Political Rents, Promotion Incentives, and Support for a Non-Democratic Regime

retirement in compliance with the contract. Without the contract the bosses expect to stay in
office longer, possibly indefinitely long (if they are hereditary autocrats or private
proprietors), but the additional rents produced by the activists’ services are lost. The outside
option of competitive regime based on private property rights always exist potentially. Under
certain conditions in the political labor market, it may become more profitable than the
hierarchical regime, prompting the rational bosses to initiate a regime change.

The effectiveness of the loyal-service-for-promotion exchange depends on the extent
to which a bureaucracy is capable of controlling the sources of income and, therefore, the
paths of upward job mobility. Communist states of the twentieth century, by establishing a
near monopoly on the ownership of productive capital, created the most favorable conditions
for such a control. In the Soviet Union, a nomenklatura system of job assignment,⁶ run by the
ruling party, provided an institutional mechanism for awarding “promotion tickets” in
exchange for loyal service. Discussion in this paper focuses on the economic incentives for
both bureaucrats and workers-activists and the determinants of demand and supply of activist
services under nomenklatura-type arrangements drawing mostly from the Soviet historical
experience. The Soviet Union is representative for a large class of political-economic
structures that rely upon the nomenklatura-type exchange between the incumbent rulers and

(Rabochii; pp. 225-234).

6 M.S.Voslenskii (1984) popularized the use of term nomenklatura as a synonym to the Soviet ruling
bureaucracy itself. The narrower meaning of “appointment control” is adopted in this paper.

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