• A problem:
Theory and domestic reality call for strong, authoritarian state 


But:
Have a democratic constitution and international reality demands keeping it 

• A solution:
Ignore constitution and democratic political institutions; create a single, national party 

• But another problem:
How then to maintain power?

• Another solution:
Rely on personal connections (a.k.a. patron-client relations or clientalism) 

• Yet another problem:
What does the ruler offer to clients in exchange for support? 

• The final solution:
Put clients in positions where they can make money: biggest source --> rents
 

Governance by Rents

• What is a rent?
A profit created simply because of scarcity, either natural or social

• What is rent-seeking?
The process of creating a scarce resource and the costs associated with gaining access to it.

• How do you govern with rents?
1. Establish rules that create all sorts of scarce resources (licenses, authorizations)
2. Give the job of allocating these resources (issuing licenses) to important clients
3. Expect that clients will collect rents
4. Create conditions that make it difficult to publicize these arrangements
5. Don't punish clients who are caught

• But there are problems:
1. Ever larger number of clients means ever more rent-seeking
2. Lowers economic growth
3. Create image of corruption
4. Undermines faith in political institutions