Social networks and credible commitments in dictatorships: Political organization and economic growth in Porfirian Mexico (1876--1911)

This dissertation addresses the paradox of economic growth in dictatorships. To resolve this paradox, I propose a theory of selective credible commitments in which dictators can credibly commit to private policies with the use of social networks that align the interests of economic and political actors to respect property rights.The logic behind the operation of the social networks that enhance credibility in dictatorships is as follows. Asset holders have an incentive to be part of social networks to enjoy private protection and to obtain information that would help them get the most lucrative private policies possible. Social networks also offer public officials an opportunity to share rents by providing private protection. An increase in the number of connections between public officials and economic actors creates a critical mass of enforcers that would be collectively hurt if the dictator were to predate on any asset holder.I tested my theory with a canonical case of growth under authoritarianism: Mexico under the dictator Porfirio Diaz (1876--1911). My methodology included a combination of standard political science analysis along with tools of network analysis. An analysis of the political economy of nature of economic activity during this period provides overwhelming support for my prediction that economic growth under Diaz was sustained by an exclusive network of private protection. My empirical analysis shows that Diaz's policies were made credible by a coalition of political and economic interests, involving members from the executive government, legislators, state governors, and influential businessmen.More generally, my theory identifies three factors that affect a dictator's ability to make credible commitments. First, the distribution of power will determine the availability of a critical mass of third party enforcers (influential political actors) that can punish government opportunism. Second, the distribution of wealth in society will determine the availability of rents to help pay for private protection. Finally, there is a need for a governance structure to encourage long-term selective credible commitments, ensuring not only that the dictator stays in power for a long time, but also there exists a long-lived pool of private enforcers.