Extractive Politics, Redistribution, and War: On the Rationality of Kleptocratic Mismanagement

We study a model on the impact of vertical inequality on autocrats' exploitation of societal wealth and their intended risk of war. Using a general equilibrium model, we demonstrate that autocrats are willing to use the military for redistribution when it increases their share of the rents. They are also willing to harm the economy to deter external threats and are most powerful for extreme un-/equal distributions. These findings offer interesting interpretations. Firstly, even in the absence of external military threats, some autocrats maintain large armies for redistribution, depending on the level of inequality. Secondly, not too low inequality can benefit ordinary citizens. Thirdly, kleptocratic mismanagement is not necessarily an unintended side effect of shameless self-enrichment, but rather a rationally chosen governance to deter too large military threats. This policy could prevent hostilities, but ruins the economy, destroying a society's wealth. The latter causes ordinary citizens to favor war since the autocrat would then lose their grip at home. These results help to explain why some autocrats maintain excessively large armies, while others stifle their economies, and yet others are drawn into wars.