Grand extortion: coup risk and the military as a protection racket.

The governments of many developing countries face a risk of a coup d’état perpetrated by their own military establishment. The phenomenon is especially acute in Africa. We develop a game theoretic model in which the military decides to threaten a coup, and the other party, the government, responds by raising military spending. This strategic interdependence can be interpreted as a model of extortion. We show that this behaviour is more likely when the underlying risk of a coup is high. Using both global and Africa-specific data sets we model the interdependence between coup risk and military spending. We find that in countries with low coup risk governments react to it by cutting military spending. However, when coup risk is high, as in Africa, governments respond by increasing spending. Thus, there is evidence for ‘grand extortion’