from now on the subscripts i and j, and I am assuming B = , = 1.
By comparing both sets of first order conditions it becomes clear that this framework would
satisfy
the stylized fact that most army officers take part in a coup while most civilian actors defer from
doing so
(see Zablotsky, 1992). The framework provides army officers not only with public good
considerations
but also private interest rewards; then, while the total payoff expected by the army officers is not
independent of their level of participation, the total payoff expected by the civilian actors is only
based in
15
a public good consideration: the change in the outcome of the redistributive game embodied in
the
overthrowing of the democratic regime. Therefore, while most army officers will choose to take
part, most
pressure groups will choose to remain inactive, unless they can affect the probability of
installation of the
military regime to a perceptible degree,
ML/MY = 0 Y Y* = 0
By means of a similar argumentation it is easy to show that the model also would satisfy the
stylized
fact that in most of the military coups d'etat it is usually verified some sort of support by part of
the civilian
population but not any form of civilian resistance. To contemplate this empirical asymmetry we
have made
use of a public good theory - based upon the pressure groups approach to the economic policy -
given that
under this framework the civilian actors will only choose to participate if they can significantly
affect the
probability of success of the coup (see Zablotsky, 1992). Under this scenario if the participation
of some
of the pressure groups benefitted by the change of political regime affects the probability of
success of the
coup, but the participation of any of the groups harmed does not, the former groups would
support the
coup but the latter will remain inactive.
The maximization problem faced by the actors allow them to choose their optimal level of
participation in the contingent stage of a military coup d'etat, but it does not explain how the
coup has
begun. We will assume, as it is also done by Tullock (1974), O'Kane (1981), and Zablotsky
(1992), that
an increase in the probability of success will increase the likelihood that a subgroup of the army
officers
would decide to begin the action,
C = C(L) and dC/dL > 0
where, (C) represents the probability of a military coup d'etat.
16
7 Actually, there are no reasons even to assume that in a given country the groups benefitted will
be the
same across time, since different variables that affect the outcome of the redistributive game may
vary (see,
for example, Becker, 1983).
Our next step will consist to make use of the described framework in order to obtain further
insights
on non-military factors that may affect the probability of a military coup d'etat; in direction to
this goal we
will propose the following hypothesis: A decrease in the income independent of government
redistribution (W) of the civilian actors benefitted by the change of political regime will
increase,
assuming decreasing marginal utility, the benefits dispensed to the actors by a successful coup;
this
would create an incentive for their participation in its support, consequently raising the
probability
of this non-democratic change of government.
Sign MY/MW = Sign {ML/MY [U'(W+M-C)-U'(W+D)]-L U''(W+M-C) C'} < 0
if *ML/MY [U'(W+M-C)-U'(W+D)]* > *L U''(W+M-C) C'*
In order to illustrate the plausibility of this hypothesis it will be necessary to identify a pressure
group
that would be benefitted by the change in the rules of the redistributive game embodied in the
overthrowing
of the democratic regimes, and then to analyze the behavior followed by some variables that may
affect the
income independent of government redistribution of its members.
Given that there are no reasons to assume that in various countries the pressure groups benefitted
by the overthrow of democratic regimes will be the same, I will center my interest on a specific
one:7
Argentina, where the export (agricultural) sector appears to have been benefitted by the
modifications in
the commercial policy embodied in the overthrow of the democratic regimes (see Zablotsky,
1992).
17
Table 1 describes the behavior followed by the real foreign price index of exports; index highly
associated with the income independent of government redistribution of the export sector.
The index actually fell before the overthrow of each of the democratic regimes (1962, 1966, and
1976); this fact motivates us to investigate further the plausibility of the hypothesis by basing our
analysis
on the behavior followed by the international price of the main agricultural products.
18
TABLE 1
REAL FOREIGN PRICE INDEX OF EXPORTS (1960=100)
Year Even Foreign Year Even Foreign
t Price t Price
Real Real
Index of Index
Exports of Exports
(1) (1)
1960 100 1972 113
1961 97 1973 138
1962 Coup 91 1974 146
1963 95 1975 121
1964 107 1976 Coup 106
1965 105 1977 102
1966 Coup 102 1978 97
1967 97 1979 111
1968 92 1980 115
1969 89 1981 109
1970 93 1982 89
1971 103 1983 79
Source: Adolfo Sturzenegger, Wylian Otrera and Beatriz Martinez Mosquera, Trade, Exchange
Rate, and Agricultural Pricing Policies in Argentina, World Bank Comparative Studies, The
World Bank,
May 1990.
where,
(1) Foreign Price Index of Exports (CEPAL)/USA Wholesale Price Index.
Table 2 reports the relative participation of the main agricultural products between 1960 and
1984,
TABLE 2
19
RELATIVE PARTICIPATION OF THE MAIN AGRICULTURAL PRODUCTS
1960-1964 1970-1974 1980-1984
Product Million Percent Million Percent Million Percent
of U$S of U$S of U$S
Beef 1038 30 2137 30 4182 25
Dairy 426 112 753 11 1781 11
Prod.
Wheat 368 11 543 8 1656 10
Corn 241 7 751 11 1266 8
Total 2073 60 4184 60 8885 54
Source: Adolfo Sturzenegger, Wylian Otrera and Beatriz Martinez Mosquera, Trade, Exchange
Rate, and Agricultural Pricing Policies in Argentina, World Bank Comparative Studies, The
World Bank,
May 1990.
All of the products, with the exception of the dairy ones, are traded goods; then, I will focus my
attention in their real international prices. To consider another independent source of
information, I also
will examine the behavior of an index elaborated by Adolfo Sturzenegger, Wylian Otrera and
Beatriz
Martinez Mosquera (1990): the relative price of each of these agricultural products respect to
nonagricultural
ones in absence of any form of government intervention (direct or indirect).
The relative prices in the absence of any form of governmental intervention are defined as:
Pi /PNA = {[(Pi * E ) - GPi]/1.03 - Ci}/PNA*
* * FOB e
where,
20
- Pi*/PNA* = Relative price in the absence of government intervention of agricultural good i
respect to the
nonagricultural goods.
- Pi = FOB price of product i.
FOB
- Ee = Equilibrium adjusted nominal exchange rate.
- GPi = Port costs for product i.
- 1.03 = Export commission costs.
- Ci = Transport and distribution costs (from the farm to the port) of product i.
- PNA = Xnat Inat [d/(1+t nat)] + Xs Is + Xcc Icc
*i
- d = E*/E. Divergence between the actual real exchange rate (E) and the sustainable equilibrium
freetrade/
real-exchange rate (E*).
- ti = Estimated implicit tariff for the nonagricultural tradable index.
nat
- Inat = Nonagricultural tradable index.
- Is = Service index.
- Icc = Cost of construction index.
- Xnat = 0.36
- Xs = 0.57
- Xcc = 0.07
Table 3 summarizes all the relevant information provided by both indicators (in the Appendix
there
are reported the time series of each of them).
TABLE 3
21
SUMMARY OF THE RESULTS
Items Increasing Path Decreasing Path
Real International Prices
Beef 0 4
Wheat 1 3
Corn 2 2
Relative Prices in the Absence of Government
Intervention
Beef 0 3
Wheat 0 3
Corn 1 2
Both indicators have usually fallen before military coups d'etat that have overthrown democratic
regimes (the real price in 75 percent of the observations and the relative price without any form
of
governmental intervention in 89 percent of the cases).
Therefore, it seems fair to state that the evidence I have examined does not reject the proposed
hypothesis, because the income independent of government redistribution of the agricultural
sector seems
to have fallen before coups that have overthrown democratic regimes; which would have risen,
in terms of
our framework, the probability of this non-democratic change of government.
Morón (1994) also provides empirical evidence that may support the proposed hypothesis. He
22
makes use of a panel data consisting of information about 16 Latin American countries
(Argentina, Bolivia,
Brazil, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras,
Haiti, Panama,
Peru, Paraguay, Uruguay, and Venezuela) for the period 1950-1990. He shows that the lack of
diversification in the export structure of a country contributes to explain successful coups d'etat.
Countries
that had not been able to diversify the export sector are more likely to suffer economic instability
due to
an external shock originated mainly by sharp declinations in the commodity prices. Therefore,
world
market conditions and in particular export characteristics form a very sound basis for developing
a general
explanation for coups d'etat.
This evidence is consistent with our proposed hypothesis since, in a small country where the
export
sector is benefitted by the change in the rules of the redistributive game embodied in a successful
coup, the
probability of this event will increase if the international price of the export good decreases,
because it will
decrease the income independent of government redistribution of the sector.
Having determined the role played by the income independent of government redistribution it
becomes clear the role played by economic growth; economic growth may reduce the probability
of a
military coup d'etat since it would increase the income independent of government redistribution
of the
interest groups benefitted by the event. It is interesting to point out that our hypothesis satisfies
the stylized
fact that high developed countries would be a less probable stage for military coups d'etat than
low
developed ones.
Moron (1994) provides evidence that sustains this assertion; he shows that the poverty situation
of a country affects the number of coups d'etat in the same country.
Zehra Fatma Arat (1984) has built an index of democraticness for selected countries which
allows
23
8 The measure of democraticness is based upon principles which lead to higher levels of popular
control.
This control is perceived to have three components: political participation (which measures the
extent that
popular will is reflected at decision-making institutions), competitiveness (which measures the
competitiveness
of the political system), and civil and political liberties (which measures the coerciveness of the
government). The estimated scores, which are ranked in the (0-20) interval, fluctuate between
0.55 and
18.91; the higher the rank, the higher the degree of democraticness.
9 We have classified under the label of "first world" the Western European countries in addition
to the
USA, Canada, Australia and New Zealand. We have classified under the label of "others" the
remaining
forty six countries: Afghanistan, Albania, Bulgaria, China, Czechoslovakia, Ethiopia, Greece,
Hungary,
Iran, Iraq, Jordan, Lebanon, Liberia, Mongolia, Nepal, Philippines, Poland, Portugal, Romania,
South
Africa, Saudi Arabia, Spain, Thailand, Turkey, USSR, Yemen, A.R., Yugoslavia plus the
following
nineteen Latin American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica,
Cuba,
Dominican Republic, Ecuador, El Salvador, Haiti, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru,
Uruguay and Venezuela.
us to illustrate clearly the point.8 From the Arat sample we have selected the 63 countries which
have been
included during the whole period and we have classified 17 of them under the label of "first
world
countries", and the remaining 46 under the label of "others"; from the later we have selected the
19 Latin
American countries (see Table 4).
While the average score for the 17 "first world countries" reached 19.40, it dropped for the 19
Latin American countries to 10.19, and to only 8.04 for the 46 "non first world countries" as a
whole.9
24
TABLE 4
SCORES OF DEMOCRATICNESS FOR 63 SELECTED COUNTRIES
Average First World Others Latin America
Year (63) (17) (46) (19)
1950 11.32 19.39 8.34 11.10
1955 10.94 19.43 7.80 10.21
1960 11.42 19.35 8.49 11.70
1965 11.25 19.42 8.23 10.64
1970 10.94 19.36 7.83 9.96
1975 10.75 19.42 7.56 7.51
Average 11.10 19.40 8.04 10.19
Source: Compiled from Zehra Fatma Arat, "The Viability of Political Democracy in Developing
Countries. Ph.D. dissertation, The Graduate School of the State University of New York at
Binghamton,
1984.
In conclusion, this paper has proposed the hypothesis that there exists a relation from economic
growth to political stability. This hypothesis does not oppose but complement the usual one,
which states
that political stability is a prerequisite for economic growth. Under our hypothesis the relation
between
political stability and economic growth has to be understood as a two way relation.
25
APPENDIX
26
TABLE A.1: BEEF
Year Event (1951=100)
Real Value of Exports
Chilled Beef Corned Beef
1951 100 100
1952 104 115
1953 132 118
1954 Coup 133 112
1955 125 100
1956 95 94
1957 89 87
Source: I.M.F., International Financial Statistics.
Year Event FOB Price
Real Price Relative
Buenos Aires without
(1960=100) Intervention
1960 100 10.05
1961 95 9.56
1962 Coup 88 8.57
1963 87 7.15
1964 123 9.07
1965 143 11.67
1966 Coup 100 8.21
1967 90 7.65
1968 86 7.44
1969 81 7.11
1970 87 6.71
27
TABLE A.1--Continued
Year Event FOB Price
Real Price Relative
Buenos Aires without
(1960=100) Intervention
1971 119 8.51
1972 127 8.53
1973 165 9.01
1974 140 8.30
1975 92 6.31
1976 Coup 60 3.60
1977 85 5.66
1978 72 4.74
1979 112 6.25
1980 117 7.31
1981 120 9.28
1982 100 8.98
1983 91 8.67
Source: Adolfo Sturzenegger, Wylian Otrera and Beatriz Martinez Mosquera, Trade, Exchange
Rate, and Agricultural Pricing Policies in Argentina, World Bank Comparative Studies, The
World Bank,
May 1990.
Note: Price FOB, Buenos Aires: annual, U$S/ton.
28
TABLE A.2: WHEAT
Year Event Exports
Real Value of
(1951=100)
1951 100
1952 119
1953 122
1954 88
1955 Coup 87
1956 75
1957 71
Source: I.M.F., International Financial Statistics.
Year Event FOB Price
Real Price Relative
Buenos Aires without
(1960=100) Intervention
1960 100 1.64
1961 106 1.83
1962 Coup 107 1.41
1963 102 1.49
1964 113 1.41
1965 100 1.33
1966 Coup 82 1.10
1967 90 1.05
1968 96 1.49
1969 92 1.46
1970 87 1.21
29
TABLE 39.--Continued
Year Event FOB Price
Real Price Relative
Buenos Aires without
(1960=100) Intervention
1971 85 1.06
1972 85 1.22
1973 138 1.62
1974 221 2.62
1975 179 2.68
1976 Coup 124 1.44
1977 81 1.03
1978 94 1.22
1979 88 0.99
1980 119 1.44
1981 121 1.07
1982 99 1.20
1983 81 1.44
Source: Adolfo Sturzenegger, Wylian Otrera and Beatriz Martinez Mosquera, Trade, Exchange
Rate, and Agricultural Pricing Policies in Argentina, World Bank Comparative Studies, The
World Bank,
May 1990.
Note: Price FOB, Buenos Aires: January (December or February during 1966-1970, 1973 and
1975), U$S/ton.
30
TABLE A.3: CORN
Year Event Exports
Real Value of
(1951=100)
1952 100
1953 68
1954 53
1955 Coup 63
1956 56
1957 52
Source: I.M.F., International Financial Statistics.
Year Event FOB Price
Real Price Relative
Buenos Aires without
(1960=100) Intervention
1960 100 1.37
1961 94 1.31
1962 Coup 96 1.23
1963 104 1.27
1964 104 1.06
1965 112 1.34
1966 Coup 93 1.02
1967 99 1.35
1968 89 1.17
1969 89 1.20
1970 96 1.11
31
TABLE A.3--Continued
Year Event FOB Price
Real Price Relative
Buenos Aires without
(1960=100) Intervention
1971 95 0.97
1972 97 1.03
1973 127 1.02
1974 128 1.16
1975 139 1.31
1976 Coup 125 1.45
1977 95 1.09
1978 95 1.07
1979 83 0.74
1980 102 0.97
1981 89 0.85
1982 70 0.82
1983 80 1.18
Source: Adolfo Sturzenegger, Wylian Otrera and Beatriz Martinez Mosquera, Trade, Exchange
Rate, and Agricultural Pricing Policies in Argentina, World Bank Comparative Studies, The
World Bank,
May 1990.
Note: Price FOB, Buenos Aires: May (July in 1967), U$S/ton.
32
REFERENCES
Alesina, Alberto and Roberto Perotti. "Income Distribution, Political Instability anIdn vestment,"
mimeo, Harvard University, September 1993.
Arat, Zehra Fatma. "The Viabililty of Political Democracy in Developing Countries," Ph.dDiss.e
rtation,
The graduate School of the State University of New York at Binghamton, 1984.
Barro, Robert. "Economic Growth in a Cross Section of Countries," The Quarterly JournaEl
confo mics,
May 1991.
Bentley, Arthur. The Process of Government, Chicago: The University of Chicago Press, 1908.
Buchanan, James and Gordon Tullock. The Calculus of Consent, Ann Arbor: University Mofi
chigan
Press, 1962.
Cao Garcia, Ramon. Explorations Toward an Economic Theory of Political Systems, NewY ork:
University Press of America, 1983.
Cartwright, P.; C. Delorme; and N. Wood. "The By-Product Theory of Revolution: Some
Empirical
Evidence," Public Choice N. 46, Summer 1985.
Downs, Anthony. An Economic Theory of Democracy, New York: Harper and Row, 1957.
Grossman, Herschel. "A General Equilibrium Model of Insurrections," American EconomRiecv
iew
N. 81, September 1991.
Ireland, T. "The Rationale of Revolt," Papers on Non Market Decision Making N. 3, Fall 1967.
Kuran, Timur. "Sparks and Prairie Fires: A Theory of Unanticipated Political RevolutionP,"u
blic
Choice N. 61, Summer 1989.
33
Leites, N. and C. Wolf, Jr. Rebellion and Authority, Chicago: Markham, 1970.
Levine, Ross and David Renelt. "A Sensitivity Analysis of Cross-Country Growth Regressions,"
The
American Economic Review, September 1992.
Mauro, Paolo. Corruption, Country Risk and Growth, paper presented at the XIII Latin American
Meeting of the Econometric Society, Venezuela, August 1994.
Mbaku, John and Chris Paul. "Political Instability in Africa: A Rent Seeking Approach," Public
Choice N. 63, Winter 1989.
Mirani, S. Kaveh. "Collective Political Violence and the Redistribution of Political IncomPe,h" .
D.
dissertation, The University of Chicago, 1984.
Morón, Eduardo. A Coup d'Etat Model for Latin American Data: A Panel Data Model wiat hP
oisson
Regression, Unpublished manuscript, UCLA, 1994.
O'Kane, Rosemary H. "A Probabilistic Approach to the Causes of Coups d'Etat," British Journal
of
Political Science N. 3, July 1981.
............... The Likelihood of Coups, Averbury, England, 1987.
Olson, Mancur. The Logic of Collective Action: Public Goods and the Theory of Groups,C
ambridge,
Mass.: Harvard University Press, 1965.
Silver, M. "Political Revolution and Repression: An Economic Approach," Public Choice
N. 17, Spring 1974.
Sturzenegger, Adolfo, Wylian Otrera and Beatriz Martinez Mosquera, Trade, Exchange Raate,n
d
34
Agricultural Pricing Policies in Argentina, World Bank Comparative Studies, The World Bank,
May
1990.
Tullock, Gordon. "The Paradox of Revolution," Public Choice N. 11, Fall 1971.
............... "The Paradox of Revolution," The Social Dilemma, Blacksburg, VA: University
Publications, 1974.
................ Autocracy. Dordrecht, The Netherlands: Kluwer Academic Publishers, 1987.
Usher D. and M. Engineer. "The Redistribution of Income in a Despotic Society," Public Choice
N.
54, Summer 1987.
Zablotsky, Edgardo. "An Economic Theory of Autocracy. A Public Good Approach to Military
Coups d'Etat," Ph.D. dissertation, The University of Chicago, June 1992.
................ "An Interest-Groups Approach to Economic Growth," Working Paper N. 100, CEMA,
November 1994.
................ "The Process of Government," The New Economics of Human Behavior, Mariano
Tommasi and Kathryn Ierulli (eds.), Cambridge University Press, 1995.