Graft And Political Risk

Predicting what leaders will fall from power is never easy, even for the pros (“Who lost Iran?).

But a quick test for stability is to check how long the leader has hung on, and how corrupt his or her country is perceived to be by the rest of the world. Although inexact, it can provide clues about what might happen.

The test works because corrupt rulers always become unpopular. To stay in power, they become increasingly repressive. Eventually the cork may blow. President Kennedy put it more eloquently: Those who make peaceful revolution impossible will make violent revolution inevitable.

Recent events in Tunisia are an example. The people rose up against President Ben Ali and pushed him and his greedy family out. He’d been in office since 1987 and his country had a ranking on the corruption perception index of 59 — higher than most Tunisians probably thought their country deserved.

A WikiLeaks diplomatic cable from June 2008 written by the American ambassador to Tunisia, Robert F. Godec — classified as secret, to be declassified in 2018 — made the link between the country’s long-time ruler, corruption, and political risk:

[C]orruption in Tunisia is getting worse. Whether it’s cash, services, land, property, or yes, even your yacht, President Ben Ali’s family is rumored to covet it and reportedly gets what it wants. Beyond the stories of the First Family’s shady dealings, Tunisians report encountering low-level corruption as well in interactions with the police, customs, and a variety of government ministries. The economic impact is clear, with Tunisian investors — fearing the long-arm of “the Family” — forgoing new investments, keeping domestic investment rates low and unemployment high. These persistent rumors of corruption, coupled with rising inflation and continued unemployment, have helped to fuel frustration with the [government of Tunisia] and have contributed to recent protests in southwestern Tunisia. . . .

The full cable can be viewed here.

It sounded familiar. A few months after President Suharto was forced out of office in 1998 by street demonstrations across Indonesia, we wrote about an American businessman in Jakarta who’d complained for years that in any deal, one of Mr. Suharto’s kids or cronies would show up and demand a piece of the action.

Drawing out the lesson, we said it was easy to do business in the Philippines during Marcos’s time, likewise in Iran during the Shah’s or Nicaragua during Somoza’s. Foreign investors cut through the red tape by working with one of the few wired local partners, often a member of the leader’s family. “Well-greased insider deals always look good at the time,” we said, “but are usually too good to be true.”

No one can predict a country’s history before it happens, and that goes for Tunisia’s neighbors. But here are some numbers to think about. In Egypt, Hosni Mubarak has been president since 1981; on the latest CPI the country ranked 98. In Libya, Mu‘ammar al-Qaḏḏāfī has been in power since 1969 and the country ranked 146 on the CPI.