Somaliland’s homegrown bicameralism achieves this by helping the key players to share the required information in a credible fashion and to exercise some veto power.
By Jean-Paul Azam
Somaliland has recently developed an unexpected democracy after seceding from chaos-ridden Somalia, while turning its port of Berbera into a success story, competing successfully with the long established ones in the Horn of Africa. A simple game-theoretic model is used to explain why the home-grown bicameral democratic system that emerged in Somaliland is a key factor in controlling violence and providing the required security along the transport infrastructure linking Berbera to neighboring landlocked Ethiopia. The model shows that redistributing some of the fiscal resources levied on this trade is necessary for sustaining this efficient political equilibrium.
On June 26, 2010, about 1.09 million Somalilanders proudly cast their votes in a free presidential election. Ahmed Mohamed Sillanyo from the opposition Kulmiye Party won and the incumbent left office without any violence erupting. The election eventually took place nearly 2 years behind schedule, because it was technically difficult to establish acceptable lists of voters in a country where the population is mostly comprised of nomadic herdsmen who constantly cross the border back and forth with neighboring Ethiopia in search of suitable pastures. A lot of negotiation between this people’s different clans was necessary to build a consensus. This process was driven by the Gurti, the Somali name for the House of the Elders. There is no formal chiefdom in the Somali clans, but the elders are traditionally exerting a significant level of authority over their members (Lewis 2008). The Somali nomadic herdsmen are still strongly affiliated to different clans, themselves subdivided into kinship groups, under the elders’ informal but firm leadership. This power was successfully harnessed to the emerging “Somaliland Republic” by creating the House of the Elders beside the standard elected House of Representatives. This unelected upper house is reminiscent of similar institutions in the most remarkable democracies in history. The Aeropagus and the Senate in the ancient Athenian and Roman republics, respectively, as well as the British House of Lords in modern times, were also meant to involve the traditional authorities in the country’s affairs. Their resilience over centuries testifies of their contributions to political stability. We argue below that the Gurti is one of the fundamental pillars of this country, as this is the key to establishing at a low upfront cost the level of security required for development. Berbera’s port and the road linking it to Ethiopia’s capital city Addis Ababa are Somaliland’s only reliable source of fiscal revenues. The government is in fact delegating to the elders the control of violence and banditry to protect the traders who then pay taxes in return for the country’s road and port services. Then, the redistribution of fiscal revenues across regions described by Eubank (2010) is the natural compensation for the investment made by the elders in providing the key public good of a safe road.
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This paper presents a framework for thinking about this unexpected success and to draw some lessons for understanding state formation in general. A simple model is used to show how Somaliland’s political equilibrium is fundamentally rooted in the need to provide this security. This model sheds some light on the unusual political institutions that emerged from less than two decades of self-rule following the 1991 secession. Although some limited fighting occurred for a while inside Somaliland in the early 1990s, in particular over the control of the port of Berbera and the airport of Hargeysa, the Somalilanders engaged quickly in a political process that led to a fairly successful democracy in about a decade. What seems very important when looking at Somaliland’s experience is that this gradual build-up of a functioning state started from the grassroots, with very little outside interference. Eubank (2010) emphasizes that the “Somaliland Republic” has not been recognized internationally, what makes it ineligible for foreign aid. In his view, this is an asset rather than a liability, as it forced the Somalilanders to develop accountable political institutions and to engage in state formation in a non-Eurocentric fashion. The aim of the present paper is to go one step further in analyzing the government that resulted, and in particular to explain why the “fiscal decentralization” that Eubank (2010) is looking for does not exist in Somaliland. The model argues instead that the redistribution of fiscal resources from the government to the different regions lies at the heart of these peaceful and democratic institutions. The key role of redistribution in peaceful state-building in Africa has been emphasized in particular by Azam (2006). In Somaliland, this redistribution of fiscal resources has funded a significant expansion of the education and health sectors over the whole territory. Between 1997 and 2006, the number of primary schools has risen from 165 to 516, while the number of Universities from 1 to 5 (MNPC 2010). Eubank (2010) presents some charts showing the remarkable progress of school enrolment over a decade.
The model argues that the “Somaliland Republic” shares many features of the “Indirect Rule” system that was widely used in the British Empire, and also used in many developing countries since their independence. Boone (2003) shows how this system was successfully applied in several parts of post-colonial Francophone West Africa, where the central government delegated the control of some areas to local traditional authorities, in return for some transfers. We argue below that this system cuts through a vexing “bootstrap” problem facing all new states: you need fiscal resources to extend the state’s control to various parts of the territory, but you need a fairly strong level of control to raise those fiscal resources in the first place. This problem explains why many African states exert in fact a limited effective control over their territory, leaving de facto large parts of their country without any effective state presence (Herbst 2000). We argue that Somaliland was put on the fast track to solve this problem thanks to two preexisting assets. First, this country inherited a valuable transport infrastructure, which only required an efficient political regime to become competitive in the Horn of Africa. Ports are “the taxman’s best friend”, as they provide a “chokepoint” where taxable resources get concentrated and make revenue collection relatively cheap. Second, the traditional institutions of this pastoral society had not been destroyed by either the British colonial rule or the subsequent “modernizer” government of post-colonial Somalia, despite the brutal attacks by Mogadishu’s government in the final years of Siyad Barre’s rule in the late 1980s (Lewis 2008). That indiscriminate violence against civilians and soldiers alike helped in fact the Somalilanders to achieve a consensus about seceding from Somalia to build their own state.
Our approach to Somaliland’s state-building shares some features of the property rights approach to the theory of the firm (Hart 1995). The returns to the transport infrastructure depend crucially on the “relationship-specific investments” made by the elders in controlling violence and banditry, which is in turn rewarded by some transfers. Similarly, Hart’s theory rests on “incomplete contracts theory”, which assumes that only a fraction of the information observed by the parties to the contract can be used as part of an enforceable contract, while the rest is not verifiable by a court. Our model pushes this to the extreme, as no third party can enforce any agreement between the government and the clans’ elders. The solution offered to this commitment problem brings out the key contribution made by the present model relative to Alesina and Spolaore’s theory of the size of nations (Alesina and Spolaore 2003). The latter sees the government as a country’s monopoly producer of a public good that benefits its people differentially and that cannot credibly commit to compensate people for these differences by transfers in a democracy. In the present model, the government is unable to produce the public good alone and must rely on the traditional authorities to control violence and banditry, provided their participation constraint is satisfied through a transfer. Then, the promise of this transfer is made credible in a repeated-game framework because the recipients can punish the government by reducing drastically its payoff in case of cheating. This implicit threat is credible because the recipient of the transfer is incurring a positive opportunity cost in delivering its part of the deal. Hence, what looks like a transfer is in fact the price paid for a productive service procured by the government.
The resulting political structure is a variant of the hybrid institutional structures analyzed in Bendor and Mookherjee (1987), which combine local hierarchies with various forms of decentralization. The social control exerted by the elders is a hierarchical relationship within the clan, while the assembly of the elders provides a horizontal form of cooperation between the clans. Hence, Somaliland’s political organization is a non-territorial federation of clans accommodating the special constraints facing a nation of nomadic herdsmen. Moreover, Somaliland’s experience suggests that a key part is played by the redistribution of the gains from cooperation by transfers, what is ruled out in Bendor-Mookherjee. Somaliland’s homegrown bicameralism achieves this by helping the key players to share the required information in a credible fashion and to exercise some veto power.
More generally, the state is a means to internalize a key externality to enlarge the players’ opportunity set and to pay fair compensations in the state-formation theory sketched below. This is why redistribution plays a key role in African state building, where the basic negative externality is the threat of civil war, or more generally the threat of violence. If I get armed, your expected welfare goes down, as there is a non-zero probability that I will use my weapons to attack you or damage your assets. The “social contract” is preventing this by providing a fair and credible compensation for giving up one’s weapons (Azam and Mesnard 2003). In Somaliland, the threat was looming on the economy, as any insecurity felt by the traders would have brought the port of Berbera to a halt, and it was overcome through a gradual bottom-up process leading to the emergence of democracy.
Section 2 presents the basic model, while Section 3 describes the mechanisms that sustain its efficient political equilibrium. Section 4 discusses why a similar process did not take place elsewhere in Somalia and Section 5 offers some brief conclusions.
Corresponding author: Professor Jean-Paul Azam, Toulouse School of Economics (ARQADE, UT1-C), 21 Allée de Brienne, 31015 Toulouse Cedex 6, France, E-mail:
Published Online: 2014-01-20
Published in Print: 2014-04-01
Citation Information: Peace Economics, Peace Science and Public Policy, Volume 20, Issue 2, Pages 245–266, eISSN 1554-8597, ISSN 1079-2457, DOI: https://doi.org/10.1515/peps-2013-0047.
About Jean-Paul Azam
Jean-Paul Azam is a professor of economics at the Toulouse School of Economics, University of Toulouse and a member of ARQADE and IAST. After publishing mainly on the macroeconomics of Africa, he has focused since the mid-1990s on explaining violent conflict and its prevention, with application to foreign aid, civil war, and transnational terrorism. He was awarded Lewis Fry Richardson Lifetime Achievement Award 2019 for his important scientific work on of militarized conflict.