The Dictator's Handbook (26 page)

Since just twenty-four members of FIFA's executive committee determine the location of the finals, the winner requires the support of only thirteen members—if that. For the December 2010 vote only twelve votes were required after two members were suspended for allegedly trying to sell their votes. One of these members, Amos Adamu, was caught asking for an $800,000 bribe in a sting operation by the
Sunday Times
newspaper. While the money was nominally for building artificial pitches, the deal required that the $800,000 be paid directly to him. Three days prior to the location vote the BBC's
Panorama
once again exercised its penchant for unearthing corruption in sports by airing a documentary entitled
FIFA's Dirty Secret
, which detailed bribery and corruption among a number of senior FIFA officials. It is thought this severely harmed England's bid to host the 2018 finals, since three of the officials accused were among the twenty-two executive committee voters. Perhaps the fact that the backers of England's bids, including British prime minister David Cameron, immediately expressed full confidence in the fidelity of the accused FIFA officials is a telling sign that bribery is the modus operandi at FIFA. Why call for an investigation, after all, when it could only imperil England's future prospects?

Fortunately, devising reforms that would promote sport and competition over bribery and corruption is straightforward, and a comparison of bribery at the two institutions shows why. To buy the Olympics takes approximately four times as many votes as to buy the World Cup, fifty-eight versus thirteen. And, if the details of alleged corruption are to be believed, the size of bribes is substantially smaller, $100,000–$200,000 per vote versus $800,000. This is a direct illustration of the role of institutions in action, and it makes the solution clear.

As the number of supporters needed increases, private goods become less important. Bribery could easily be made a thing of the past by simply expanding the IOC. For instance, all Olympians might be
made IOC members eligible to vote for the executive officers and the site of future games. There were nearly 11,000 athletes at the Beijing summer games and over 2,500 at the Vancouver games. Alternatively, medalists, or to prevent overrepresentation of team sports, one representative per medal, could become IOC members. Either way, within a few years the body of the IOC would swell, and officials and bidding cities would have to compete on the quality of leadership, games, and facilities rather than on lavish travel trips. (Alastair laments that fixing the English football team poses a far greater challenge.)

From any boss's perspective, the best way to organize a business is exactly the same as the best way to organize a government: rely on a small group of essentials, drawn from a small group of influential selectors, who are drawn from millions of interchangeable selectors. That, of course, is a perfect description of most modern, publicly traded corporations. It also happens to be a pretty good description of organized crime families. A coincidence? Probably not—and not for the reasons you may be thinking.

Big corporations do not coerce people to consume their services. In fact, they provide valuable services that lead people voluntarily to spend money on them and to make themselves generally better off for having done so. But, like the mafia, and like monarchies and petty dictatorships, publicly traded corporations are made up of a small coalition, a small group of influentials, and masses of interchangeables. That means that for their leaders—the CEOs, CFOs, and other senior management—to survive in office they must provide lots of private goods to their coalition of essential supporters.

The media (itself made up of just such corporations) like to portray Wall Street businesses as tone-deaf and greedy. We take a broader view: pretty much all of us are greedy, some for money, some for adulation, some for power, but all greedy nevertheless. Some few among us have the opportunity to act on our greed, while most of us are confined to pursuing our greed in minor ways. Wall Street bankers have
the opportunity to satisfy their desire for money and power in a big way and we should not be surprised that they do so.

As we all know, the world economy went through a massive tumble in recent years. Even several years after the near-depression's onset, unemployment remained high and economic growth meager. And yet—here being the media's basis for the accusation of tonedeafness—Wall Street bonuses remained huge even as the banks lost their proverbial shirts. Wall Street financial houses distributed $18.4 billion in bonuses in 2008, even though many of the largest Wall Street firms begged for and got billions in bailout money from the federal government. Of course, these bonuses, distributed among the leaders, their coalition, and their influential backers, are the very private goods that helped keep the existing managers in their jobs. It is equally worth noting that these bonuses were more than 40 percent lower than in 2007, the year before the economic collapse. Private goods are doled out from revenue. If revenue is down, private goods are likely to go down too, because, after all, leaders want to keep as much for their discretionary purposes as possible, and when there isn't much money around it is not as if those getting private goods can easily find a better deal by defecting to some alternative leadership.

We commented earlier that “Successful leaders are not above repression, suppression, oppression, or even killing their rivals, real and imagined.” The truth of this statement is demonstrated routinely in the world's smallest coalition environments. Aleksei Dymovsky's unhappy experience in Russia is nothing compared to what happens when anticorruption campaigns are mounted in really small coalition settings.

Africa provides many of the worst cases. Daniel Kaufman, a senior fellow at the Brookings Institute, estimates that more than a trillion dollars is spent annually on bribes worldwide, presumably with most of it going to government officials. With so much money on the line, it is no wonder that he also reports, “We are witnessing an era of major
backtracking on the anticorruption drive. And one of the most poignant illustrations is the fate of the few anticorruption commissions that have had courageous leadership. They're either embattled or dead.” Two examples among many include the deaths of Ernest Manirumva of Burundi and Bruno Jacquet Ossebi in the Congo. Mr. Manirumva was investigating corruption at high levels in Burundi when he was stabbed to death. Although he apparently was not robbed of his personal possessions, the president of the nonprofit organization he was working with reported, according to the
New York Times
, that, “A bloodstained folder lay empty on his bed. Documents and a computer flash drive were missing.” Coincidence, no doubt!

Mr. Ossebi's error was to cooperate with Transparency International in its lawsuit to recover wealth allegedly stolen by Congo's president. Mr. Ossebi died as the result of a suspicious fire in his home. Alexei Dymovsky, if he knows these facts, must count his good fortune in living in a country that is transitioning away from democracy rather than in one that never got close to such a status in his lifetime.

Whistle-blowing is not the only way to get in trouble. Leaders can put themselves at dire risk if they take their coalition's loyalty for granted. The rules governing rulers teach us that leaders should never underpay their coalition whether they do so to reward themselves or the common people. Those who want to enrich themselves must do so out of discretionary funds, not coalition money. Those who want to make the people's lives better likewise should only do so with money out of their own pockets and not at the expense of the coalition. Leaders sometimes miscalculate what is needed to keep the coalition happy. When they make this mistake it costs them their leadership role and, very often, their life. The stories of crime boss “Big” Paul Castellano and Roman emperor Julius Caesar are cautionary tales for any who would make the mistake of not giving the coalition its due.

“Big” Paul Castellano, who inherited control of the Gambino crime family in 1976, made just such a mistake. He shifted the focus of the family business to racketeering and shaking down the construction industry. Indeed it was said that no concrete could be poured on projects worth over $2 million in New York City without the mafia's permission. That would have been fine for his crime family if the wealth from these new activities flowed to its members, or if he continued to pay sufficient attention to their traditional revenue sources. Instead, he neglected the traditional businesses, like extortion, loan sharking, and prostitution that were the source of income for his coalition of mafiosi. When a moment of opportunity presented itself, triggered by the death of a key supporter, Aniello “Neil” Dellacroce, and the pressures from the ongoing Mafia Commission Trial prosecuted by Rudy Giuliani, Castellano's erstwhile backers turned on him. John “the Dapper Don” Gotti, Frank DeCicco, Sammy “The Bull” Gravano, and other captains worked together to gun down Castellano outside of Sparks Steak House on Forty-sixth Street in New York.
¹³

Castellano rewarded himself at the expense of his supporters and it cost him his life. A few thousand years earlier, Julius Caesar's mistake was to help the people at the expense of his backers and this too cost him his life. Julius Caesar's death at the hands of some of his closest supporters is often portrayed as the slaying of a despot. But the facts don't support this interpretation.

Julius Caesar was a reformer. He undertook important public works, from redoing the calendar and relieving traffic congestion, to stabilizing food availability. He also took steps specifically designed to help the poor. For instance, he provided land grants to former soldiers and got rid of the system of tax farming, replacing it with a more orderly and predictable tax system. Not only that, he relieved the people's debt burden by about 25 percent.

Not surprisingly, though these policies were popular with the people, many came at the expense of Rome's prominent citizens. Tax farming was, of course, lucrative for those lucky few who got to extract money from the people. High indebtedness was also lucrative for those who were owed money. These groups found Caesar's reforms hitting them straight in their anachronistic pocketbooks and, therefore,
not at all to their liking. Popular though many of his reforms might have been with the man on the street, they harmed the welfare of the powerful influentials and essentials, and it was of course these people who cut him down.
¹⁴

Caesar made the mistake of trying to help the people by using a portion of the coalition's share of rewards. It is fine for leaders to enrich the people's lives, but it has to come out of the leader's pocket, not the coalition's. The stories of Caesar and Castellano remind us that too many good deeds or too much greed are equally punished if the coalition loses out as a result.

As we have seen, there is a fine balance between giving enough private goods to keep the coalition loyal and giving too much or too little. When money is spent elsewhere that “rightfully” belongs to the coalition, there is a serious risk of a coup d'état. When more money is spent on the coalition than is their due, then the incumbent wastes funds that would otherwise have been his.

What is a leader to do with any money that need not go to the coalition to buy loyalty? There are two answers to this question: sock it away in a secret account or lavish it on the people. Those who are most successful at stealing for their own benefit open the door to joining our
Haul
of Fame. Those who are more civic-minded spend discretionary money to help the people, but only some of them are good at it. The successful join our Hall of Fame and the unsuccessful, those with bad ideas about civic improvement, become members of our Hall of Shame.

According to Hank Gonzalez, a politician in Mexico before democratization, “A politician who stays poor is poor at politics.”
¹⁵
On this basis, Zaire's Mobutu was a political genius. He allegedly stole billions. His biographer, Michela Wrong, observes that, “No other African autocrat had proved such a wily survivor. No other president had been presented with a country of such potential, yet achieved so little. No other leader had plundered his economy so effectively or lived the
high life to such excess.”
¹⁶
Indeed, the word
kleptocrat,
meaning rule by theft, was coined to describe Mobutu's style of governance. But though Mobutu made kleptocracy famous, he didn't invent it.

King Solomon is reported to have had 700 wives. One can only wonder for how many of them the choice was theirs or his alone. And then who can forget the economic looting of the Caliphate. A serious estimate of the Caliphate's income for the years 918–919 is 15.5 million dinars, 10.5 million of which was spent on the Caliphs household.
¹⁷
To put that in perspective, if President Barack Obama had that proportion of the US economy available for his household's discretionary use, he and Michelle would personally control a cool $5 trillion, give or take a few hundred billion. There, indeed, is the reason people took such great risks to become the Caliph.

Small-coalition leaders have tons of money to use as they see fit. Even though they compensate their coalition of essential backers well, with so few who need to be bribed, plenty is left over. Some incumbents may choose to use their discretionary pile of money for civic-minded purposes—we'll talk about them when we discuss hall of shame and hall of fame leaders—but an awful lot just want to sock the money away for a rainy day. It is to accommodate just such leaders that secret bank accounts exist.