This was a very interesting Russ Roberts podcast, which I missed last week while I was at the beach.

the median poor country has violence– Russ: Poor defined as? Guest: The bottom half of the distribution of countries. Russ: The median within that half. Guest: The median within that half experiences violence every 7 years. Russ: A regime change. Not just some fighting outside the palace. That’s shocking. Guest: Right.

When a regime changes through violence, the rules of property can change along with them. It is hard to invest for the long term under such circumstances. Also, people come to see control over government as the main route to obtaining or securing wealth. Finally, Weingast argues that in order to prevent coups, governments have to make economic concessions to groups that otherwise might become violent. Governments have to use regulation and subsidies to keep the peace.

I should note that in the United States, a similar process takes place but without the threat of violence. The housing lobby can threaten to throw a legislator out of office, and so the housing lobby gets what it wants. I am not convinced that the U.S. has less rent-seeking than less developed countries. Maybe it’s true, but I would like to see data. However, I am convinced that stability of regime is a good thing.