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You can answer this by looking in Chapter 14, page 276 in the paperback edition of the book. There, we see how Diamond defines a kleptocracy. He says that a kleptocracy is any government which transfers wealth from commoners to upper classes. He argues that it is very difficult to tell the difference between a kleptocracy and a good government. Governments always take money from the common people. If the "commoners" like what the government does with that money, the government is not a kleptocracy. If they do not like what the government does, the government is a kleptocracy.
Jessica Stern, in the book, Terror in the Name of God, refers to Indian-administered Kashmir as a Kleptocracy, a region ruled by Delhi through "compliant Muslim politicians who monopolized illegal businesses and franchised out areas of criminal and legal commercial enterprises. Corruption, extortion, and bribery were common."
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