Elites Behaving Badly

Abstract

This paper presents a model to account for the behaviour of social elites, in terms of their decisions to distribute resources between themselves, and a mass of disadvantaged members of society. Privileged members of society have the opportunity to allocate resources either to improve their own productive capacity, or to enhance the productive capacity of the disadvantaged. Redistribution in favour of the disadvantaged increases the productive capacity of society, but comes at the cost of rising political aspirations of the poor, which erodes the power of the elite. The paper derives conditions under which (a) the elite will redistribute to the point of equality with the disadvantaged; (b) conditions under which the disadvantaged are subject to extreme forms of extraction by the elite; as well as (c) the range of intermediate redistributive activity likely to be employed by the privileged. Examination of empirical evidence suggests that the model generalizes across the experience of a panel of 102 countries.