Dambisa Moyo | April 26, 2018 | Foreign Policy
Endless elections, unqualified leaders, uninformed voters, and short-term thinking are impeding economic growth.
Only 19 percent of Americans today say they can trust their government to do what is right. Meanwhile, citizens in developing countries see authoritarian leaders as more trustworthy than democratic politicians. Increasingly, it seems that people across the globe are skeptical of the ability of democratic governments to act effectively — including as good custodians of the economy. Indeed, the liberal democratic system is unwittingly undermining the economic growth that is necessary for its continued survival.
At the root of the problem is a predilection for short-termism that has become embedded in the political and business culture of modern democracies. By design, Western politicians have relatively short political horizons; they are often in office for terms of less than five years. So they find their duties regularly interrupted by elections that distract from the job of addressing long-term policy challenges. As a result, politicians are naturally and rationally drawn to focus their efforts on seducing their electorates with short-term sweeteners — including economic policies designed to quickly produce favorable monthly inflation, unemployment, and GDP numbers.
Voters generally favor policies that enhance their own well-being with little consideration for that of future generations or for long-term outcomes.
Politicians are rewarded for pandering to voters’ immediate demands and desires, to the detriment of growth over the long term.
Politicians are rewarded for pandering to voters’ immediate demands and desires, to the detriment of growth over the long term. Because democratic systems encourage such short-termism, it will be difficult to solve many of the seemingly intractable structural problems slowing global growth without an overhaul of democracy.
One of the most fundamental obstacles to effective governance is the short electoral cycle embedded in many democratic systems. Frequent elections taint policymaking, as politicians, driven by the rational desire to win elections, opt for quick fixes that have a tendency to undermine long-term growth. Meanwhile, they neglect to address more entrenched, longer-term economic challenges, such as worsening education standards, the imminent pension crisis, and deteriorating physical infrastructure, that don’t promise immediate political rewards.
America’s failing infrastructure encapsulates the problem of both public and private myopia. A 2017 report by the American Society of Civil Engineers (ASCE) gave the country a grade of D+ for overall infrastructure, citing 2,170 high-hazard dams, 56,007 structurally deficient bridges (9.1 percent of the nation’s total), and $1 trillion in needed upgrades to drinking water systems over the next 25 years.
At a minimum, the ASCE suggests that a $2 trillion investment is needed by 2020 to address the significant backlog of overdue maintenance and the pressing need for modernization. The effects of increased infrastructure investment on the prospects of low-skilled labor could be substantial. Investing in infrastructure would have all sorts of other benefits, but the prevailing democratic political system discourages the sort of long-term thinking necessary to do so.
Clearly there have been periods in the past when governments have chosen to undertake large infrastructure projects without succumbing to political myopia. In the United States, for example, the federal government drove the rollout of the Work Projects Administration (WPA) in the 1930s. Launched under President Franklin D. Roosevelt’s New Deal to help address America’s chronic unemployment, the WPA was America’s largest and most ambitious project dedicated to constructing public buildings, roads, bridges, schools, and courthouses. It was possible because the short-term political incentive of reducing mass unemployment through the rapid creation of jobs aligned with a long-term agenda.
Today, when it comes to infrastructure, China and India present a useful study in contrasts. Both countries needed roads to increase productivity. China built them, but India’s infrastructure programs got bogged down in red tape and political wrangling born of political fissures in its democratic system. Because vested interests in India have a stranglehold on policymaking and implementation, India’s democratic processes stifled decisions that could have helped drive economic growth. In the 2016-2017 World Economic Forum Global Competitiveness Report, India was ranked 68th of 138 countries for overall infrastructure, well behind China, which was ranked 42nd. The effects of underinvestment in infrastructure on the economy are real: For India, spending 1 percent of GDP on infrastructure is likely to boost the country’s GDP by 2 percent and create as many as 1.4 million jobs.
A second major obstacle to effective democratic governance is interest group lobbying, a feature in many liberal democracies that tends to interfere with the proper allocation of assets. In 2016, more than $3.15 billion was spent lobbying the U.S. Congress, roughly double the amount spent in 2000. Across sectors, lobbying by special interest groups has a discernible impact on public policy decisions in ways that negatively affect trade, infrastructure, and ultimately economic growth. For example, environmental groups oppose pipelines and new oil exploration projects, agricultural interests lobby for farm subsidies, and American trucking interest groups oppose additional tolls earmarked for road maintenance.
Political cycles too often keep politicians beholden to the individuals and corporate interests that help fund their campaigns and to the vagaries of public opinion polling. And because democratic politics rests on political contributions, it widens the inequality between rich and poor. It is the use of wealth to influence political outcomes that helps inequality take root. Until democracies push back on the use of wealth to influence elections and policies, initiatives to address inequality will be blunted.
Until democracies push back on the use of wealth to influence elections and policies, initiatives to address inequality will be blunted.
When democracy works, it delivers economic growth and fundamental freedoms in a way that no other system can. And when it fails, it is rarely, if ever, replaced by a system that can do a better job of delivering for its population. Democracies must therefore adapt or they will further decay. Eradicating political myopia is essential, but even more radical reforms will be necessary.
First, policymakers should bind current governments and their successors more firmly to policies once laws have been passed. At the moment, policies committed to and enacted by an incumbent are routinely unwound, thereby creating policy uncertainty, which in turn hurts investment and ultimately impedes economic growth.
In some cases, one branch of government can override commitments made by another. This means that a president can agree to a treaty (like the Trans-Pacific Partnership, say), only to have it shot down by Congress, weakening a country’s ability to act on the global stage. In other cases, governments cease to comply with existing international agreements like the Paris climate accord, which was signed by former President Barack Obama but rejected by President Donald Trump. Finally, there is the risk that politicians will wash their hands of present-day problems created by their predecessors.
There are often existing avenues for addressing a government’s failure to abide by its commitments. Under international law, countries are generally bound to the terms of treaties to which they are signatories. Governments are free to enter, reject, or withdraw from international agreements, and they should also be free to tell sitting members of their own legislatures that they can never exit the agreement. By signing these treaties and agreements (some with 10-year commitments and tenures) the hope is that politicians will be insulated from lobbying or voter pressure.
The stability of these countries’ transactions with the private sector depends on the reliability of their contracts. This acts as a deterrent and carries with it reputational risk. If, for example, a Canadian defense department bureaucrat fails to process a payment that is owed to a contractor in a timely manner, the government can likely be sued for recovery. However, if the Canadian Parliament passed a law rescinding all of Canada’s agreements to buy fighter jets, there would likely be no legal remedy by Canada’s contractual counterparties — at least not in a Canadian court. As a practical matter, and in certain circumstances, leaders should bind future political actors to economic policies by ensuring that some legislation cannot be repealed at all or by restricting subsequent governments so that they are unable to make changes to laws during a prescribed period.
While all major democracies sign on to treaties and multinational agreements, those agreements only retain force until a majority of legislators decide they should not. The goal should be to set extremely high hurdles for policy repeal, thereby reducing policy confusion and short-termism.
The goal should be to set extremely high hurdles for policy repeal, thereby reducing policy confusion and short-termism.
Second, democracies must implement tighter restrictions on campaign contributions to reduce the disproportionate impact of wealthy voters in determining election and policy outcomes. At least $2 billion was raised to support candidates in the 2016 U.S. presidential election, and over $6.8 billion was spent by candidates running for federal offices that year, much of it on television advertising. By comparison, in France, where campaign donations and expenditures are tightly capped, the En Marche! campaign surrounding Emmanuel Macron in the 2017 presidential elections received just 9 million euros in donations. Unconstrained campaign contributions, and a political system in which money commands political influence, introduce the risk that politicians will very rationally spend their time courting and catering only to the needs of their wealthy benefactors, rather than to the wishes of all citizens.
Third, in order to improve the quality of lawmaking, officeholders should be paid salaries competitive with those of private sector leaders, as well as performance bonuses. In the private sector, higher compensation is thought to act as an incentive for higher-quality performance. But few nations apply the same principle when it comes to compensating lawmakers and other leaders. An exception is Singapore, where government ministers are among the best paid in the world, and ministers receive bonuses linked to the performance of the economy.
The issue of politicians’ pay matters because large pay differentials between the private and public sectors can harm the public sector’s efforts to attract and retain the most talented people
The issue of politicians’ pay matters because large pay differentials between the private and public sectors can harm the public sector’s efforts to attract and retain the most talented people, who are instead drawn to higher-paying opportunities at banks or consulting firms. A wide pay gap between the private and public sectors can also create perverse incentives whereby politicians and policymakers make decisions with one eye toward future, better-compensated employment in the private sector. For instance, government officials might promulgate more diluted and less far-reaching regulations than they would otherwise, because they expect to make use of the revolving door and seek work in the regulated industries after their term in office. If politicians were adequately compensated, they might not fall prey to the allure of private sector compensation and would be more at liberty to focus on unbiased and effective long-term policymaking.
A fourth way to discourage politicians’ short-term thinking is to lengthen politicians’ terms in office. The goal of such a change would be to match political cycles with the length of the business cycle. According to the National Bureau of Economic Research, there were 11 business cycles between 1945 and 2009. Each cycle — that is, a period of economic expansion followed by one of contraction — lasted an average of 69 months, or almost six years each.
If politicians’ terms in office lasted roughly the same amount of time, policymakers would have an incentive to implement policies that would deliver growth over five to seven years and beyond, rather than one to three years. They would likely be thinking far enough ahead to know that an economic contraction was inevitably in the offing; they would work to soften its blow rather than, say, take advantage of flush times by enacting a big tax cut.
Fifth, the extension of terms should be accompanied by the imposition of term limits. In the United States and a handful of other countries, the chief executive is restricted to a limited number of terms in office, and several nations impose limits on the number of consecutive terms the executive may serve. But across Europe, the vast majority of heads of government face no set term limits. Meanwhile, there are no limits on the terms served by representatives in the U.S. Congress. Rep. John Dingell (D-Mich.) retired in January 2015 after serving more than 59 years. Robert Byrd, a Democrat from West Virginia, served more than 57 years total in the House of Representatives and the Senate. Any politician granted a position of authority or power for multiple decades risks slipping into complacency and reduced accountability.
Sixth, mature liberal democracies need stringent requirements regarding who is eligible to run for office. Such screening of candidates would exclude those who are narrowly political in their outlook because they lack real-world experience. Democracies should set minimum standards for public officeholders, requiring candidates to have work experience outside the political realm — not only in business but in a range of “real world” jobs.
Today, the British political class remains dominated by career politicians. A 2012 study by the British House of Commons Library sheds further light on the rising trend of professional politicians who have little to no real-world experience. The study finds that since 1983, the number of career politicians in Parliament — insiders who worked in politics in advance of their election — more than quadrupled from 20 to 90 between 1983 and 2010. Over the same period, the number of parliamentary representatives with a background in manual labor has dropped from more than 70 in 1983 to around 25 in 2010. The British system is now designed to favor those who serve as advisors or aides to politicians.
But this professional political class has relatively little real-world experience to inform economic decision-making. Its members are arguably more susceptible than most to catering to the whims of the voter at the expense of addressing longer-term economic challenges. It’s simply what they have been trained to do. People with real-world experience, on the other hand, are more likely to understand the sorts of policies that are needed in a modern economy than those conditioned on a diet of polls and political tactics.
Seventh, democracies must reduce the number of uncontested or “safe” seats in legislative elections. If an incumbent officeholder fails to deliver on her promise to help effectively oversee the government’s provision of public goods, she should be voted out of office. But there is no such accountability today. If a politician knows that there is little chance of losing an election, there is a risk he will make only a minimal effort to court voters. A politician in a safe seat might become feckless and ineffective, adversely affecting economic policymaking. Ultimately, the real risk is the inadvertent creation of complacent policymakers, who have little need to fulfill their duty in delivering long-term positive and effective policies.
Uncompetitive elections are a serious problem in the United States, where gerrymandering effectively disenfranchises large numbers of voters. According to Pew Research, “since 1992, 93% of House members who actually seek re‑election have won.” The solution is to change electoral boundaries to minimize the number of safe seats. Fully contested elections help to keep incumbent politicians accountable, holding their feet to the fire on the quality of their economic policies and decisions.
Finally, we must recognize that voters are ultimately responsible for the politicians they elect and the economic decisions those politicians make. And that’s why voting must be mandatory. In November 2014, only 36 percent of eligible voters in the United States cast a vote in the midterm elections — the lowest turnout in more than 70 years. In 2016, just 58 percent of eligible voters cast a ballot for president.
Americans could learn from other countries’ electoral systems. Many of the countries whose turnout rates are highest — including Australia, Singapore, Belgium, and Liechtenstein — enforce compulsory voting laws.
Many of the countries whose turnout rates are highest — including Australia, Singapore, Belgium, and Liechtenstein — enforce compulsory voting laws.
Most often, compulsory voting is enforced through fines on those who don’t vote. Often, the penalty amounts to little more than a symbolic slap on the wrist. But even the threat of a small fine clearly has an impact, as rates of voter participation in these countries suggest. In Belgium, nonvoters are disenfranchised for 10 years after failing to vote in at least four elections within 15 years, and it is difficult to get a job within the public sector if you are a nonvoter. In Singapore, nonvoters must reapply to be included on the voting register, explaining why they did not cast a vote.
The smaller the electorate, the likelier that policies will favor the few — in most cases wealthier citizens who vote regularly. By creating the broadest possible electoral base, mandatory voting maximizes the quality of democracy, making it more efficient and enhancing economic policy outcomes.
That said, countries where voting is mandatory but the population is not well informed can fall prey to populist policies that are inimical to longer-term economic growth and success. It is therefore imperative to educate the population on the tradeoffs between short-term gains and their costs to future growth. Voters must be nudged toward the right long-term policy choices, rather than being swayed by personalities and short-term fixes.
The proliferation of personalized media diets increasingly means that voters cling to their own facts, assumptions, and beliefs.
Here, high-quality media institutions can play a vital role. The proliferation of personalized media diets increasingly means that voters cling to their own facts, assumptions, and beliefs.
This creates a weak civic environment, undermining political outcomes. In the context of economic growth, an ideological media imbues and reinforces a culture of short-termism among politicians and political classes as politicians scramble to act and react to an agenda set by the press.
All of these reforms are urgent at a time when liberal democracy is increasingly at risk. Already, the young are growing more skeptical of the liberal democratic system. The Guardian has reported that just 42 percent of Australian 18- to 29-year-olds thought democracy was “the most preferable form of government,” compared with 65 percent of those 30 or above.
These proposals are not meant as a reaction to rising populism around the world — and they are not merely a “fix” for the problems in democracy that allowed Brexit and Trump’s 2016 victory to occur. Even if the trend toward deglobalization were to slow or reverse, major reforms to a democratic system that is currently viewed as sacrosanct would still be necessary.
Indeed, without these reforms, the lure of authoritarian models of governance will grow stronger, and democracies could increasingly fall under the sway of a disillusioned, uninformed electorate who put poorly qualified populist leaders in office. Electing such leaders will not make America or any other nation great again; it will lead instead to bad policy and less economic growth.
This excerpt was adapted from Dambisa Moyo’s new book, Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth—and How to Fix It.