Once the system gets there, it stays there… or does it?

by niamh on June 4, 2013

Who will bring about political reform, and what are the political incentives for doing it? The question comes from an earlier post. Is there a road-map for exiting from a sub-optimal equilibrium in the way political institutions function? I don’t know the answer.

In Ireland, parties in opposition seem to agree that the lack of accountability of the executive to parliament is a problem. But why would they voluntarily cede the advantages of executive autonomy when in power themselves?

In Greece, the question as to who will introduce real reform is more serious because the problems are so much more pervasive. Behind the massive improvement that has been achieved in the primary fiscal balance, many would still hold that the political system often works badly (inefficiently, ineffectively) and that corruption is a pervasive feature of everyday life. People don’t have much confidence that the institutions of state will act impartially (the keystone of good governance, as Rothstein and Teorell tell us), or even that the rule of law will prevail in the justice system. But individuals can’t change the perverse institutional incentives by themselves. They are stuck with their decidedly dysfunctional political culture, trying to work through it as best they can.

These are problems of different degrees of severity and intractability.

In the Irish example, we could think of it as a problem of time-inconsistent preferences. Governments could bind their own preferences for more power now in order to secure a better outcome later (better-quality policy or better regulation for example). But there will still be specific costs to the reforming actors now, since the immediate change will benefit their political rivals rather than them; and the eventual gains may be uncertain and hard to estimate anyway. We could perhaps imagine a deeply unpopular government that knows it’s heading for opposition status after the next election. It might try to enact political reform now in order to make life in opposition more bearable for itself. But it’s still a tricky calculation.

In the Greek case it’s hard to think where the leverage point might be. Formal and informal institutions interact to sustain mutually reinforcing incentives for suboptimal practices, in ways that Douglass North has helped to make familiar. Bo Rothstein argues that the best option may be a ‘Big Bang’ approach to reform, where everything has to change simultaneously and over a concentrated period of time. The aim would be to change the institutional incentives that shape people’s expectations about how other people will behave.

But we still have the problem of who would take this on and how it would be sustained. In Greece, the economic crisis may have intensified the pain caused by the present system, but it hasn’t noticeably increased political leaders’ commitment to change. Pressure from international agencies, for example in the form of loan conditionality, isn’t directed at institutional reform: budgets, it seems, are ‘technical’ matters, while bureaucratic practices are ‘political’. And the time-frame is likely to be challenging, say between ten and twenty years – short in historical perspective, but spanning several electoral cycles.

So it seems we’re back to piecemeal reform. I’m less pessimistic about this than Rothstein seems to be, if we think of it in sectoral terms. It’s probably a lot easier to get a new set of priorities going amongst the top cadre in some key institutions than across the whole political system. I’m thinking of, for example, the tax administration, or the courts service – agencies that can be given operational autonomy from political interference, and in which new sets of incentives can be set up and protected throughout changes of government. It’s the kind of ‘middle-range’ reform practice where expert assistance from international agencies may well be useful. Self-reinforcing ideas about professional best practice might well become institutionalized (see for example the Center for Excellence in Finance in the Balkans), and policy diffusion could then make a real difference. Or so we may hope.

{ 15 comments }

1

floopmeister 06.05.13 at 12:54 am

We could perhaps imagine a deeply unpopular government that knows it’s heading for opposition status after the next election. It might try to enact political reform now in order to make life in opposition more bearable for itself. But it’s still a tricky calculation.

Sounds like Australia – but here both parties stitched up a deal to allow tens of millions of dollars of public money to fund both their political advertising campaigns…

… but when knowledge of the deal came out publicc opposition (across the political spectrum) was so strong the deal was dropped.

Unfortunately though that seems to be reflective of a general disgust with the system (wishing STD on both establishments) rather than a positive example of reform driven from below. Starting to feel like a general malaise across the political spectrum and across countries…

2

Bruce Wilder 06.05.13 at 12:55 am

It never stays “there”, wherever “there” may be.

Strategic competition to change the rules of the game is part of the game, and the way the game is played will change the rules, one way or another. So, the game is always being changed by the players, even if not always in a particularly enlightened or far-sighted or even fully intentional way.

Every element from the background culture of the masses to arcane technical rules of procedure are available for strategic exploitation. You can re-write the formal document, or pass a sweeping amendment as the culmination of a mass movement; you can re-define, or invent, a term of categorization, in an act of semantic subversion.

3

john c. halasz 06.05.13 at 1:16 am

@1:

STD? Isn’t that something “both establishments” routinely transmit?

OP:

It seems to be a rather short-circuited and establishmentarian account of Greece’s “problems”. As if “bad governance” is not precisely what is imposing the excruciating austerity, rather than the cause, rather than the cure, of all that pain. Or are you buying in too much to the Irish version of that sort of narrative?

4

Ronan(rf) 06.05.13 at 1:24 am

Thanks for the response to the question Niamh! Very interesting

5

P O'Neill 06.05.13 at 1:37 am

It’s bizarre that we are 5 years into financial crisis adjustment programmes and none of the key sponsors thereof — IMF, EU, ECB — have any actual theory of reform other than an assumption that crisis promotes reform and conversely when the pressure is reduced (as with the success of the ECB OMT promise), the zeal for reform will wane. But there’s no element of a theory about institutions or incentives which underlies the recommendations and indeed the assumption in all their projections that such and such a measure will be implemented.

Also

We could perhaps imagine a deeply unpopular government that knows it’s heading for opposition status after the next election. It might try to enact political reform now in order to make life in opposition more bearable for itself.

Fianna Fail 2009-2010 is the test case for this, there was the dawning realization that they were going to lose but the focus seems to have been making it a one-term opposition rather than a more bearable opposition. Hence the loading up on poison pills for the alternative government — the conditions in the bailout which would fall to that government to implement, Croke Park, the promissory note. I think the “we’ll be back” mentality dominates other motives.

6

david 06.05.13 at 1:55 am

It’s not bizarre. The IMF, EU, and ECB are all massive multinational bureaucracies headed by committees of individuals who have other primary responsibilities: expecting them to have a consistent internal vision is unreasonable.

7

floopmeister 06.05.13 at 3:55 am

STD? Isn’t that something “both establishments” routinely transmit?

:)

Well, you know even life is sexually transmitted…

8

Mark English 06.05.13 at 4:10 am

Isn’t it all too often the case that people seeking to reform a political system are, and are seen to be, primarily interested in (and so motivated by) specific causes? They want to change the system not so much to make it better (in the sense of more efficient or less prone to nepotism or corruption) as (indirectly) to advance a particular social or political agenda.

And I think that this perception explains to a large extent why there is widespread suspicion of and resistance to such reform.

But I agree with Bruce Wilder that shifts and changes in the formal and informal structures of politics and government are occurring all the time, driven not only by “the way the game is played” but also by external factors.

9

Omega Centauri 06.05.13 at 1:59 pm

I was thinking how this applies across the pond from Europe. Here our problem is that government, and media -which is the main transmission belt for public attitudes, has been highly co-opted by big money interests. There is at least a glimmer of hope, as little as two years ago advancing the proposition that our democracy has been co-opted into a plutocracy would have got one labeled as a delusional leftist -nowt it is widely acknowledged. The similar proposition, that the media are almost equally co-opted is still in the early adoption phase. We have a huge mental roadblock in the way of reform however, -we take our contitution-worship seriously over here. And the first amendment, which is supposed to protect free speech, is widely interpreted to include the protection of paid for megaphones.

10

Jonas 06.06.13 at 1:31 am

Isn’t it what Machiavelli said about initiating a new order of things?

“It must be considered that there is nothing more difficult to carry out nor more doubtful of success nor more dangerous to handle than to initiate a new order of things; for the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order; this lukewarmness arising partly from the incredulity of mankind who does not truly believe in anything new until they actually have experience of it.” – Machiavelli

That’s why after a certain point, systems tend to collapse rather than reform. It’s not governments, even in computer software, after a while, it’s not worth trying to rewrite it anymore. There’s too much “vested interest” in bad assumptions from the original design. You have to start anew.

The problem with something like the EU is that the system is too tied together. You can’t collapse any one piece without collapsing them all. It’s the 21st century equivalent to WWI where the patchwork of alliances was too rigid, and couldn’t be collapsed without collapsing it all.

I tend to be pessimistic, but it’s still a worthy area of study because even a slight improvement in understanding/ameliorating this can bring about so much social utility.

11

Katherine 06.06.13 at 12:25 pm

“It must be considered that there is nothing more difficult to carry out nor more doubtful of success nor more dangerous to handle than to initiate a new order of things…”

And yet, things do change, sometimes significantly. Women got the vote, the NHS happened etc. The weight of feeling builds up until the tide cannot be pushed back. Trouble is, we in the West a living in a time where nothing that significant has happened within our lifetimes, so we don’t know what it feels like.

My impression is that it happens when political incentives go out of the window, and things get done because dammit it’s the right thing to do. This may be naive of me.

12

SamChevre 06.06.13 at 3:10 pm

The problem with something like the EU is that the system is too tied together.

I think this is a very large piece of the problem–with any institution, notably including banks and governments. The more possible it is for pieces to change and fail, the more failures there will be–but they will be manageable failures. “Too big to fail” works –there are no failures–until it doesn’t–and then the failure is catastrophic.

13

Barry 06.06.13 at 6:37 pm

“It’s bizarre that we are 5 years into financial crisis adjustment programmes and none of the key sponsors thereof — IMF, EU, ECB — have any actual theory of reform other than an assumption that crisis promotes reform and conversely when the pressure is reduced (as with the success of the ECB OMT promise), the zeal for reform will wane. But there’s no element of a theory about institutions or incentives which underlies the recommendations and indeed the assumption in all their projections that such and such a measure will be implemented. “

‘Theory of reform’ here means ‘the elites take advantage of a crisis to f*ck over everybody else’. When you look at it that way, it makes much more sense.

14

Stephen 06.06.13 at 6:49 pm

Rather simple question, but still maybe perhaps worth asking:

In the distant past, pre- oh, I don’t know, 1992? – have political reforms been brought about in, shall we say, political systems outside the USA or EU?

If so, how did they happen?

If they did, are they irrelevant to the present USA/EU?

15

Jameson Quinn 06.07.13 at 7:49 pm

I put my hope — such as it is — in reforms of democracy itself. I mean simple, limited reforms like approval voting or proportional representation (in those systems that don’t have it), or more direct democracy in the EU. In the short term, these would throw only the worst the current leaders out on their asses, so a middling politician could be convinced to support them. But in the longer term, they would realign incentives and increase the power of the regular people to bring further reforms. Basically, it would take a political system that’s brittle with TBTF parties, and allow flexibility and soft/partial failure.

Yes, I know. As long as I could fit the people who agree with me on this one into an average lecture hall, this is going nowhere. But still, it seems more hopeful than a lot of other solutions which, it appears, excite more direct opposition from the beneficiaries of the status quo.

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