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At the roots of the crisis

Friday 25 April 2008, by Alex de Waal

Robert Bates’ When Things Fell Apart: State Failure in Late Century Africa is a seminal contribution to understanding state crises Africa. Bates’ thesis is that in the late 20th century, sub-Saharan African states suffered a catastrophic lowering of public revenues (brought about by a combination of poverty and fiscal austerity measures), that caused rulers with relatively short time horizons to shift from a longer-term strategy of promoting domestic wealth creation, and taxing it, to short-term predation.

Definitive of political order is the capacity to coerce. A ruler can deploy violence either in support of a rule-governed system (protecting the creation of wealth by private citizens) or to strip assets (preying on citizens), bringing short-term returns to the ruler at the expense of a subsequent collapse in governance and a lower rate of return. When the ruler opts for predation, citizens are more likely to take up arms to protect their (dwindling) assets and (threatened) livelihoods, resorting to vigilantism or rebellion or both.

Patrimonial political systems operate by the ruler distributing material benefits to his supporters. The ruler’s challenge is to secure sufficient inflow of resources from taxation or predation to exceed the disbursement of rewards sufficient to secure the loyalties of enough political players so as to outrank the competition.

Bates brings quantitative evidence from 46 countries over the years 1970-1996 in support his argument that the collapse of domestic tax revenues, the availability of resources to plunder, and the foreshortened time horizons of the ruler, combined to push countries into a condition at which the basic social contract broke down. Sudan is a data point and is mentioned several times in passing. Does Bates’ thesis fit Sudan when its political history is examined in detail? The answer is absolutely yes, with its own specific variation.

Every single political crisis in Sudan since the mid-1970s has been directly related to a financial crisis at the centre of state power and a struggle to control state revenues and parallel sources of finance. The combination of a financial system based on plunder and rent-seeking and the unstable politics of unresolved competition to control these plunder and rents have locked Sudan into protracted turbulence.

In analyses I have published elsewhere (Food and Power in Sudan [African Rights 1997], War in Darfur and the Search for Peace), I have identified eight major financial crises affecting the state between 1978 to 1999. In each case the core problem was insufficient funds available to finance either the war effort or the patronage machine. In each case the ruler has used short-term stratagems of rent-seeking (including running up debts) or predation to secure the necessary funds, usually reconfiguring political alliances in order to secure the money. Those with least finance on offer—such as the Southerners—are repeatedly and doubly disadvantaged by these manouevres, because they are marginalized in the governing coalition and are subject to the depredations of those who are well-placed. The current financial crisis is running true to form (see last week’s posting paragraphs 21-24).

As a rule, Sudan’s financial crises have been handled in a strictly short term and opportunistic manner by successive governments. Many commentators have noted the ability of Sudanese governments to manage short-term crises with well-honed tactical acumen. Governing Sudan is akin to a complicated juggling act, in which it is never possible to keep all the balls in the air at once, but the juggler must calculate which balls can be allowed to drop—on the assumption that they will bounce and can be caught in the next movement. For forty years no government has had a strategy for financial sustainability.

There is much more that could be written about this, in support of the application of Bates’ hypothesis to Sudan. For example, tribal militias and ethnic conflict are better seen as a product of this type of governance rather than the cause of it.

One important variation on Bates’ account deserves mention. Unlike many other sub-Saharan African countries, during more than thirty years of fiscal crisis in Sudan there have been vast amounts of hard currency sloshing around the economy. Until oil revenues came on-stream, most of it was remittances and the associated consumer and real estate businesses. But the state was unable to capture this money, in part because of mistaken analysis of the cause of financial instability in the system. (Richard Brown wrote a brilliant but much overlooked study of the IMF in Sudan that brought out this point.)

One consequence of this was that the price of buying the political allegiance of those elites with links to the Arab world went up (because they had independent sources of wealth) just as the state resources for patronage went down (through austerity measures). Successive leaders of Sudan had the choice between using outright repression or cutting bargains with those elites in which the state put its institutions at the service of private interests. Nimeiri and Bashir both tried the first, briefly, and it didn’t work. The second is standard practice.

One fundamental challenge facing Sudan is reconstituting the finances of the central government in such a way that the country’s commercial elites have a vested interest in stable and productive peripheries.

What could make them have such an interest? To date, neither rural insurrection nor international pressure has changed the dynamic of Sudan’s political economy. Rebellion has simply created more opportunities for predation and asset stripping. The international approach to Sudan has generally been to use short-term carrots and sticks (in the 1970s and 1980s mostly carrots, since 1990 mostly sticks) to try to persuade Khartoum to act differently. It has rarely worked. Most policies have simply been too inconsistent to encourage anything other than opportunistic compliance. Possibly the best chance lies in the combination of a fast-developing metropolitan economy and economic incentives structured around international assistance to the peripheries. (Arguably what made the CPA possible was the fact that 2000-05 was a period of uninterrupted economic growth which allowed for an all-round expansion of the patrimonial system.) Perhaps there will be opportunities for using debt forgiveness in creative ways to these ends.

The problems of Sudan’s peripheries, including Darfur, originate in Khartoum. By the same token, the solution will come from Khartoum. Without reconfiguring—and strengthening—state finances there can be no resolution to the Sudanese crisis.