Sunday, 15 February 2015

Ways and outcomes of splitting the DRC's revenue

I wrote in my last post about the split of revenue between the mineral-rich Katanga region and the rest of the DRC.  Since then, I've been thinking about ways in which the division could occur, and the outcomes from the division.  Here are some of them:

An aggressive central government
The DRC government takes all the revenue, and if there are any disturbances in Katanga it fights them.  The government gets the revenue minus its side of the losses from conflict, and Katanga gets only its side of the losses.

A money maximising central government
The DRC government takes the amount of revenue that maximises its revenue.  If there are no disturbances in Katanga, then it takes everything.  If disturbances occur in Katanga, then the central government takes money so that the income minus the disturbance losses are maximised.  The outcome may be that all of Katanga's money is taken (if the disturbance can be suppressed easily) or none of Katanga's money is taken (if the disturbances are expensive to suppress).  Katanga would get the remaining money minus its losses from the disturbance.  The government may attempt to call Katanga's bluff, if both sides would lose from conflict (this situation is typically analysed through "game theory").

A pro-Katanga central government
The DRC government takes none of the revenue, and Katanga is richer than the rest of the DRC.  There are no losses by disturbance, but the outcome is national inequality.

A national revenue maximising central government
The national government maximises the revenue to itself plus the revenue to Katanga.  As revenue is maximised when there are no disturbances.  One outcome in which there are no disturbances is when Katanga keeps all the money, and a central government which acts in this way increases the incentive for Katanga to have disturbances.

A government valuing equity and national peace
The national government maximises its income minus its losses through disturbances minus Katanga's losses through disturbances.  This is like a money maximising government, but one that recognises Katanga's losses in conflict.  If the government can fight cheaply but at great cost to Katanga, it is less likely to do so when it acts in this way.

The last approach seems to have the nicest outcomes.

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